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As filed with the Securities and Exchange Commission on February 3, 1998
Registration No. 333-42977
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
PRE-EFFECTIVE AMENDMENT NO. 1 TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
NIAGARA BANCORP, INC.
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
DELAWARE 6712 (TO BE APPLIED FOR)
(State or other jurisdiction of (Primary standard (I.R.S Employer
incorporation or organization) industry classification) indentification number)
</TABLE>
6950 SOUTH TRANSIT ROAD, P.O. BOX 514
LOCKPORT, NEW YORK 14095-0514
(716) 625-7500
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
WILLIAM E. SWAN
PRESIDENT AND CHIEF EXECUTIVE OFFICER
NIAGARA BANCORP, INC.
6950 SOUTH TRANSIT ROAD, P.O. BOX 514
LOCKPORT, NEW YORK 14095-0514
(716) 625-7500
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
JOHN J. GORMAN, ESQ.
KENNETH R. LEHMAN, ESQ.
LUSE LEHMAN GORMAN POMERENK & SCHICK
5335 WISCONSIN AVENUE, N.W.
SUITE 400
WASHINGTON, D.C. 20015
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this registration statement becomes effective.
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 of the Securities Act of 1933,
check the following box: [X]
If this form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434, check
the following box. [_]
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 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 SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION
8(A), MAY DETERMINE.
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PROSPECTUS SUPPLEMENT
NIAGARA BANCORP, INC.
LOCKPORT SAVINGS BANK
401(K) PLAN
This Prospectus Supplement is being provided to members (the "Members") in
the Lockport Savings Bank 401(k) Plan (the "Plan"). Lockport Savings Bank is
reorganizing from the mutual form of organization to the mutual holding company
form of organization, and shares of Common Stock of Niagara Bancorp, Inc. will
be issued to certain depositors and the public. Members who are depositors are
being given the opportunity to direct the trustee of the Plan to purchase Common
Stock in the Offering with amounts allocated to your account under the Plan.
The Plan would invest in Common Stock through the Niagara Bancorp, Inc. Stock
Fund ("Employer Stock Fund"). Since the Plan actually purchases the Common
Stock, you would acquire only a "membership interest" in the shares and would
not own the shares directly. This Prospectus Supplement relates to your initial
election to direct that all or a portion of your account be invested in the
Employer Stock Fund in the stock offering and also to your election to direct
such investment after the offering is completed. You will be able to provide
alternative investment instructions to the trustee in the event that the
offering is oversubscribed and the total amount allocated to your account cannot
be used by the trustee to purchase Common Stock.
The Prospectus of the Company dated ______________, 1998 (the "Prospectus")
which is attached to this Prospectus Supplement includes detailed information
with respect to the mutual holding company reorganization and related stock
offering, and the financial condition, results of operations and business of
the Bank. This Prospectus Supplement, which provides information with respect
to the Plan, should be read only in conjunction with the Prospectus. For a
discussion of certain factors that should be considered by each Member as to an
investment in the Common Stock, see "Risk Factors" beginning on page __ of the
Prospectus.
The interests in the Plan and the offering of the Common Stock have NOT
been approved or disapproved by:
. the Federal Deposit Insurance Corporation
. the Securities and Exchange Commission
. the New York State Banking Department
. the Superintendent of Banks of the State of New York, or
. any other federal state agency.
No office, corporation, commission, bureau or other agency has passed upon
the accuracy or adequacy of this Prospectus Supplement. Any representation to
the contrary is a criminal offense.
The membership interests offered hereby are NOT (1) savings accounts or
deposits; (2) federally insured or guaranteed, or (3) guaranteed by the Company
of the Bank. The Plan's entire investment in Common Stock is subject to
loss.
The date of this Prospectus Supplement is ___________________, 1998.
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TABLE OF CONTENTS
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THE OFFERING..................................................................... 1
Securities Offered.......................................................... 1
Election to Purchase Common Stock in the Offering; Priorities............... 1
Value of Participation Interests............................................ 2
Method of Directing Transfer................................................ 2
Time for Directing Transfer................................................. 2
Irrevocability of Transfer Direction........................................ 2
Direction to Purchase Common Stock After the Offering....................... 2
Purchase Price of Common Stock.............................................. 3
Nature of a Members Interest in Common Stock................................ 3
Voting Rights of Common Stock............................................... 3
DESCRIPTION OF THE PLAN.......................................................... 3
Introduction................................................................ 3
Eligibility and Participation............................................... 4
Contributions Under the Plan................................................ 4
Limitations on Contributions................................................ 5
Investment of Contributions and Account Balances............................ 7
Benefits Under the Plan..................................................... 9
Withdrawals and Distributions From the Plan................................. 9
Trustee..................................................................... 10
Plan Administrator.......................................................... 10
Reports to Plan Members..................................................... 11
Amendment and Termination................................................... 11
Merger, Consolidation or Transfer........................................... 11
Federal Income Tax Consequences............................................. 11
ERISA and Other Qualifications.............................................. 14
SEC Reporting and Short-Swing Profit Liability.............................. 14
Financial Information Regarding Plan Assets................................. 15
LEGAL OPINION.................................................................... 15
</TABLE>
1
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THE OFFERING
SECURITIES OFFERED
The securities offered hereby are participation interests in the Plan. Up
to 480,000 shares (assuming a purchase price of $10.00 per share) of Common
Stock may be acquired by the Plan to be held in the Employer Stock Fund. The
Company is the issuer of the Common Stock. Only employees of the Bank may become
Members in the Plan. The Common Stock to be issued hereby is conditioned on the
consummation of the Conversion. A Member's investment in the Employer Stock Fund
in the Conversion is subject to the priority set forth in the Plan of
Conversion. Information with regard to the Plan is contained in this Prospectus
Supplement and information with regard to the Conversion and the financial
condition, results of operation and business of the Bank is contained in the
attached Prospectus. The address of the principal executive office of the Bank
is 6950 South Transit Road, Lockport, New York 14095-0514. The Bank's telephone
number is (716) 625-7500.
ELECTION TO PURCHASE COMMON STOCK IN THE OFFERING; PRIORITIES
The Plan permits each Member to direct that all or part of the funds which
represent his or her beneficial interest in the assets of the Plan may be
transferred to the Employer Stock Fund, an investment fund in the Plan, that
will invest in Common Stock and will be used to purchase Common Stock issued in
connection with the Offering. The Trustee of the Plan will purchase Common Stock
offered for sale in connection with the Offering in accordance with each
Member's directions. Members will be provided the opportunity to elect
alternative investments from among the six other funds offered. In the event the
Offering is oversubscribed and the Trustee is unable to use the full amount
allocated by a Member to purchase Common Stock in the Offering, Members may
either (i) elect alternative investments from among the six other funds offered,
or (ii) direct the Trustee to hold the funds transferred to the Employer Stock
Fund and purchase Common Stock in the open market after the Offering. If a
Member fails to direct the investment of his or her account balance, the
Member's account balance will remain in the other investment funds of the Plan
as directed by the Member.
The shares of Common Stock to be sold in the Offering are being offered in
accordance with the following priorities: (i) holders of deposit accounts of the
Bank totaling $100 or more as of August 31, 1996 ("Eligible Account Holders");
(ii) the Employee Stock Ownership Plan ("ESOP"); (iii) holders of deposit
accounts of the Bank totaling $100 or more as of December 31, 1997
("Supplemental Eligible Account Holders"); (iv) certain members of the general
public with preference given to natural persons residing in Niagara, Erie,
Orleans and Genesee Counties, New York. To the extent that Members fall into one
of these categories, they are being permitted to use funds in their Plan account
to subscribe or pay for the Common Stock being acquired. Common Stock so
purchased will be placed in the Member's Employer Stock Fund within his Plan
account.
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VALUE OF PARTICIPATION INTERESTS
The assets of the Plan were valued at approximately $3.7 million as of
December 31, 1996. Each Member was informed of the value of his or her
beneficial interest in the Plan as of September 30, 1997. The $3.7 million value
represents the aggregate market value as of December 31, 1996, of all Members'
accounts and earnings thereon, less previous withdrawals.
METHOD OF DIRECTING TRANSFER
Each Member shall receive a form which provides for a Member to direct that
all or a portion of his or her beneficial interest in the Plan be transferred to
the Employer Stock Fund (the "Contribution and Investment Form") or to the other
investment options established under the Plan. The Member's investment in the
other investment options set forth in the Plan may be in any whole percentage
from 0% to 100%. If a Member wishes to invest all or part of his or her
beneficial interest in the assets of the Plan to the purchase of Common Stock
issued in connection with the Offering, he or she should indicate that decision
on the Contribution and Investment Form.
TIME FOR DIRECTING TRANSFER
Directions to transfer amounts to the Employer Stock Fund in order to
purchase Common Stock issued in connection with the Offering must be returned to
the Stock Information Center at 55 East Avenue, P.O. Box 886, Lockport, New York
14095 no later than _:00 p.m. on ______________, 1998.
IRREVOCABILITY OF TRANSFER DIRECTION
A Member's direction to transfer amounts credited to such Member's account
in the Plan to the Employer Stock Fund in order to purchase shares of Common
Stock in connection with the Offering is irrevocable. Members, however, will be
able to direct the investment of their accounts under the Plan as explained
below.
DIRECTION TO PURCHASE COMMON STOCK AFTER THE OFFERING
After the Offering, a Member will continue to be able to direct that a
certain percentage of his or her interest in the Plan be transferred to the
Employer Stock Fund and invested in Common Stock, or to the other investment
funds available under the Plan (amounts invested in the investment funds may be
invested in any whole percentage from 0% to 100%). The allocation of a Member's
interest in a Plan Fund may be changed on a monthly basis. Special restrictions
may apply to transfers directed to and from the Employer Stock Fund by those
Members who are officers, directors and principal shareholders of the Company
who are subject to the provisions of Section 16(b) of the Securities and
Exchange Act of 1934 (the "Exchange Act"), as amended.
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PURCHASE PRICE OF COMMON STOCK
The funds transferred to the Employer Stock Fund for the purchase of Common
Stock in connection with the Offering will be used by the Trustee to purchase
shares of Common Stock, except in the event of an oversubscription, as discussed
above. The price paid for such shares of Common Stock will be the same price as
is paid by all other persons who purchase shares of Common Stock in the
Offering.
Subsequent to the Offering, Common Stock purchased by the Trustee will be
acquired in open market transactions. The prices paid by the Trustee for shares
of Common Stock will not exceed "adequate consideration" as defined in Section
3(18) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA").
NATURE OF A MEMBER'S INTEREST IN THE COMMON STOCK
The Common Stock will be held in the name of the Trustee for the Plan, as
Trustee. Shares of Common Stock acquired at the direction of a Member will be
allocated to the Member's account under the Plan. Therefore, earnings with
respect to a Member's account should not be affected by the investment
designations (including investments in Common Stock) of other Members. The
Trustee as record holder will vote such allocated shares, if any, as directed by
Members.
VOTING RIGHTS OF COMMON STOCK
The Trustee generally will exercise voting rights attributable to all
Common Stock held by the Employer Stock Fund as directed by Members with
interests in the Employer Stock Fund. With respect to each matter as to which
holders of Common Stock have a right to vote, each Member will be allocated
voting instruction rights reflecting such Member's proportionate interest in the
Employer Stock Fund. The number of shares of Common Stock held in the Employer
Stock Fund that are voted in the affirmative and negative on each matter shall
be proportionate to the number of voting instruction rights exercised by Members
in the affirmative and negative respectively.
DESCRIPTION OF THE PLAN
INTRODUCTION
The Bank adopted a prototype plan effective January 1, 1990, which Plan and
related Adoption Agreement were amended, effective January 1, 1998, to include
the Employer Stock Fund as an investment alternative. The amendment transformed
the Plan into an individually designed plan. The Plan is a profit sharing plan
with a cash or deferred compensation feature established in accordance with the
requirements under Section 401(a) and Section 401(k) of the Internal Revenue
Code of 1986, as amended (the "Code"). The Plan has applied for a ruling from
the Internal Revenue Service that the Plan is qualified under Section 401(a) of
the Code, and its related trust is qualified
3
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under Section 501(a) of the Code.
The Bank intends that the Plan, in operation, will comply with the
requirements under Section 401(a) and Section 401(k) of the Code. The Bank will
adopt any amendments to the Plan that may be necessary to ensure the qualified
status of the Plan under the Code and applicable Treasury Regulations.
Employee Retirement Income Security Act. The Plan is an "individual
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account plan" other than a "money purchase pension plan" within the meaning of
ERISA. As such, the Plan is subject to all of the provisions of Title I
(Protection of Employee Benefit Rights) and Title II (Amendments to the Internal
Revenue Code Relating to Retirement Plans) of ERISA, except the funding
requirements contained in Part 3 of Title I of ERISA which by their terms do not
apply to an individual account plan (other than a money purchase plan). The Plan
is not subject to Title IV (Plan Termination Insurance) of ERISA. The funding
requirements contained in Title IV of ERISA are not applicable to Members (as
defined below) or beneficiaries under the Plan.
Reference to full Text of Plan. The following statements are summaries of
------------------------------
certain provisions of the Plan. They are not complete and are qualified in their
entirety by the full text of the Plan. Words capitalized but not defined in the
following discussion have the same meaning as set forth in the Plan. Copies of
the Plan are available to all employees by filing a request with the Plan
Administrator, c/o Lockport Savings Bank, 6950 South Transit Road, Lockport, New
York 14095-0514. Each employee is urged to read carefully the full text of the
Plan.
ELIGIBILITY AND PARTICIPATION
Any employee of the Employer is eligible to become a member in the Plan on
the first day of the month following completion of one (1) year of Entry
Service, as defined, with the Bank, provided he or she has reached age 21 at
such time. A year of Entry Service is defined as the 12 month period during
which an employee completes at least 1000 hours of service with the Bank. The
plan year is January 1 to December 31 (the "Plan Year").
As of December 31, 1996, there were approximately 314 employees eligible to
participate in the Plan, and 277 employees participating by making elective
deferral contributions.
CONTRIBUTIONS UNDER THE PLAN
401(k) Plan Contributions. Each Member of the Plan is permitted to elect to
-------------------------
defer such Member's Pay (as defined below) on a pre-tax basis up to the lesser
of 15% of annual Pay (expressed in terms of whole percentages) or the applicable
limit under the Code (for 1998, the applicable limit is $10,000) and subject to
certain other restrictions imposed by the Code, and to have that amount
contributed to the Plan on such Member's behalf. For purposes of the Plan, "Pay"
means, generally, a Member's total pay received from the Bank as reported on IRS
Form W-2 for purposes of income-tax withholding. In 1998, the annual Pay of each
Member taken into account under the Plan was and
4
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is limited to $160,000. (Limits established by the IRS are subject to increase
pursuant to an annual cost of living adjustment, as permitted by the Code). A
Member may elect to modify the amount contributed to the Plan by filing a new
elective deferral agreement with the Plan Administrator on a bi-weekly basis.
Employer Contributions. The Bank makes matching contributions to the Plan
----------------------
equal to 50% of the elective deferral contributions, up to a maximum of 6% of
the Member's Pay for the Plan Year.
LIMITATIONS ON CONTRIBUTIONS
Limitation on Employee Salary Deferrals. The annual amount of deferred
-----------------------------------------
Pay of a Member (when aggregated with any elective deferrals of the Member under
a simplified employee pension plan or a tax-deferred annuity) may not exceed the
limitation contained in Section 402(g) of the Code, adjusted for increases in
the cost of living as permitted by the Code (the limitation for 1998 is
$10,000). Contributions in excess of this limitation ("excess deferrals") will
be included in the Member's gross income for federal income tax purposes in the
year they are made. In addition, any such excess deferral will again be subject
to federal income tax when distributed by the Plan to the Member, unless the
excess deferral (together with any income allocable thereto) is distributed to
the Member not later than the first April 15th following the close of the
taxable year in which the excess deferral is made. Any income on the excess
deferral that is distributed not later than such date shall be treated, for
federal income tax purposes, as earned and received by the Member in the taxable
year in which the distribution is made.
Limitations on Annual Additions and Benefits. Pursuant to the
---------------------------------------------
requirements of the Code, the Plan provides that the amount of contributions and
forfeitures allocated to each Member's account during any Plan Year may not
exceed the lesser of $30,000 or 25% of the Member's Compensation (as defined)
for the Plan Year. In addition, annual additions are limited to the extent
necessary to prevent contributions on behalf of any employee from exceeding the
employee's combined plan limit, i.e., a limit that takes into account the
contributions and benefits made on behalf of an employee to all plans of the
Bank. To the extent that these limitations have been exceeded with respect to a
Member, the Plan Administrator shall:
(i) return any elective deferral contributions to the extent that the
return would reduce the excess amount in the Member's accounts;
(ii) if the Member is covered by the Plan at the end of the Plan Year, any
excess amount remaining will be used to reduce Employer Contributions for such
Member in the next Plan Year, and each succeeding Plan Year if necessary;
(iii) if an excess amount still exists, and the Member is not covered by
the Plan at the end of a Plan Year, the Excess Amount will be held unallocated
in a suspense account. The suspense account will be applied to reduce future
Employer Contributions for all remaining Members in the
5
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next Plan Year, and each succeeding Plan Year if necessary;
(iv) if a suspense account is in existence at any time during a Plan Year,
it will participate in the allocation of the trust's investment gains or losses.
If a suspense account is in existence at any time during a particular Plan Year,
all amounts in the suspense accounts must be allocated and reallocated to
Member's Accounts before any employer or any Member contributions may be made to
the Plan for that Plan Year. Excess amounts may not be distributed to Members or
former Members.
If, in addition to this Plan, the Member is covered under other defined
contribution plans and welfare benefit funds maintained by the Bank and annual
additions exceed the maximum permissible amount, the amount contributed or
allocated under this Plan will be reduced so that the annual additions under all
such plans and funds equal the maximum permissible amount.
Limitation on Plan Contributions for Highly Compensated Employees.
-----------------------------------------------------------------
Sections 401(k) and 401(m) of the Code limits the amount of elective deferral
contributions and matching contributions that may be made to the Plan in any
Plan Year on behalf of Highly Compensated Employees (defined below) in relation
to the amount of elective deferral contributions made by or on behalf of all
other employees eligible to participate in the Plan. Specifically, the "actual
deferral percentage" ("ADP") (i.e., the average of the actual deferral ratios,
expressed as a percentage, of each eligible employee's elective deferral
contribution if any, for the Plan Year over the employee's Pay), of the Highly
Compensated Employees must meet either of the following tests: (i) the ADP of
the eligible Highly Compensated Employees is not more than 125% of the ADP of
all other eligible employees, or (ii) the ADP of the eligible Highly Compensated
Employees is not more than 200% of the ADP of all other eligible employees, and
the excess of the ADP for the eligible Highly Compensated Employees over the ADP
of all other eligible employees is not more than two percentage points.
Similarly, the actual contribution percentage ("ACP") (i.e., the average of the
actual contribution ratios, expressed as a percentage, of each eligible
employee's matching contributions, if any, for the Plan Year over the employees
Pay) of the Highly Compensated Employees must meet either of the following
tests: (i) the ACP of the eligible Highly Compensated Employees is not more than
125% of the ACP of all other eligible employees, or (ii) the ACP of the eligible
Highly Compensated Employees is not more than 200% of the ACP of all other
eligible employees, and the excess of the ACP for the eligible Highly
Compensated Employees over the ACP of all other employees is not more than two
percentage points.
In general, for Plan Years beginning in 1998, a Highly Compensated
Employee includes any employee, who, (1) during the Plan Year or the preceding
Plan Year, was at any time a 5% owner (i.e., owns directly or indirectly more
than 5% of the stock of an employer, or stock possessing more than 5% of the
total combined voting power of all stock of an employer), or (2) for the
preceding Plan Year, received Pay from an employer in excess of $80,000 (in
1998), and (if the employer elects for a Plan Year) was in the group consisting
of the top 20% of employees when ranked on the basis of Pay paid during the Plan
Year. The dollar amounts set forth above are adjusted annually to reflect
increases in the cost of living.
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In order to prevent the disqualification of the Plan, any amount
contributed by Highly Compensated Employees that exceed the ADP limitation in
any Plan Year ("excess contributions"), together with any income allocable
thereto, must be distributed first to Highly Compensated Employees with the
greatest dollar amount deferrals, and so on, until the Plan satisfies the ADP
test, before the close of the following Plan Year. Moreover, the Bank will be
subject to a 10% excise tax on any excess contributions unless such excess
contributions, together with any income allocable thereto, either are re-
characterized or are distributed before the close of the first 2-1/2 months
following the Plan Year to which such excess contributions relate. In addition,
in order to avoid disqualification of the Plan, any contributions by Highly
Compensated Employees that exceed the average contribution limitation in any
Plan Year ("excess aggregate contributions") together with any income allocable
thereto, must be distributed to such Highly Compensated Employees before the
close of the following Plan Year. However, the 10% excise tax will be imposed on
the Bank with respect to any excess aggregate contributions, unless such
amounts, plus any income allocable thereto, are distributed within 2-1/2 months
following the close of the Plan Year in which they arose.
INVESTMENT OF CONTRIBUTIONS AND ACCOUNT BALANCES
All amounts credited to Members' accounts under the Plan are held in the
Plan Trust (the "Trust") which is administered by the Trustee appointed by the
Bank's Board of Directors.
Prior to the effective date of the Offering, Members have been provided the
opportunity to direct the investment of their accounts into one of the following
funds (the "Funds"):
A. Guaranteed Interest Account
B. Money Market Account
C. Bond and Mortgage Account
D. Stock Index 500 Account
E. U.S. Stock Account
F. Small Company Blend Account
The Plan now provides that in addition to the Funds specified above, a
Member may direct the Trustee to invest all or a portion of his account in the
Employer Stock Fund.
A Member may elect to have both past contributions (and earnings), as well
as future contributions to the Member's account invested either in the Employer
Stock Fund or among the Funds listed above. Transfers of past contributions (and
the earnings thereon) do not affect the investment mix of future contributions.
These elections will be effective on the effective date of the Member's notice
to the Plan Administrator. Any amounts credited to a Member's account for which
investment directions are not given will be invested in the Guaranteed Interest
Account.
A. PREVIOUS FUNDS.
Prior to the effective date of the Offering, contributions under the Plan
have been invested
7
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in the six funds specified above. The annual percentage return on these funds
for the prior three years was:
<TABLE>
<CAPTION>
9/30/1997* 1996 1995 1994
--------- ----- ----- -----
<S> <C> <C> <C> <C>
A. Guaranteed Interest Account -- 5.7 5.96 6.23
B. Money Market Account 3.88 5.11 5.65 4.01
C. Bond and Mortgage Account 7.34 3.94 18.41 -2.05
D. Stock Index 500 Account 29.27 22.50 37.07 1.05
E. U.S. Stock Account 22.98 24.13 33.10 0.29
F. Small Company 28.69 18.01 29.44 3.05
</TABLE>
*Unannualized rate of return since January 1, 1997.
The following is a description of each of the Plan's six investment funds:
Account A (Guaranteed Interest Account) This Account earns a guaranteed
--------------------------------------
interest rate for a specific number of years; it offers low risk and low
earnings.
Account B (Money Market Account) This Account invests in high-quality
--------------------------------
commercial paper (short-term, unsecured corporate loans). The average maturity
is usually less than one month; it offers low risk and low earnings.
Account C (Bond and Mortgage Account) This Account makes loans to
-------------------------------------
companies, most of which are bonds and commercial mortgages; it offers moderate
risk and earnings.
Account D (Stock Index 500 Account) This Account invests in the common
-----------------------------------
stocks of those companies listed in the Standard & Poor's 500 Stock Index; it
offers a chance for greater reward in return for a higher degree of risk.
Account E (U.S. Stock Account) This Account invests money in stocks of
------------------------------
U.S. companies of all sizes; it offers a chance for greater reward in return for
a higher degree of risk.
Account F (Small Company Blend Account) This Account invests in stocks of
---------------------------------------
smaller seasoned companies where potential for long-term growth is expected to
be above-average. This Account combines growth and value in a "blend" portfolio.
B. THE EMPLOYER STOCK FUND.
The Employer Stock Fund will consist of investments in Common Stock made on
and after the effective date of the Offering. After the Offering, the Trustee
will, to the extent practicable, use all amounts held by it in the Employer
Stock Fund, including cash dividends paid on Common Stock held in the Employer
Stock Fund, to purchase shares of Common Stock of the Company. It is expected
that all purchases will be made at prevailing market prices. Under certain
circumstances,
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the Trustee may be required to limit the daily volume of shares purchased.
Pending investment in Common Stock, assets held in the Employer Stock Fund will
be placed in money market accounts.
As of the date of this Prospectus Supplement, none of the shares of Common
Stock have been issued or are outstanding and there is no established market for
the Common Stock. Accordingly, there is no record of the historical performance
of the Employer Stock Fund. Performance will be dependent upon a number of
factors, including the financial condition and profitability of the Company and
the Bank and market conditions for the Common Stock generally.
INVESTMENT IN THE EMPLOYER STOCK FUND MAY INVOLVE CERTAIN RISKS IN
INVESTMENT IN COMMON STOCK OF THE COMPANY. FOR A DISCUSSION OF THESE RISK
FACTORS, SEE THE PROSPECTUS.
BENEFITS UNDER THE PLAN
Vesting. A Member, at all times, has a fully vested, nonforfeitable
--------
interest in his or her account under the Plan.
WITHDRAWALS AND DISTRIBUTIONS FROM THE PLAN
APPLICABLE FEDERAL LAW REQUIRES THE PLAN TO IMPOSE SUBSTANTIAL RESTRICTIONS
ON THE RIGHT OF A PLAN MEMBER TO WITHDRAW AMOUNTS HELD FOR HIS OR HER BENEFIT
UNDER THE PLAN PRIOR TO THE MEMBER'S TERMINATION OF EMPLOYMENT WITH THE BANK. A
SUBSTANTIAL FEDERAL TAX PENALTY MAY ALSO BE IMPOSED ON WITHDRAWALS MADE PRIOR TO
THE MEMBER'S ATTAINMENT OF AGE 59-1/2, REGARDLESS OF WHETHER SUCH A WITHDRAWAL
OCCURS DURING HIS OR HER EMPLOYMENT WITH THE BANK OR AFTER TERMINATION OF
EMPLOYMENT.
Withdrawals Prior to Termination of Employment. A Member may make a
-----------------------------------------------
withdrawal from his or her elective deferral contributions (and earnings
thereon) prior to termination of employment only in the event of financial
hardship, subject to the hardship distribution rules under the Plan. These
requirements insure that Members have a true financial need before a withdrawal
may be made.
Distribution Upon Retirement or Disability. Unless an optional form of
-------------------------------------------
benefit has been elected, the automatic form of benefit payable to a Member who
retires, incurs a disability, or otherwise terminates employment shall be a
qualified joint and survivor annuity. In the case of a Member who dies before
the Annuity Starting Date, the automatic form of benefit to such Member's
Beneficiary shall be a qualified pre-retirement survivor annuity if the Member
is married and a lump sum payment if a Member is unmarried. The optional forms
of retirement benefit shall be the following: a straight life annuity; single
life annuities with certain periods of five, ten or fifteen years; a single life
annuity with installment refund; survivorship life annuities with installment
refund and survivor percentages of 50, 66 2/3, or 100; fixed period annuities
for any period of whole
9
<PAGE>
months which is not less than sixty and does not exceed the Life Expectancy of
the Member and the named Beneficiary where the Life Expectancy is not
recalculated; a series of installments chosen by the Member with a minimum
payment each year beginning with the year the Member turns age 70-1/2; or a
single sum payment. Benefit payments ordinarily shall commence as soon as
practicable following termination of service upon (i) retirement on or after
attainment of normal retirement age; (ii) retirement due to disability; or (iii)
death of the Member. With respect of a 5% owner, benefit payments must commence
in no event later than April 1 following the calendar year in which the Member
attains age 70-1/2.
Distribution Upon Death. A Member who dies prior to the benefit
------------------------
commencement date for retirement, disability or termination of employment shall
have his or her benefits paid to the surviving spouse or beneficiary under one
or more of the forms available under the Plan.
Distribution Upon Termination for Any Other Reason. Distribution of
---------------------------------------------------
benefits to a Member who terminates employment for any other reason will not be
made to the Member at the time of termination but shall be made on the
occurrence of an event which would result in a distribution had the Member
remained in the employ of the Bank (i.e., upon the Member's death, disability,
or attainment of early or normal retirement age). Alternatively, at the Member's
election, a Member may receive a distribution of his account after he ceases to
be an employee.
Nonalienation of Benefits. Except with respect to federal income tax
-------------------------
withholding and as provided with respect to a qualified domestic relations order
(as defined in the Code), benefits payable under the Plan shall not be subject
in any manner to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, charge, garnishment, execution, or levy of any kind, either
voluntary or involuntary, and any attempt to anticipate, alienate, sell,
transfer, assign, pledge, encumber, charge or otherwise dispose of any rights to
benefits payable under the Plan shall be void.
TRUSTEE
The Trustee is appointed by the Board of Directors of the Bank to serve at
its pleasure. Delaware Charter Guarantee and Trust Company has been appointed as
trustee of the Employer Stock Fund of the Plan.
The Trustee receives, holds and invests the contributions to the Employer
Stock Fund of the Plan in trust and distributes them to Members and
beneficiaries in accordance with the terms of the Plan and the directions of the
Plan Administrator. The Trustee is responsible for investment of the assets of
the Trust.
PLAN ADMINISTRATOR
Pursuant to the terms of the Plan, the Plan is administered by the plan
administrator (the "Plan Administrator"). The Bank is the Plan Administrator and
has designated Kathleen P. Monti, Senior Vice President, Human Resources and
Administration, to supervise its responsibilities as such. The address and
telephone number of the Plan Administrator is c/o Lockport Savings Bank,
Attention: Ms. Kathleen P. Monti, Senior Vice President, 6950 South Transit
Road, Lockport, New York 14095-0514, Telephone number (716) 625-7500. The Plan
Administrator is responsible for the
10
<PAGE>
administration of the Plan, interpretation of the provisions of the Plan,
prescribing procedures for filing applications for benefits, preparation and
distribution of information explaining the Plan, maintenance of plan records,
books of account and all other data necessary for the proper administration of
the Plan, and preparation and filing of all returns and reports relating to the
Plan which are required to be filed with the U.S. Department of Labor and the
IRS, and for all disclosures required to be made to Members, beneficiaries, and
others under Sections 104 and 105 of ERISA.
REPORTS TO PLAN MEMBERS
The Plan Administrator will furnish to each Member a statement quarterly
showing (i) the balance in the Member's account as of the end of that period,
(ii) the amount of contributions allocated to such Member's account for that
period, and (iii) the adjustments to such Member's account to reflect earnings
or losses (if any).
AMENDMENT AND TERMINATION
It is the intention of the Bank to continue the Plan indefinitely.
Nevertheless, the Bank may terminate the Plan at any time. If the Plan is
terminated in whole or in part, then regardless of other provisions in the Plan,
each employee affected by such termination shall have a fully vested interest in
his or her accounts. The Bank reserves the right to make, from time to time, any
amendment or amendments to the Plan which do not cause any part of the Trust to
be used for, or diverted to, any purpose other than the exclusive benefit of
Members or their beneficiaries; provided, however, that the Bank may make any
amendment it determines necessary or desirable, with or without retroactive
effect, to comply with ERISA.
MERGER, CONSOLIDATION OR TRANSFER
In the event of the merger or consolidation of the Plan with another plan,
or the transfer of the Trust assets to another plan, the Plan requires that each
Member would (if either the Plan or the other plan then terminated) receive a
benefit immediately after the merger, consolidation or transfer which is equal
to or greater than the benefit he or she would have been entitled to receive
immediately before the merger, consolidation or transfer (if the Plan had then
terminated).
FEDERAL INCOME TAX CONSEQUENCES
The following is only a brief summary of certain federal income tax aspects
of the Plan which are of general application under the Code and is not intended
to be a complete or definitive description of the federal income tax
consequences of participating in or receiving distributions from the Plan. The
summary is necessarily general in nature and does not purport to be complete.
Moreover, statutory provisions are subject to change, as are their
interpretations, and their application may vary in individual circumstances.
Finally, the consequences under applicable state and local income tax laws may
not be the same as under the federal income tax laws. Members are urged to
consult their tax advisors with respect to any distribution from the Plan and
transactions involving the Plan.
The Plan is qualified under Section 401(a) and 401(k) of the Code and the
related Trust is
11
<PAGE>
exempt from tax under Section 501(a) of the Code. A plan that is qualified under
these sections of the Code is afforded special tax treatment which include the
following: (1) the Bank is allowed an immediate tax deduction for the amount
contributed to the Plan each year; (2) Members pay no current income tax on
amounts contributed by the Bank on their behalf; and (3) Earnings of the Plan
are tax-exempt thereby permitting the tax-free accumulation of income and gains
on investments. The Plan will be administered to comply in operation with the
requirements of the Code as of the applicable effective date of any change in
the law. The Bank expects to timely adopt any amendments to the Plan that may be
necessary to maintain the qualified status of the Plan under the Code.
Assuming that the Plan is administered in accordance with the requirements
of the Code, participation in the Plan under existing federal income tax laws
will have the following effects:
(a) Amounts contributed to a Member's account and the investment earnings
on the account are not includable in a Member's federal taxable income until
such contributions or earnings are actually distributed or withdrawn from the
Plan. Special tax treatment may apply to the taxable portion of any distribution
that includes Common Stock or qualifies as a Lump Sum Distribution (as described
below).
(b) Income earned on assets held by the Trust will not be taxable to the
Trust.
Lump Sum Distribution. A distribution from the Plan to a Member or the
---------------------
beneficiary of a Member will qualify as a lump sum distribution ("Lump Sum
Distribution") if it is made: (i) within one taxable year of the Member or
beneficiary; (ii) on account of the Member's death, disability or separation
from service, or after the Member attains age 59-1/2; and (ii) consists of the
balance to the credit of the Member under this Plan and all other profit sharing
plans, if any, maintained by the Bank. The portion of any Lump Sum Distribution
that is required to be included in the Member's or beneficiary's taxable income
for federal income tax purposes (the"total taxable amount") consists of the
entire amount of such Lump Sum Distribution less the amount of after-tax
contributions, if any, made by the Member to any other profit sharing plan
maintained by the Bank which is included in such distribution.
Averaging Rules. The portion of the total taxable amount of a Lump Sum
----------------
Distribution that is attributable to participation after 1973 in the Plan or in
any other profit-sharing plan maintained by the Bank (the "ordinary income
portion") will be taxable generally as ordinary income for federal income tax
purposes. However, a Member who has completed at least five years of
participation in the Plan before the taxable year in which the distribution is
made, or a beneficiary who receives a Lump Sum Distribution on account of the
Member's death (regardless of the period of the Member's participation in the
Plan or any other profit-sharing plan maintained by the Bank), may elect to have
the ordinary income portion of such Lump Sum Distribution taxed according to a
special averaging rule ("five-year averaging"). The election of the special
averaging rules may apply only to one Lump Sum Distribution received by the
Member or beneficiary, provided such amount is received on or after the Member
turns 59-1/2 and the recipient elects to have any other Lump Sum Distribution
from a qualified plan received in the same taxable year taxed under the special
averaging rule. Under a special grandfather rule, individuals who turned 50 by
1985 may elect to have their Lump Sum Distribution taxed under either the five-
year averaging rule or under the prior law ten-year averaging
12
<PAGE>
rule. Such individuals also may elect to have that portion of the Lump Sum
Distribution attributable to the Member's pre-1974 participation in the Plan
taxed at a flat 20% rate as gain from the sale of a capital asset.
Common Stock Included in Lump Sum Distribution. If a Lump Sum Distribution
-----------------------------------------------
includes Common Stock, the distribution generally will be taxed in the manner
described above, except that the total taxable amount will be reduced by the
amount of any net unrealized appreciation with respect to such Common Stock,
i.e., the excess of the value of such Common Stock at the time of the
distribution over the cost or other basis to the Trust. The tax basis of such
Common Stock to the Member or beneficiary for purposes of computing gain or loss
on its subsequent sale will be the value of the Common Stock at the time of
distribution less the amount of net unrealized appreciation. Any gain on a
subsequent sale or other taxable disposition of such Common Stock, to the extent
of the amount of net unrealized appreciation at the time of distribution, will
be considered long-term capital gain regardless of the holding period of such
Common Stock. Any gain on a subsequent sale or other taxable disposition of the
Common Stock in excess of the amount of net unrealized appreciation at the time
of distribution will be considered short-term, mid-term or long-term capital
gain depending upon the length of the holding period of the Common Stock. The
recipient of a distribution may elect to include the amount of any net
unrealized appreciation in the total taxable amount of such distribution to the
extent allowed by the regulations to be issued by the IRS.
Contribution to Another Qualified Plan or to an IRA. A Member may defer
----------------------------------------------------
federal income taxation of all or any portion of the total taxable amount of a
Lump Sum Distribution (including the proceeds from the sale of any Common Stock
included in the Lump Sum Distribution) to the extent that such amount, or a
portion thereof, is contributed, within 60 days after the date of its receipt by
the Member, to another qualified plan or to an individual retirement account
("IRA"). If less than the total taxable amount of a Lump Sum Distribution is
contributed to another qualified plan or to an IRA within the applicable 60-day
period, the amount not so contributed must be included in the Member's income
for federal income tax purposes and will not be eligible for the special
averaging rules or for capital gains treatment. Additionally, a Member may defer
the federal income taxation of any portion of an amount distributed from the
Plan on account of the Member's disability or separation from service,
generally, if the amount is distributed within one taxable year of the Member,
and such amount is contributed, within 60 days after the date of its receipt by
the Member, to an IRA. Prior to 1993, following the partial distribution of a
Member's account, any remaining balance under the Plan (and the balance to the
credit of the Member under any other profit sharing plan sponsored by the Bank)
would not be eligible for the special averaging rules or for capital gains
treatment. For these purposes, a "partial distribution" is a distribution within
one taxable year of the Member equal to at least 50% of the balance of a
Member's account ("Partial Distribution").
Pursuant to a change in the law, effective January 1, 1993, virtually all
distributions from the Plan may be rolled over to another qualified Plan or to
an IRA without regard to whether the distribution is a Lump Sum Distribution or
a Partial Distribution. Effective January 1, 1993, Members have the right to
elect to have the Trustee transfer all or any portion of an "eligible rollover
distribution" directly to another plan qualified under Section 401(a) of the
Code or to an IRA. If the Member does not elect to have an "eligible rollover
distribution" transferred directly to another qualified plan or to an IRA, the
distribution will be subject to a mandatory federal withholding tax equal to 20%
of the taxable distribution. An "eligible rollover distribution" means any
amount
13
<PAGE>
distributed from the Plan except: (1) a distribution that is (a) one of a series
of substantially equal periodic payments made (not less frequently than
annually) over the Member's life or the joint life of the Member and the
Member's designated beneficiary, or (b) for a specified period of ten years or
more; (2) any amount that is required to be distributed under the minimum
distribution rules; and (3) any other distributions excepted under applicable
federal law.
The beneficiary of a Member who is the Member's surviving spouse also may
defer federal income taxation of all or any portion of a distribution from the
Plan to the extent that such amount, or a portion thereof, is contributed within
60 days after the date of its receipt by the surviving spouse, to an IRA. If all
or any portion of the total taxable amount of a Lump Sum Distribution is
contributed by the surviving spouse of a Member to an IRA within the applicable
60-day period, any subsequent distribution from the IRA will not be eligible for
the special averaging rules or for capital gains treatment. Any amount received
by the Member's surviving spouse that is not contributed to another qualified
plan or to an IRA within the applicable 60-day period, and any amount received
by a nonspouse beneficiary will be included in such beneficiary's income for
federal tax purposes in the year in which it is received.
Additional Tax on Early Distributions. A Member who receives a
--------------------------------------
distribution from the Plan prior to attaining age 59 1/2 will be subject to an
additional income tax equal to 10% of the taxable amount of the distribution.
The 10% additional income tax will not apply, however, to the extent the
distribution is rolled over into an IRA or another qualified plan or the
distribution is (i) made to a beneficiary (or to the estate or a Member) on or
after the death of the Member, (ii) attributable to the Member's being disabled
within the meaning of Section 72(m)(7) of the Code, (iii) part of a series of
substantially equal periodic payments (not less frequently than annually) made
for the life (or life expectancy) of the Member or the joint lives (or joint
life expectancies) of the Member and his beneficiary, (iv) made to the Member
after separation from service on account of early retirement under the Plan
after attainment of age 55, (v) made to pay medical expenses to the extent
deductible for federal income tax purposes, (vi) payments made to an alternate
payee pursuant to a qualified domestic relations order, or (vii) made to effect
the distribution of excess contributions or excess deferrals.
ERISA AND OTHER QUALIFICATIONS
As noted above, the Plan is subject to certain provisions of the ERISA and
has applied for a favorable determination that it is qualified under Section
401(a) of the Code.
The foregoing is only a brief summary of certain federal income tax aspects
of the Plan which are of general application under the Code and is not intended
to be a complete or definitive description of the federal income tax
consequences of participating in or receiving distributions from the Plan.
Accordingly, each Member is urged to consult a tax advisor concerning the
federal, state and local tax consequences of participating in and receiving
distributions from the Plan.
SEC REPORTING AND SHORT-SWING PROFIT LIABILITY
Section 16 of the Exchange Act imposes reporting and liability requirements
on officers, directors, and persons beneficially owning more than 10% of public
companies such as the
14
<PAGE>
Company. Section 16(a) of the Exchange Act requires the filing of reports of
beneficial ownership. Within 10 days of becoming a person subject to the
reporting requirements of Section 16(a), a Form 3 reporting initial beneficial
ownership must be filed with the Securities and Exchange Commission ("SEC") .
Certain changes in beneficial ownership, such as purchases, sales and gifts must
be reported periodically, either on a Form 4 within 10 days after the end of the
month in which a change occurs, or annually on a Form 5 within 45 days after the
close of the Company's fiscal year. Certain discretionary transactions in and
beneficial ownership of the Common Stock through the Employer Stock Fund of the
Plan by officers, directors and persons beneficially owning more than 10% of the
Common Stock of the Company must be reported to the SEC by such individuals.
In addition to the reporting requirements described above, Section 16(b) of
the Exchange Act as provides for the recovery by the Company of profits realized
by an officer, director or any person beneficially owning more than 10% of the
Company's Common Stock ("Section 16(b) Persons") resulting from non-exempt
purchases and sales of the Company's Common Stock within any six-month period.
The SEC has adopted rules that provide exemption from the profit recovery
provisions of Section 16(b) for all transactions in employer securities within
an employee benefit plan, such as the Plan, provided certain requirements are
met. These requirements generally involve restrictions upon the timing of
elections to acquire or dispose of employer securities for the accounts of
Section 16(b) Persons.
Except for distributions of Common Stock due to death, disability,
retirement, termination of employment or under a qualified domestic relations
order, Section 16(b) Persons are required to hold shares of Common Stock
distributed from the Plan for six months following such distribution and are
prohibited from directing additional purchases of units within the Employer
Stock Fund for six months after receiving such a distribution.
FINANCIAL INFORMATION REGARDING PLAN ASSETS
Financial statements for the Plan for the year ending December 31, 1996 are
attached to the Prospectus.
LEGAL OPINION
The validity of the issuance of the Common Stock will be passed upon by
Luse Lehman Gorman Pomerenk & Schick, A Professional Corporation, Washington,
D.C., which firm acted as special counsel to the Bank in connection with the
Company's Conversion from a mutual savings bank to a stock based organization
and the concurrent formation of the Company.
15
<PAGE>
LOCKPORT SAVINGS BANK
401(k) PLAN
Financial Statements and Schedules
December 31, 1996 and 1995
(With Independent Auditors' Report Thereon)
<PAGE>
LOCKPORT SAVINGS BANK
401(K) PLAN
INDEX
Independent Auditors' Report
Statement of Net Assets Available for Plan Benefits
with Fund Information as of December 31, 1996
Statement of Net Assets Available for Plan Benefits
with Fund Information as of December 31, 1995
Statement of Changes in Net Assets Available for Plan
Benefits with Fund Information for the year ended
December 31, 1996
Statement of Changes in Net Assets Available for Plan
Benefits with Fund Information for the year ended
December 31, 1995
Notes to Financial Statements
Schedule
--------
Item 27a - Schedule of Assets Held for Investment Purposes 1
as of December 31, 1996
Item 27d - Schedule of Reportable Transactions for the 2
year ended December 31, 1996
* * * * *
<PAGE>
[LETTERHEAD OF KPMG PEAT MARWICK LLP APPEARS HERE]
Independent Auditors' Report
----------------------------
The Employee Benefits Committee of
Lockport Savings Bank:
We have audited the accompanying statements of net assets available for plan
benefits of Lockport Savings Bank 401(k) Plan as of December 31, 1996 and 1995,
and the related statements of changes in net assets available for plan benefits
for the years then ended. These financial statements are the responsibility of
the Plan's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for plan benefits of Lockport
Savings Bank 401(k) Plan as of December 31, 1996 and 1995, and the changes in
net assets available for plan benefits for the years then ended, in conformity
with generally accepted accounting principles.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. Supplemental schedules 1 and 2 are
presented for the purpose of additional analysis and are not a required part of
the basic financial statements but are supplementary information required by the
Department of Labor's Rules and Regulations for Reporting and Disclosure under
the Employee Retirement Income Security Act of 1974. The fund information in the
statements of net assets available for plan benefits and the statements of
changes in net assets available for plan benefits is presented for purposes of
additional analysis rather than to present the net assets available for plan
benefits and changes in net assets available for plan benefits of each fund. The
supplemental schedules and fund information have been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, are fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
/s/ KPMG Peat Marwick LLP
August 26, 1997
<PAGE>
LOCKPORT SAVINGS PLAN
401(k) PLAN
Statement of Net Assets Available for Plan Benefits
with Fund Information
December 31, 1996
<TABLE>
<CAPTION>
Guaranteed U.S. Money Bond and Stock
Interest Stock Market Mortgage Index
Account Account Account Account Account Total
---------- ------- ------- -------- ------- -----
<S> <C> <C> <C> <C> <C> <C>
Investments under group
annuity contract with
insurance company (note 3) $ 1,424,167 1,767,188 99,217 139,919 257,326 3,687,817
---------- --------- ------ ------- ------- ---------
Contributions receivable:
Employee 7 23 -- -- -- 30
Employer 3 10 -- -- -- 13
---------- --------- ------ ------- ------- ---------
Total Contributions receivable 10 33 -- -- -- 43
---------- --------- ------ ------- ------- ---------
Net assets available for plan
benefits $ 1,427,177 1,767,221 99,217 139,919 257,326 3,687,860
========== ========= ====== ======= ======= =========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
LOCKPORT SAVINGS PLAN
401(k) PLAN
Statement of Net Assets Available for Plan Benefits
with Fund Information
December 31, 1995
<TABLE>
<CAPTION>
Guaranteed U.S. Money Bond and Stock
Interest Stock Market Mortgage Index
Account Account Account Account Account Total
---------- ------- ------- -------- ------- -----
<S> <C> <C> <C> <C> <C> <C>
Investments under group
annuity contract with
insurance company (note 3) $ 1,285,051 1,148,101 57,957 85,276 120,865 2,697,250
--------- --------- ------ ------ ------- ---------
Net assets available for plan
benefits $ 1,285,051 1,148,101 57,957 85,276 120,865 2,697,250
========= ========= ====== ====== ======= =========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
LOCKPORT SAVINGS BANK
401(k) PLAN
Statement of Changes in Net Assets
Available for Plan Benefits with Fund Information
December 31, 1996
<TABLE>
<CAPTION>
GUARANTEED U.S. MONEY BOND AND STOCK
INTEREST STOCK MARKET MORTGAGE INDEX
ACCOUNT ACCOUNT ACCOUNT ACCOUNT ACCOUNT TOTAL
---------- ------- ------- ---------- ---------- -----
Contributions:
<S> <C> <C> <C> <C> <C> <C>
Employer $ 59,467 69,830 4,922 14,324 20,568 169,111
Employee 179,283 208,766 15,353 43,835 61,520 508,757
----------- ----------- --------- ----------- ----------- -----------
238,750 278,596 20,275 58,159 82,088 677,868
----------- ----------- --------- ----------- ----------- -----------
Investment income:
Interest 79,970 - - - - 79,970
Net appreciation (depreciation) in fair
value of investments, including
realized gains and losses (3,893) 317,414 4,187 4,984 40,445 363,137
----------- ----------- --------- ----------- ----------- -----------
76,077 317,414 4,187 4,984 40,445 443,107
----------- ----------- --------- ----------- ----------- -----------
Total contributions and
investment income 314,827 596,010 24,462 63,143 122,533 1,120,975
Benefits paid to participants (65,586) (43,286) (2,390) (4,401) (14,702) (130,365)
Transfers among funds (110,115) 66,396 19,188 (4,099) 28,630 -
----------- ----------- --------- ----------- ----------- -----------
Net increase 139,126 619,120 41,260 54,643 136,461 990,610
Net assets available for plan benefits:
Beginning of year 1,285,051 1,148,101 57,957 85,276 120,865 2,697,250
----------- ----------- --------- ----------- ----------- -----------
End of year $ 1,424,177 1,767,221 99,217 139,919 257,326 3,687,860
=========== =========== ========= =========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
LOCKPORT SAVINGS PLAN
401(k) PLAN
Statement of Changes in Net Assets
Available for Plan Benefits with Fund Information
December 31, 1996
<TABLE>
<CAPTION>
Guaranteed U.S. Money Bond and Stock
Interest Stock Market Mortgage Index
Account Account Account Account Account Total
---------- ------- ------- -------- ------- -----
<S> <C> <C> <C> <C> <C> <C>
Contributions:
Employer $ 59,946 56,911 3,171 10,469 12,525 143,022
Employee 150,426 215,196 7,502 27,205 31,036 431,365
---------- --------- ------- -------- ------- --------
210,372 272,107 10,673 37,674 43,561 574,387
---------- --------- ------- -------- ------- --------
Investment income:
Interest 77,159 -- -- -- -- 77,159
Net appreciation (depreciation)
in fair value of investments,
including realized gains and
losses (6) 245,443 3,207 9,026 23,004 280,674
---------- --------- ------- -------- ------- ---------
77,153 245,443 3,207 9,026 23,004 357,833
---------- --------- ------- -------- ------- ---------
Total contributions and
investment income 287,525 517,550 13,880 46,700 66,565 932,220
Benefits paid to participants (37,320) (18,207) (4,811) -- (109) (60,447)
Transfers among funds (25,700) 3,477 13,633 3,239 5,351 --
---------- --------- ------- -------- ------- ---------
Net increase 224,505 502,820 22,702 49,939 71,807 871,773
Net assets available for plan
benefits:
Beginning of year 1,060,546 645,281 35,255 35,337 49,058 1,825,477
---------- --------- ------- -------- ------- ---------
End of year $ 1,285,051 1,148,101 57,957 85,276 120,865 2,697,250
========== ========= ======= ======== ======= =========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
LOCKPORT SAVINGS BANK
401(K) PLAN
Notes to Financial Statements
December 31, 1996 and 1995
(1) Description of Plan
-------------------
The following description of Lockport Savings Bank 401(k) Plan (the Plan)
is provided for general information purposes only. Participants should
refer to the Plan document for more complete information.
(a) General
-------
The Plan is a defined contribution plan covering all employees of
Lockport Savings Bank (the Bank). The Plan is subject to the
provisions of the Employee Retirement Income Security Act of 1974
(ERISA).
(b) Eligibility
-----------
Employees are eligible to participate in the Plan when they reach age
21 and have completed one year of service during which they
worked at least 1,000 hours.
(c) Contributions
-------------
Participants may make contributions to the Plan in the form of salary
reductions of up to 15% of their total compensation, excluding
bonuses. The Bank makes matching contributions of 50% of employee
contributions, up to a maximum of 6% of the employee's total
compensation, excluding bonuses. Participant contributions are
limited by the maximum allowable contribution under the Internal
Revenue Code.
(d) Participants' Accounts
----------------------
Each participant's account is credited with contributions and a pro
rata share of investment income.
(e) Vesting
-------
Participant and Bank matching contributions immediately vest 100% to
the participant.
(f) Distributions
-------------
Participants or their beneficiaries are entitled to their entire
account balance upon death, disability or retirement, payable in
a single sum or in an annuity.
(g) Administrative Expenses
-----------------------
All the costs of administering the Plan are borne by the Bank.
1 (Continued)
<PAGE>
LOCKPORT SAVINGS BANK
401(k) PLAN
Notes to Financial Statements
(2) Summary of Significant Accounting Policies
------------------------------------------
(a) Basis of Presentation
---------------------
The accompanying financial statements have been prepared on the
accrual basis of accounting.
(b) Use of Estimates
----------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires the use of estimates and
assumptions that affect the reported amounts of net assets
available for plan benefits and changes therein. Actual results
could differ from those estimates.
(c) Investments
-----------
Investments in the pooled separate accounts of the Principal Mutual
Life Insurance Company (Principal) are carried at fair value
based on the fair values of the underlying assets. The Guaranteed
Interest Account is carried at fair value, which approximates
contract value (original investment plus accrued interest).
Investment income includes unrealized appreciation or
depreciation in the value of the investments.
(3) Investments
-----------
Contributions to the Plan are invested under a group annuity contract with
Principal. Plan participants may allocate their funds among one or
more of the following investment accounts under the contract:
. Guaranteed Interest - A general investment account comprised of
guaranteed interest contracts.
. U.S. Stock - A pooled separate account which is comprised of equity
securities.
. Money Market - A pooled separate account which is comprised of
commercial paper, U.S. government and agency securities and other
short-term, interest-bearing securities.
. Bond and Mortgage - A pooled separate account which is comprised of
intermediate-term, commercial mortgages and mortgage-backed
securities.
. Stock Index - A pooled separate account which is comprised of the
stocks included in the Standard & Poor's 500 Stock Index.
2 (Continued)
<PAGE>
LOCKPORT SAVINGS BANK
401(K) PLAN
Notes to Financial Statements, Continued
(3) Investments, Continued
----------------------
Individual investments held by Principal that comprise 5% or more of the
Plan's net assets available for plan benefits at December 31, 1996 and
1995 are as follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Principal Mutual Life Insurance Company:
Guaranteed Interest Account $ 1,424,167 1,285,051
U.S. Stock Account 1,767,188 1,148,101
Stock Index Account 257,326 -
========== =========
</TABLE>
(4) Federal Income Taxes
--------------------
The Internal Revenue Service has issued a determination letter that the
Plan is qualified under the provisions of Sections 401(a) and 401(k)
of the Internal Revenue Code (the "Code") and is therefore exempt from
federal income taxes under Section 501(a) of the Code. The Plan
sponsor has represented that the Plan has operated in conformity with
applicable laws and regulations to maintain its tax qualified status.
(5) Plan Termination
----------------
Although it has not expressed any intent to do so, the Bank has the right
to discontinue its matching contribution at any time and to terminate
the Plan subject to the provisions of ERISA. In the event of a
termination of the Plan, participants will be entitled to the entire
amount credited to their accounts.
3
<PAGE>
Schedule 1
----------
LOCKPORT SAVINGS BANK
401(k) PLAN
Item 27a - Schedule of Assets Held for Investment Purposes
December 31, 1996
<TABLE>
<CAPTION>
Fair
Identity of issue Description Cost Value
----------------- ----------- ---- -----
<S> <C> <C> <C>
Group annuity contract with Principal
Mutual Life Insurance Company:*
Guaranteed Interest Account General investment
account comprised
of guaranteed
interest contracts $ 1,428,065 1,424,167
U.S. Stock Account Pooled separate account
investing in equity
securities 1,176,808 1,767,188
Money Market Account Pooled separate account
investing in money
market instruments 93,889 99,217
Bond and Mortgage Account Pooled separate account
investing in fixed
income securities 127,170 139,919
Stock Index Account Pooled separate account
investing in corporate
stocks 197,921 257,326
----------- -----------
$ 3,023,853 3,687,817
=========== ===========
</TABLE>
*Person named is a party-in-interest.
<PAGE>
SCHEDULE 2
----------
LOCKPORT SAVINGS BANK
401(k) PLAN
Item 27d - Schedule of Reportable Transactions
Year ended December 31, 1996
<TABLE>
<CAPTION>
Expense
Number Number incurred
Identity of Description of units Purchase of units Selling Lease with
party involved of asset purchased price sold price rental transaction
-------------- ----------- --------- -------- -------- ------- ------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Group Annuity
contract with
Principal Mutual
Life Insurance
Company:*
Guaranteed General investment
Interest account comprised
Account** of guaranteed
interest contracts - $ 380,814 - $317,775 - -
U.S Stock Pooled separate
Account** account investing
in equity
securities 1519.4946 405,909 397.5914 104,235 - -
Money Market Pooled separate
Account** account investing
in money
market
instruments 2681.8994 86,982 1533.2210 49,909 - -
Stock Index Pooled separate
Account** account investing
in corporate
stocks 5559.6847 122,841 1210,7832 26,825 - -
========== ========== ========= ======== ========= =========
<CAPTION>
Fair
value of
asset on
Identity of Description Cost of transaction Net
party involved of asset asset date gain
-------------- ----------- ------- ----------- ----
<S> <C> <C> <C> <C>
Group Annuity
contract with
Principal Mutual
Life Insurance
Company:*
Guaranteed General investment
Interest account comprised
Account** of guaranteed
interest contracts 317,775 317,775 -
U.S Stock Pooled separate
Account** account investing
in equity
securities 76,642 76,642 27,593
Money Market Pooled separate
Account** account investing
in money
market
instruments 47,428 47,428 2,481
Stock Index Pooled separate
Account** account investing
in corporate
stocks 22,156 22,156 4,669
======== ======== =======
</TABLE>
*Person named is a party-in-interest.
**Series of transactions
<PAGE>
PROSPECTUS
Up to 13,501,554 shares of common stock
NIAGARA BANCORP, INC.
6950 South Transit Road
P.O. Box 908
Lockport, New York 14095-0908
(716) 625-7500
================================================================================
Lockport Savings Bank is reorganizing from the mutual form of organization
to the mutual holding company form of organization. As part of the
Reorganization, Lockport Savings Bank will become a wholly-owned subsidiary of
Niagara Bancorp, Inc., and Niagara Bancorp, Inc. will issue a majority of its
common stock to Niagara Bancorp, MHC, a mutual holding company, and sell a
minority of its common stock to the public. The shares of common stock of
Niagara Bancorp, Inc. are being offered to depositors and the public under the
terms of a plan of reorganization which must be approved by depositors of
Lockport Savings Bank and by the New York State Banking Department. In
addition, the Federal Deposit Insurance Corporation must issue a letter of
nonobjection to the reorganization. The Reorganization will not go forward if
Lockport Savings Bank does not receive these approvals and nonobjections, or if
Niagara Bancorp, Inc. does not sell at least a minimum number of shares of its
common stock. Because the names of Niagara Bancorp, Inc. and Niagara Bancorp,
MHC are so similar, we will refer to Niagara Bancorp, Inc. as the "Company" and
we will refer to Niagara Bancorp, MHC as the "Mutual Holding Company."
================================================================================
TERMS OF OFFERING
An independent appraiser has estimated that the pro forma market value of
the Common Stock of the Company to be between $191.1 million to $258.8 million.
Based on this valuation, the Company will issue between 19,125,000 and
25,875,000 shares of common stock in the reorganization. We intend to sell
45.4% of such shares, or between 8,677,747 and 11,740,482 shares, to depositors
and the public, and issue 53.3% of such shares, or between 10,186,921 and
13,782,304 shares, to the Mutual Holding Company. In addition, shares are being
issued to a charitable foundation, which will result in stockholders other than
the Mutual Holding Company owning 46.7% of the shares of the Common Stock
outstanding at the conclusion of the reorganization. Subject to the approval of
the New York State Banking Department and the nonobjection of the Federal
Deposit Insurance Corporation, a total of 29,756,250 shares may be issued in the
reorganization, and up to 13,501,554 shares may be sold to depositors and the
public in the offering. Based on these estimates, we are making the following
offering of shares of Common Stock.
<TABLE>
<S> <C> <C> <C>
. Price Per Share: $10.00
. Number of Shares
Minimum/Maximum/Adjusted Maximum: 8,677,747 11,740,482 13,501,554
. Reorganization Expenses
Minimum/Maximum/Adjusted Maximum: $1,455,352 $1,694,858 $1,800,000
. Net Proceeds to Niagara Bancorp, Inc.
Minimum/Maximum/Adjusted Maximum: $85,322,118 $15,709,962 $133,215,540
. Net Proceeds per share to Niagara Bancorp, Inc.
Minimum/Maximum/Adjusted Maximum: $9.83 $9.86 $9.87
</TABLE>
Please refer to Risk Factors beginning on page _____ of this Prospectus.
These securities are not deposits or accounts and are not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
<PAGE>
Neither the Securities and Exchange Commission, the New York State Banking
Department, the Federal Deposit Insurance Corporation, nor any state securities
regulator has approved or disapproved these securities or determined if this
Prospectus is accurate or complete. Any representation to the contrary is a
criminal offense.
CIBC Oppenheimer Corp. and Trident Securities, Inc. will use their best
efforts to assist the Company in selling at least the minimum number of shares
but do not guarantee that this number will be sold. All funds received from
subscribers will be held in an interest bearing savings account at Lockport
Savings Bank until the completion or termination of the Reorganization. Niagara
Bancorp has received conditional approval to list the common stock on the
National Market System of the Nasdaq Stock Market under the symbol "NBCP."
For information on how to subscribe, call the Stock Information Center at
(716) 438-1198. For additional information about the Bank, please visit our
Website at http://www.__________.com.
CIBC OPPENHEIMER CORP. TRIDENT SECURITIES, INC.
Prospectus dated February ___, 1998
<PAGE>
MAP
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
QUESTIONS AND ANSWERS ABOUT THE STOCK OFFERING.............................. 1
SUMMARY AND OVERVIEW........................................................ 4
SELECTED FINANCIAL INFORMATION.............................................. 8
RISK FACTORS................................................................ 11
NIAGARA BANCORP, INC........................................................ 15
LOCKPORT SAVINGS BANK....................................................... 15
REGULATORY CAPITAL COMPLIANCE............................................... 16
USE OF PROCEEDS............................................................. 17
DIVIDEND POLICY............................................................. 18
MARKET FOR THE COMMON STOCK................................................. 19
CAPITALIZATION.............................................................. 19
PRO FORMA DATA.............................................................. 20
COMPARISON OF VALUATION AND PRO FORMAINFORMATION WITHOUT FOUNDATION......... 28
PARTICIPATION BY MANAGEMENT................................................. 29
CONSOLIDATED STATEMENTS OF INCOME........................................... 30
MANAGEMENT'S DISCUSSION AND ANALYSIS OFFINANCIAL CONDITION AND RESULTS OF
OPERATIONS................................................................. 31
BUSINESS OF THE COMPANY..................................................... 47
BUSINESS OF THE BANK........................................................ 47
FEDERAL AND STATE TAXATION.................................................. 82
REGULATION.................................................................. 83
MANAGEMENT OF THE COMPANY................................................... 92
MANAGEMENT OF THE BANK...................................................... 93
THE REORGANIZATION AND OFFERING............................................. 102
</TABLE>
(i)
<PAGE>
<TABLE>
<S> <C>
RESTRICTIONS ON ACQUISITION OF THE COMPANY.................................. 118
DESCRIPTION OF CAPITAL STOCK OF THE COMPANY................................. 120
TRANSFER AGENT AND REGISTRAR................................................ 121
LEGAL AND TAX MATTERS....................................................... 121
EXPERTS..................................................................... 122
ADDITIONAL INFORMATION...................................................... 122
CONSOLIDATED FINANCIAL STATEMENTS........................................... F-1
</TABLE>
This document contains forward-looking statements which involve risks and
uncertainties. Niagara Bancorp, Inc.'s actual results may differ significantly
from the results discussed in the forward-looking statements. Factors that might
cause such a difference include, but are not limited to, those discussed in
"Risk Factors" beginning on page 11 of this Prospectus.
Please see the Glossary beginning on page G-l for the meaning of capitalized
terms that are used in this Prospectus.
(ii)
<PAGE>
MAP
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE STOCK OFFERING
Q: What is the purpose of the offering?
A: The offering is being made in connection with the reorganization of
Lockport Savings Bank from a New York-chartered mutual savings bank into
the mutual holding company form of ownership. As part of the
reorganization, you will have the opportunity to become a shareholder of
Niagara Bancorp, Inc., which will allow you to share in the future of our
bank. The offering will increase our capital for lending and investment
activities. This will better enable us to continue the expansion of our
retail banking franchise and to diversify operations. Further, as a stock
savings bank operating through a holding company structure, we will improve
our ability to access the capital markets. As part of the reorganization,
we are also establishing a charitable foundation that will be dedicated
exclusively to supporting charitable causes and community development
activities in Western New York.
Q: How do I order the stock?
A: You must complete and return the stock order form and certification to us
together with your payment, on or before March _____, 1998.
Q: How much stock may I order?
A: The minimum order is 25 shares (or $250). The maximum order is 20,000
shares (or $200,000) for any individual person or persons ordering through
a single account. No person, related person, or persons acting together
may order more than 40,000 shares (or $400,000). We may decrease or
increase the maximum purchase limitation without notifying you. However,
if we increase the maximum purchase limitation, and you previously
subscribed for the maximum number of shares, you will be given the
opportunity to subscribe for additional shares.
Q: Who will be permitted to purchase stock?
A: The stock will be offered on a priority basis to the following persons:
. Persons who had deposit accounts of at least $100 with us on August
31, 1996. Any remaining shares will be offered to:
. The Company's employee stock ownership plan. Any remaining shares
will be offered to:
. Persons who had deposit accounts of at least $100 with us on December
31, 1997.
If the above persons do not subscribe for all of the shares, the remaining
shares will be offered to certain members of the general public, with
preference given first to natural persons residing in the Western New York
counties of Niagara, Erie, Orleans and Genesee, and secondly to natural
persons residing in the remaining four counties of Western New York,
Wyoming, Allegany, Cattaraugus and Chautauqua counties.
Q: What happens if there are not enough shares to fill all orders?
A: If the offering is oversubscribed in any of the categories listed above,
then shares will be allocated among all subscribers in that category based
on a formula that is described in detail in "The Reorganization and
Offering".
<PAGE>
Q: As a depositor of Lockport Savings Bank, what will happen if I do not order
any stock?
A: You are not required to purchase common stock. Your deposit accounts and
any loans you may have with us will not be affected by the
reorganization.
Q: How do I decide whether to buy stock in the offering?
A: In order to make an informed investment decision, you should read this
entire Prospectus, particularly the section titled "Risk Factors."
Q: Who can held answer any questions I may have about the offering?
If you have questions about the offering, you may contact:
Stock Information Center
Lockport Savings Bank
55 East Avenue
P.O. Box 886
Lockport, New York 14095-0886
(716) 438-1198
2
<PAGE>
SUMMARY AND OVERVIEW
Generally, this summary highlights selected information from this document
and does not contain all the information that you need to know before making an
informed investment decision. To understand the Offering fully, you should read
carefully this entire Prospectus, including the consolidated financial
statements and the notes to the consolidated financial statements of Lockport
Savings Bank. References in this document to "we", "us", or "our" refer to
Lockport Savings Bank. In certain instances where appropriate, "us" or "our"
refers collectively to Niagara Bancorp, Inc. and Lockport Savings Bank.
References in this document to the "Bank" refer to Lockport Savings Bank.
References in this document to the "Company" refer to Niagara Bancorp, Inc.
References to the "Mutual Holding Company" refer to Niagara Bancorp, MHC.
The Reorganization
The reorganization involves a number of steps, including the following:
. The Bank will establish the Company and the Mutual Holding Company,
neither of which will have any assets prior to the completion of
the Reorganization.
. The Bank will convert from the mutual form of organization to the
capital stock form of organization and issue 100% of its capital
stock to the Company.
. The Company will issue between 19,125,000 and 29,756,250 shares of
common stock in the Reorganization: 53.3% of these shares (or
between 10,186,921 and 13,782,304 shares) will be issued to the
Mutual Holding Company, 45.4% (or between 8,677,747 and 11,740,482
shares) will be sold to depositors and the public, and 1.3% of these
shares (or between 248,625 shares and 386,831) will be issued to a
newly formed charitable foundation.
. Interests that depositors had in the Bank will become interests in
the Mutual Holding Company, which will own 53.3% of the shares of
common stock of the Company and indirectly of the Bank.
The Mutual Holding Company Structure
The mutual holding company structure differs in significant respects from
the bank holding company structure that is used in a standard mutual to stock
conversion. A savings institution that converts from the mutual to stock form of
organization using the mutual holding company structure sells only a minority of
its shares at the time of the Reorganization and Offering. By doing so, a
converting institution raises less than half the proceeds that would be raised
in a traditional mutual to stock conversion. Because less than half the proceeds
are raised, the Company and the Bank will not be as overcapitalized as if the
Bank had converted in a standard conversion. The shares that are issued to the
mutual holding company may be subsequently sold to the Bank's depositors if the
mutual holding company converts from the mutual to the stock form of
organization. See "Regulation - Mutual Holding Company Regulation -Conversion of
the Mutual Holding Company to the Stock Form." In addition, because the Mutual
Holding Company controls a majority of the Company's Common Stock, we believe
that the Reorganization and Offering will permit the
3
<PAGE>
Bank to achieve the benefits of a stock company without a loss of control that
often follows a standard conversion from mutual to stock form. Sales of locally
based, independent savings institutions to larger, regional financial
institutions can result in closed branches, fewer choices for consumers,
employee layoffs and the loss of community support for and involvement by
financial institutions.
Because the Mutual Holding Company is a mutual corporation, its actions
will not necessarily always be in the interests of the Company's stockholders.
In making business decisions, the Mutual Holding Company's Board of Directors
will consider a variety of constituencies, including the depositors of the Bank,
the employees of the Bank, and the communities in which the Bank operates. As
the majority stockholder of the Company, the Mutual Holding Company is also
interested in the continued success and profitability of the Bank and the
Company. Consequently, the Mutual Holding Company will act in a manner which
furthers the general interest of all of its constituencies, including, but not
limited to, the interest of the stockholders of the Company. The Mutual Holding
Company believes that the interests of the stockholders of the Company, and
those of the Mutual Holding Company's other constituencies, are in many
circumstances the same, such as the increased profitability of the Company and
the Bank and continued service to the communities in which the Bank operates.
The Company
Niagara Bancorp, Inc.
6950 South Transit Road
P.O. Box 514
Lockport, New York 14095-0514
(716) 625-7500
The Company was formed to be our holding company, and has not had any
operations to date. Upon completion of the reorganization of the Bank into the
mutual holding company structure and the sale of stock to depositors and the
public (the "Reorganization"), the Company will own all of Lockport Savings
Bank's common stock, the public (including depositors and the foundation) will
own a minority of the shares of Common Stock of the Company, and the Mutual
Holding Company will be the Company's majority stockholder. The holding company
structure will provide us greater flexibility in terms of operations, expansion
and diversification. See page _____.
The Bank
Lockport Savings Bank
6950 South Transit Road
P.O. Box 514
Lockport, New York 14095-0514
(716) 625-7500
The Bank was organized in 1870 as a New York-chartered mutual savings bank.
At September 30, 1997, we had total assets of $1.2 billion, total deposits of
$992.2 million, and net worth of $126.7 million. We are a community-and
customer-oriented savings bank that operates fifteen full-service branch offices
in the Western New York counties of Niagara, Orleans, Erie and Genesee, which we
consider to be our primary market area. We also consider the remaining four
counties of Western New York, Wyoming, Allegany, Cattaraugus and Chautauqua
counties, as our market area. Through our "Person to Person Commitment"
approach to retail banking, we emphasize personal service and customer
convenience in serving the financial needs of the individuals, families and
businesses residing in Western New York. We offer the convenience and product
mix of a larger, super regional bank while providing the responsiveness and
community orientation of a smaller, local institution.
Lockport is located on the historic Erie Canal and is 20 miles northeast
of Buffalo and 15 miles east of Niagara Falls. More than 9 million people
reside within the 125-mile radius of the city of Buffalo and the region is the
45th largest metropolitan area in the nation and the 3rd largest in New York
State.
4
<PAGE>
Based on FDIC-published data, as of June 30, 1996 we had the second largest
deposit market share in each of Niagara and Orleans counties, the fifth largest
share in Genesee county, and the eighth largest share in Erie County. We have
customer relationships with over 76,000 households in our primary market area,
representing approximately 17% of all households therein. For 1996, we were the
fourth leading originator of residential mortgage loans in Erie County. In the
eight county Western New York region, we had the fifth largest aggregate deposit
market share. Those banks having a larger aggregate market share in Western New
York are significantly larger, super regional financial institutions.
Management considers the Bank to be the dominant independent community bank
focused exclusively on serving the banking needs of the Western New York region.
Since 1990, when the Bank acquired the savings bank life insurance
operations of another Western New York savings bank, the Bank's life insurance
department has grown to become one of the largest servicers of savings bank life
insurance in New York State. These insurance products, along with the sale of
various annuity products, were expanded in 1997 as the Bank added the sale of
mutual funds to its non-deposit product line. Additional opportunities in the
non-deposit field, such as the sale of property and casualty insurance, should
continue to enhance the Bank's position as a full service provider of financial
services in the near future.
Our business strategy is designed to enhance our profitability and
strengthen our position as the dominant, independent community bank in Western
New York. The highlights of our strategy include the following:
. Expansion of the retail banking franchise. We are continuing to
focus on expanding our retail banking franchise and increasing the
number of households served within our market area and the number
of bank products used per customer. Since 1994 we have opened five
full-service branch offices and our Board has authorized the
establishment of three additional branch offices in 1998. We
operate two full-service supermarket branch offices, provide
customer access to ATMs, including the Bank's fourteen ATMs,
without a service charge, provide telephone customer service, and
provide 24-hour telephone account access. We have established a
Website and are developing plans to introduce home computer banking
services. Under the direction of our new head of retail banking,
hired in 1997, additional emphasis and training is being directed
toward greater cross-selling of bank products.
. Loan portfolio growth. Our loan portfolio consists of one- to four-
family residential mortgage loans, commercial and multi-family real
estate loans, consumer and other loans, and commercial business
loans. At September 30, 1997, our loan portfolio totaled $622.5
million, an increase of $263.0 million, or 73.2%, since December
31, 1992. The loan portfolio represented 52.9% of total assets and
62.7% of total deposits at September 30, 1997, compared to 43.1% of
total assets and 48.2% of deposits at December 31, 1992. We intend
to continue to increase our loan portfolio as a percentage of
assets. Further, while maintaining our position as a leading
originator of residential loans in our market, we plan to build
upon our position as the dominant independent community bank to
increase our market share of higher margin multi-family, commercial
real estate, consumer and commercial business loans.
. Maintaining asset quality. Because we believe that asset quality is
a critical component of long-term financial success, we have
remained committed to a conservative credit culture. During the
past five years, and including the nine month period ended
September 30, 1997, non-performing assets have averaged 0.59% of
total assets. At September 30, 1997, our non-performing loans
totaled $1.9 million, representing 0.31% of the loan portfolio, and
our non-performing assets totaled $2.2 million, representing 0.19%
of assets. Our allowance for loan losses amounted to $6.4 million
at September 30, 1997, and represented 1.02% of our loan portfolio
and 330.0% of non-performing loans.
. Managing interest rate risk. Although our liabilities are more
sensitive to changes in interest rates than our assets, we seek to
manage our exposure to interest rate risk by originating and
retaining adjustable-rate loans in both the residential and
commercial real estate loan portfolios, and by
5
<PAGE>
originating short-term and medium-term fixed-rate consumer loans. We
also use our investment and mortgage related securities portfolios to
manage our interest rate risk exposure. As of September 30, 1997, our
securities available for sale totaled $465.0 million, or 39.5% of
total assets, with an average life of 4.27 years, and our securities
held to maturity totaled $37.5 million, or 3.2% of total assets, with
an average life of .07 years.
The Stock Offering
The Company is offering for sale between 8,677,747 and 11,740,482 shares
of its Common Stock, for a price per share of $10.00. Subject to the approval of
the New York State Banking Department and the nonobjection of the FDIC, the
Offering may be increased to 13,501,554 shares (the "Offering").
Stock Purchase Priorities
We are offering shares of Common Stock on the basis of purchase
priorities. Certain depositors of the Bank and the ESOP will receive
subscription rights to purchase shares. Any shares not subscribed for will be
offered to certain members of the general public in a community offering, with
preference given first to natural persons residing in the Western New York
counties of Niagara, Erie, Orleans and Genesee, and secondly to natural persons
residing in the remaining four counties of Western New York, Wyoming, Allegany,
Cattaraugus and Chautauqua counties. We have engaged CIBC Oppenheimer Corp. and
Trident Securities, Inc. to assist us on a best efforts basis in selling the
Common Stock in the Offering. See pages _____ to _____.
Prohibition on Transfer of Subscription Rights
You may not sell or assign your subscription rights. Any transfer of
subscription rights is illegal.
Stock Pricing and Number of Shares to be Issued
The board of directors set the purchase price per share at $10.00 (the
"Subscription Price"), the price most commonly used in stock offerings involving
mutual to stock conversions of mutual savings institutions. The number of shares
of common stock issued in the Offering is based on the independent valuation
(the "Independent Valuation") prepared by RP Financial, LC, an appraisal firm
experienced in appraisals of savings institutions. The Independent Valuation
states that as of November 28, 1997, the estimated pro forma market value of the
Company's common stock to be issued in the Reorganization ranged from a minimum
of $191,250,000 to a maximum of $258,750,000, with a midpoint of $225,000,000
(the "Estimated Valuation Range"). Based on the Independent Valuation and the
Subscription Price, the number of shares of common stock that the Company will
issue will range from between 19,125,000 shares to 25,875,000 shares. The Bank
has decided to offer 45.4% of such shares, or between 8,677,747 shares and
11,740,482 shares (the "Offering Range"), to depositors and the public. The
Board of Directors determined to sell 45.4% of the stock to depositors and the
public in order to raise the maximum amount of proceeds while permitting the
Company to issue additional shares to the charitable foundation and additional
shares of common stock in the future pursuant to the restricted stock plan and
stock option plan that the Company intends to adopt after the reorganization and
offering. The 53.3% of the shares of Company's common stock that are not sold in
the Offering and issued to the charitable foundation will be issued to the
Mutual Holding Company. The establishment of the charitable foundation had the
effect of reducing the Estimated Valuation Range. See "Comparison of Valuation
and Pro Forma Information Without Foundation."
Changes in the market and financial conditions and demand for the common
stock may result in an increase of up to 15% in the maximum of the Estimated
Valuation Range (to up to $297,562,500) and a corresponding increase in the
maximum of the Offering Range (to up to 13,501,554 shares), subject to the
approval of the New York State Banking Department and the nonobjection of the
FDIC. We will not notify subscribers if the maximum of the Estimated Valuation
Range and the maximum of the Offering Range are increased by 15% or less. We
will, however, notify
6
<PAGE>
subscribers if the maximum of the Estimated Valuation Range is increased by more
than 15% or if the minimum of the Estimated Valuation Range is decreased. The
Independent Valuation is not a recommendation of as to the advisability of
purchasing shares, and you should not buy stock based on the Independent
Valuation.
Termination of the Offering
The Subscription Offering will terminate at ___________, New York time,
on March __, 1998. The Community Offering may terminate on or after March ___,
1998, but in any event, no later than May ___, 1998, without the approval of the
FDIC and the Banking Department. If the Reorganization and Offering is not
completed by May ___, 1998 all subscribers will be notified and will be given
the opportunity to cancel or modify their order.
Benefits to Management from the Offering
Our full-time employees will participate in the ESOP, which is a form of
retirement plan that will purchase shares of Common Stock in the Offering. We
also intend to implement a restricted stock plan and a stock option plan
following completion of the Reorganization, which will benefit our officers and
directors. If we adopt the restricted stock plan, certain officers and directors
will be awarded shares of Common Stock at no cost to them. However, the
restricted stock plan and stock option plan may not be adopted until at least
six months after completion of the Reorganization and are subject to shareholder
approval. See pages _____ to _____.
The Charitable Foundation
In furtherance of our commitment to our local community, we intend to
establish a charitable foundation as part of the Reorganization. We will make a
contribution to the foundation, in the form of shares of Common Stock and cash,
in a total amount equal to 5% of the aggregate price of the shares of Common
Stock sold in the Offering. The number of shares of Common Stock to be
contributed to the foundation will equal 3% of the shares sold in the Offering.
The balance of the contribution will consist of cash. The foundation will be
dedicated exclusively to supporting charitable causes and community development
activities in Western New York. Due to the issuance of additional shares of
Common Stock to the foundation, persons purchasing shares in the Offering will
have their ownership and voting interests in the Company diluted by 1.3%. The
Company will incur an expense equal to the full amount of the contribution to
the foundation, offset in part by a corresponding tax benefit, during the
quarter in which the contribution is made. Such expense will reduce earnings
and have a material impact on the Company's earnings. See "Risk Factors--The
Expense and Dilutive Effect of the Contribution of Shares and Cash to the
Charitable Foundation," "Pro Forma Data," and "The Reorganization and Offering-
- -Establishment of the Charitable Foundation."
Use of the Proceeds Raised from the Sale of Common Stock
The Company will use the net proceeds from the Offering as follows. The
percentages we use are estimates:
. 50% will be used to buy all the capital stock of Lockport Savings
Bank.
. 8% will be loaned to the ESOP to fund its purchase of Common
Stock.
. 42% will be retained as a possible source of funds for the payment
of dividends to shareholders, the repurchase of stock, and for
other general corporate purposes.
The proceeds to be received by the Bank will be available for continued
expansion of the retail banking franchise through the opening of new branches,
deposit or bank acquisitions, continued growth in the loan portfolio, and the
purchase of investment and mortgage related securities, in addition to general
corporate purposes.
See pages _____ to _____.
7
<PAGE>
Prospectus Delivery and Procedure for Purchasing Common Stock
To ensure that eligible account holders and supplemental eligible
account holders are properly identified as to their stock purchase priorities,
such parties must list all deposit accounts on the order form, giving all names
on each deposit account and the account numbers at the applicable date. The
failure to provide accurate and complete account information on the order form
may result in a reduction or elimination of your order.
Full payment by check, cash (except by mail), money order, bank draft
or withdrawal authorization (payment by wire transfer will not be accepted) must
accompany an original order form. The Company is not obligated to accept an
order submitted on photocopied or telecopied order forms. We will not accept
order forms if the certification appearing on the reverse side of the order form
is not executed.
Dividends
Niagara Bancorp, Inc. intends to pay an annual cash dividend of $0.12
payable quarterly at $0.03 per share. The payment of dividends is expected to
commence following the first full quarter after completion of the
Reorganization. For a discussion of the Company's anticipated dividend policy,
including restrictions on its ability to pay dividends, see "Dividend
Policy."
Market for the Common Stock
The Company has received conditional approval to have the Common Stock
quoted on the Nasdaq National Market under the symbol "NBCP." CIBC Oppenheimer
Corp. and Trident Securities, Inc. intend to make a market in the Common Stock,
and we expect that additional market makers will be identified.
Important Risks in Purchasing and Owning the Company's Common Stock
Before you decide to purchase stock in the Offering, you should read
the Risk Factors section on pages _____ of this Prospectus, in addition to the
other sections of this Prospectus.
8
<PAGE>
SELECTED FINANCIAL INFORMATION
The selected data presented below under the captions "Selected Financial
Condition Data" and "Selected Operations Data" for, and as of the end of, each
of the years in the five-year period ended December 31, 1996, are derived from
the audited consolidated financial statements of Lockport Savings Bank and
subsidiaries. The consolidated financial statements as of December 31, 1996 and
1995 and for each of the years in the three-year period ended December 31, 1996
are included elsewhere in this prospectus. The selected data presented below as
of and for the nine-month periods ended September 30, 1997 and 1996 are derived
from the unaudited consolidated financial statements of Lockport Savings Bank
and subsidiaries included elsewhere in this prospectus.
<TABLE>
<CAPTION>
December 31,
September 30, ------------------------------------------------------
1997 1996 1995 1994 1993 1992
-------- ------- -------- ------ ------ ------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Selected Financial Condition Data:
- -----------------------------------
Total assets........................... $1,176,451 $1,093,358 $994,291 $ 916,185 $914,910 $834,764
Loans, net............................. 622,487 598,486 535,971 474,191 421,061 359,442
Securities available for sale(1):
Mortgage related securities........... 285,762 284,860 261,543 273,280 300,582 323,105
Other securities...................... 179,211 130,269 84,867 65,733 67,903 27,520
Securities held to maturity............ 37,500 38,000 46,700 43,838 51,927 33,809
Deposits............................... 992,219 920,072 861,065 819,690 812,939 746,345
Other borrowed funds................... 28,740 32,008 - - - -
Net worth.............................. 126,720 115,664 107,653 81,322 87,195 75,722
<CAPTION>
Nine Months
Ended September 30, Years Ended December 31,
------------------------ ---------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
---------- ------- -------- -------- ------ ------ ------
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Selected Operations Data:
- ---------------------------
Interest income......................... $ 61,310 $ 55,458 $ 75,062 $ 69,856 $ 63,144 $ 61,681 $61,096
Interest expense........................ 33,335 30,024 40,655 39,034(2) 31,754 32,597 34,281
---------- ---------- -------- --------- -------- -------- -------
Net interest income................... 27,975 25,434 34,407 30,822 31,390 29,084 26,815
Provision for loan losses............... 975 1,861 2,187 1,016 948 1,522 1,398
---------- ---------- -------- --------- -------- -------- -------
Net interest income after
provision for loan losses............. 27,000 23,573 32,220 29,806 30,442 27,562 25,417
---------- ---------- -------- --------- -------- -------- -------
Fees and service charges................ 3,037 2,564 3,495 2,692 2,283 2,293 1,774
Net gain (loss) on sale of
securities available for sale......... 875 532 576 1,477 (849) 3,601 5,732
Other operating income.................. 1,044 1,223 1,681 1,237 952 1,149 172
---------- ---------- -------- --------- -------- -------- -------
Total operating income.................. 4,956 4,319 5,752 5,406 2,386 7,043 7,678
---------- ---------- -------- --------- -------- -------- -------
Operating and other expenses............ 18,416 14,999 20,926 20,143 18,399 16,666 15,689
---------- ---------- -------- --------- -------- -------- -------
Income before taxes and
cumulative effect of change
in accounting principle.............. 13,540 12,893 17,046 15,069 14,429 17,939 17,406
Income taxes............................ 4,905 4,667 6,278 5,144 4,704 6,595 6,184
Cumulative effect of change
in accounting principle.............. - - - - (924)(3) 129(4) -
---------- ---------- -------- --------- -------- -------- -------
Net income.............................. $ 8,635 $ 8,226 $ 10,768 $ 9,925 $ 8,801 $ 11,473 $11,222
========== ========== ======== ========= ======== ======== =======
</TABLE>
- ---------------------------
(1) The Bank adopted the provisions set forth in SFAS No. 115 on January 1,
1994, which requires securities available for sale to be carried at fair
value. At December 31, 1993 and 1992, securities held for sale were
carried at amortized cost.
(2) Includes $1.25 million paid as a special interest payment in 1995, which
was paid on a prorata basis on all interest-bearing savings, NOW, money
market and certificate of deposit accounts in recognition of the Bank's
125th anniversary.
(3) Cumulative effect of change in accounting for postretirement health care
and life insurance benefits.
(4) Cumulative effect of change in accounting for income taxes.
9
<PAGE>
<TABLE>
<CAPTION>
At or For the Nine Months
Ended September 30, At or For the Years Ended December 31,
------------------------ ------------------------------------------------------
1997(1) 1996(1) 1996 1995 1994 1993 1992
----------- ----------- --------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Selected Financial Ratios
and Other Data:(2)
- ----------------------------
Performance Ratios:
Return on assets (ratio of
net income to average total
assets)..................... 1.01% 1.06% 1.03% 1.04% 0.95% 1.31% 1.47%
Return on net worth (ratio
of net income to average
net worth).................. 9.58 10.20 9.84 10.25 10.41 14.01 16.02
Interest rate spread
information:
Average during period........ 2.83 2.83 2.82 2.88 3.07 3.10 3.17
End of period................ 2.84 2.97 3.03 2.83 3.18 3.04 3.25
Net interest margin (3)....... 3.38 3.38 3.38 3.44 3.50 3.49 3.64
Ratio of operating
income to average
total assets (4)............ 0.48 0.49 0.50 0.41 0.35 0.40 0.25
Ratio of operating expenses
to average total assets...... 2.16 1.94 2.01 2.10 1.99 1.92 2.05
Ratio of average
interest-earning assets
to average interest-
bearing liabilities......... 113.63 113.80 113.93 113.92 112.30 109.95 110.27
Asset Quality Ratios:
Non-performing loans to
total loans.................. 0.31% 0.91% 0.78% 0.74% 0.89% 1.10% 0.75%
Non-performing assets to
total assets................. 0.19 0.54 0.48 0.97 0.56 0.69 0.70
Allowance for loan losses
to non-performing loans...... 330.03 118.58 138.60 119.01 99.29 88.61 102.20
Allowance for loan losses
to total loans............... 1.02 1.08 1.09 0.88 0.88 0.96 0.75
Ratio of net charge-offs
during the period to
average loans outstanding
during the period............ 0.19% 0.04% 0.06% 0.10% 0.17% 0.05% 0.18%
Capital Ratios:
Net worth to total assets..... 10.77% 10.15% 10.58% 10.92% 8.88% 9.53% 9.07%
Average net worth to
average assets............... 10.60 10.43 10.49 10.11 9.17 9.37 9.15
Other Data:
Number of full-service
offices...................... 15 12 13 11 10 10 8
Number of deposit accounts.... 141,088 127,843 129,087 122,464 114,464 107,242 108,146
Loans serviced for others..... $145.7 $123.8 $129.0 $110.4 $85.1 $69.5 $35.6
(in millions)
Residential loan
originations................. $77.4 $83.0 $110.9 $107.6 $84.1 $134.5 $110.3
(in millions)
Full time equivalent
employees.................... 353.0 312.0 325.0 276.5 243.5 238.5 224.0
</TABLE>
- ---------------------------
(1) Ratios for nine month periods have been annualized.
(2) Averages presented are monthly averages.
(3) Net interest income divided by average interest earning assets.
(4) Other operating income excludes net gain(loss) on sale of securities
available for sale.
<PAGE>
RISK FACTORS
In addition to the other information in this Prospectus, you should
consider carefully the following risk factors in evaluating an investment in the
Common Stock.
Decreased Return on Average Equity Immediately After Reorganization
At September 30, 1997, Lockport Savings Bank's ratio of net worth to total
assets was 10.77%. Our equity position will significantly increase as a result
of the net proceeds that we receive in the Offering. On a pro forma basis as of
September 30, 1997, assuming the sale of Common Stock at the midpoint of the
Offering Range, the Company's consolidated ratio of equity to assets would be
approximately 16.8%. We currently anticipate that it will take time to
prudently deploy such capital. As a result, until we have leveraged the capital
we receive in the Offering by increasing our interest-earning assets (and our
interest-bearing liabilities) and thereby reducing our equity as a percentage of
assets, our return on average equity is expected to be below the industry
average. There can be no assurances that we will be able to successfully
leverage our capital, or that we will be successful in generating future returns
on equity equal to our historical returns or industry averages.
Potential Effects of Changes in Interest Rates and the Current Interest Rate
Environment
Our results of operations and financial condition are significantly
affected by changes in interest rates. Our results of operations are
substantially dependent on our net interest income, which is the difference
between the interest income earned on our interest-earning assets and the
interest expense paid on our interest-bearing liabilities. Because as a general
matter our interest-bearing liabilities reprice or mature more quickly than our
interest-earning assets, an increase in interest rates generally would result in
a decrease in our average interest rate spread and net interest income. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations-- Management of Interest Rate Risk."
Changes in interest rates also affect the value of our interest-earning
assets, and in particular our investment securities portfolio. Generally, the
value of investment securities fluctuates inversely with changes in interest
rates. At September 30, 1997, our securities portfolio totaled $502.5 million,
including $465.0 million of securities available for sale. Unrealized gains and
losses on securities available for sale are reported on a quarterly basis as a
separate component of equity. Decreases in the fair value of securities
available for sale therefore could have an adverse affect on stockholders'
equity. See "Business of the Bank--Securities Investment Activities."
We are also subject to reinvestment risk relating to interest rate
movements. Changes in interest rates can affect the average life of loans and
mortgage related securities. Decreases in interest rates can result in
increased prepayments of loans and mortgage related securities, as borrowers
refinance to reduce borrowing costs. Under these circumstances, we are subject
to reinvestment risk to the extent that we are not able to reinvest such
prepayments at rates that are comparable to the rates on the maturing loans or
securities.
Lending Risks Associated With Commercial Real Estate, Multi-Family and Consumer
Lending
At September 30, 1997, our portfolio of multi-family loans totaled $72.8
million, or 11.6% of total loans, our portfolio of commercial real estate loans
totaled $69.6 million, or 11.1% of total loans, and our portfolio of consumer
and other loans totaled $65.4 million, or 10.5% of total loans. Most industry
experts believe that multi-family, commercial real estate and consumer loans
expose a lender to a greater risk of loss than one- to four-family residential
loans. See "Business of the Bank -Lending Activities" and " -Delinquencies and
Classified Assets."
11
<PAGE>
Minority Public Ownership and Certain Anti-Takeover Provisions
Voting Control of the Mutual Holding Company. Under New York law, the Plan
of Reorganization, and our governing corporate instruments, at least 51% of the
Company's voting shares must be owned by the Mutual Holding Company. The Mutual
Holding Company will be controlled by its Board of Trustees, who will consist of
persons who are members of the Board of Directors of the Company and the Bank.
The Mutual Holding Company will elect all members of the Board of Directors of
the Company, and as a general matter, will control the outcome of all matters
presented to the stockholders of the Company for resolution by vote, except for
matters that require a vote greater than a majority. The Mutual Holding
Company, acting through its Board of Trustees, will be able to control the
business and operations of the Company and the Bank and will be able to prevent
any challenge to the ownership or control of the Company by stockholders other
than the Mutual Holding Company ("Minority Stockholders"). Accordingly, a
change in control of the Company and the Bank cannot occur unless the Mutual
Holding Company first converts to the stock form of organization. Although New
York law, applicable regulations and the Plan of Reorganization permit the
Mutual Holding Company to convert from the mutual to the capital stock form of
organization, it is not anticipated that a conversion of the Mutual Holding
Company will occur in the foreseeable future. There can be no assurance when,
if ever, a conversion of the Mutual Holding Company will occur.
Provisions in the Company's and the Bank's Governing Instruments. In
addition, certain provisions of the Company's certificate of incorporation and
bylaws, particularly a provision limiting voting rights, as well as certain
federal and state regulations, assist the Company in maintaining its status as
an independent publicly owned corporation. These provisions provide for, among
other things, supermajority voting, staggered boards of directors, noncumulative
voting for directors, limits on the calling of special meetings of shareholders,
and limits on the ability of Minority Stockholders to vote Common Stock in
excess of 5% of the issued and outstanding shares (inclusive of shares issued to
the Mutual Holding Company). The New York State Banking Regulations prohibit,
for a period of one year following the date of the Reorganization, offers to
acquire or the acquisition of beneficial ownership of more than 10% of the
outstanding stock of the Bank or the Company. The Bank's restated organization
certificate also prohibits, for three years, the acquisition, directly or
indirectly, of the beneficial ownership of more than 10% of the Bank's or the
Company's equity securities.
Dividend Waivers by the Mutual Holding Company
It has been the policy of many mutual holding companies to waive the
receipt of dividends declared by its subsidiary. In connection with its
approval of the Reorganization, however, the Board of Governors of the Federal
Reserve System (the "Federal Reserve Board") imposed certain conditions on the
waiver by the Mutual Holding Company of dividends paid on the Common Stock. In
particular, the Mutual Holding Company must obtain prior Federal Reserve Board
approval before it may waive any dividends. As of the date hereof, management
does not believe that the Federal Reserve Board has given its approval to any
waiver of dividends by any mutual holding company that has requested its
approval. The cumulative amount of waived dividends, if any, must be maintained
in a restricted capital account which would be added to any liquidation account
of the Bank, and would not be available for distribution to Minority
Stockholders. The Plan of Reorganization also provides that if the Mutual
Holding Company converts to stock form in the future, any waived dividends would
reduce the percentage of the converted company's shares of Common Stock issued
to Minority Stockholders in connection with any such transaction. See
"Regulation--Mutual Holding Company Regulation--Conversion of the Mutual Holding
Company to Stock Form." It is not currently intended that the Mutual Holding
Company will waive dividends declared by the Company.
Possible Dilutive Effect of Issuance of Additional Shares
Various possible and planned issuances of Common Stock could dilute the
interests of prospective stockholders of the Company following consummation of
the Reorganization, as noted below.
12
<PAGE>
The number of shares to be sold in the Reorganization may be increased as a
result of an increase in the Estimated Valuation Range of up to 15% to reflect
changes in the market and financial conditions and demand for the stock
following the commencement of the Offering. In the event that the Estimated
Valuation Range is so increased, it is expected that the Company will issue up
to 29,756,250 shares of Common Stock, including 13,501,554 shares of Common
Stock to depositors and the public pursuant to this Prospectus. An increase in
the number of shares will decrease net income per share and stockholders' equity
per share on a pro forma basis and will increase the Company's consolidated
stockholders' equity and net income. See "Capitalization" and "Pro Forma Data."
The ESOP intends to purchase 8.0% of the Common Stock sold in the Offering.
In the event that there are insufficient shares available to fill the ESOP's
order due to an oversubscription by eligible account holders, the Company may
issue authorized but unissued shares of Common Stock to the ESOP in an amount
sufficient to fill the ESOP's order and/or the ESOP may purchase such shares in
the open market. In the event that additional shares of Common Stock are issued
to the ESOP to fill its order, stockholders would experience dilution of their
ownership interests (by up to 3.6% at the adjusted maximum of the Estimated
Valuation Range, assuming the ESOP purchased no shares in the Offering and
excluding shares expected to be issued to the foundation) and per share
stockholders' equity and per share net income would decrease. See "Management
of the Bank--Benefit Plans--Employee Stock Ownership Plan and Trust" and "The
Reorganization and Offering--The Offering."
The restricted stock plan intends to acquire an amount of Common Stock
equal to 4.0% of the shares of Common Stock sold in the Offering. Such shares
of Common Stock may be acquired in the open market with funds provided by the
Company, if permissible, or from authorized but unissued shares of Common Stock.
The issuance of authorized but unissued shares of Common Stock to the restricted
stock plan in an amount equal to 4% of the Common Stock sold in the Offering
would dilute the voting interests of existing stockholders by approximately
1.8%, and net income per share and stockholders' equity per share would be
decreased by a corresponding amount. See "Pro Forma Data" and "Management the
Bank--Benefit Plans--Recognition and Retention Plan."
The Company's stock option plan will reserve for future issuance pursuant
to such plan a number of shares of Common Stock equal to an aggregate of 10% of
the Common Stock sold in the Offering (1,174,048 shares, based on the maximum of
the Estimated Valuation Range). The issuance of authorized but unissued shares
of Common Stock pursuant to the stock option plan in an amount equal to 10% of
the Common Stock sold in the Offering would dilute the voting interests of
existing stockholders by approximately 4.5%, and net income per share and
stockholders' equity per share would be decreased by a corresponding amount.
See "Pro Forma Data" and "Management of the Bank--Benefit Plans--Stock Option
Plan."
The Expense and Dilutive Effect of the Contribution of Shares and Cash to the
Charitable Foundation
Pursuant to the Plan, we intend to establish a charitable foundation in
connection with the Reorganization. We will make a contribution to the
foundation, in the form of shares of Common Stock and cash, in a total amount
equal to 5% of the aggregate Subscription Price of the shares of Common Stock
sold in the Offering. The number of shares of Common Stock to be contributed to
the foundation will equal 3% of the shares sold in the Offering. The balance of
the contribution will consist of cash. Due to the issuance of additional shares
of Common Stock to the foundation, persons purchasing shares in the Offering
will have their ownership and voting interests in the Company diluted by 1.3%.
The contribution of Common Stock to the foundation will be dilutive to the
interests of stockholders and the aggregate contribution will have an adverse
impact on the reported earnings of the Company in 1998, the fiscal year in which
the foundation is to be established and the contribution made. If the foundation
had been established and the contribution made at September 30, 1997, and
assuming the sale of the Common Stock at the midpoint of the Estimated Valuation
Range, we would have reported net income of $5.3 million, rather than reporting
net income of $8.6 million for the nine months ended September 30, 1997. Upon
completion of the Reorganization, the foundation will own 1.4% of the total
shares of the Common Stock to be issued and outstanding (including shares to be
owned by the Mutual Holding Company). See "The Reorganization and Offering--
Establishment of the Charitable Foundation."
13
<PAGE>
Potential Increased Compensation Expenses after the Reorganization
In November 1993, the American Institute of Certified Public Accountants
issued Statement of Position 93-6 entitled "Employers' Accounting for Employee
Stock Ownership Plans," which requires an employer to record compensation
expense in an amount equal to the fair market value of shares committed to be
released to employees from an employee stock ownership plan, instead of an
amount equal to the cost basis of such shares. If the shares of Common Stock
appreciate in value over time, this will result in increased compensation
expense with respect to the ESOP. It is impossible to determine at this time
the extent of such impact on future net income. See "Pro Forma Data" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Recent Accounting Pronouncements." In addition, after completion of
the Reorganization, the Company intends to implement, subject to stockholder
approval (which approval cannot be obtained earlier than six months subsequent
to the Reorganization), the restricted stock plan. Upon implementation, the
award of shares of Common Stock from the restricted stock plan will result in
significant additional compensation expense. See "Pro Forma Data" and
"Management of the Bank--Benefit Plans--Recognition and Retention Plan."
Strong Competition Within the Bank's Market Area
Competition in the banking and financial services industry is intense. In
our market area, we compete with commercial banks, savings institutions,
mortgage brokerage firms, credit unions, finance companies, mutual funds,
insurance companies, and brokerage and investment banking firms operating
locally and elsewhere. Many of these competitors have substantially greater
resources and lending limits than Lockport Savings Bank and may offer certain
services that we do not or cannot provide. Our profitability depends upon our
continued ability to successfully compete in our market area.
Regulatory Oversight and Legislation
We are subject to extensive regulation, supervision and examination by the
New York State Banking Department (our chartering authority), and by the FDIC as
insurer of deposits up to applicable limits. We are also a member of the
Federal Home Loan Bank System and are subject to certain limited regulations
promulgated by the Federal Home Loan Bank. As bank holding companies, the
Company and the Mutual Holding Company also will be subject to regulation and
oversight by the Federal Reserve Board. Such regulation and supervision govern
the activities in which an institution and its holding company may engage and
are intended primarily for the protection of the insurance fund and depositors.
Regulatory authorities have extensive discretion in connection with their
supervisory and enforcement activities which are intended to strengthen the
financial condition of the banking and thrift industries, including the
imposition of restrictions on the operation of an institution, the
classification of assets by the institution and the adequacy of an institution's
allowance for loan losses. Any change in such regulation and oversight whether
in the form of regulatory policy, regulations, or legislation, could have a
material impact on Lockport Savings Bank, the Company, and our operations. See
"Regulation."
Uncertainty as to Future Growth Opportunities
In an effort to fully deploy the capital we raise in the Offering, and to
increase our loan and deposit growth, we may seek to further expand our banking
franchise by acquiring other financial institutions or branches in Western New
York. Our ability to grow through selective acquisitions of other financial
institutions or branches of such institutions will depend on successfully
identifying, acquiring and integrating such institutions or branches. We can
not assure prospective purchasers of Common Stock that we will be able to
generate internal growth or identify attractive acquisition candidates, make
acquisitions on favorable terms or successfully integrate any acquired
institutions or branches into the Company. We currently have no specific plans,
arrangements or understandings regarding any such expansions or acquisitions,
nor have we established criteria to identify potential candidates for
acquisition.
14
<PAGE>
Absence of Market for Common Stock
The Company, as a newly organized company, has never issued capital stock
and, consequently, there is no established market for the Common Stock at this
time. The Company has received conditional approval to have its Common Stock
quoted on the Nasdaq National Market under the symbol "NBCP". CIBC Oppenheimer
Corp. and Trident Securities, Inc. intend to make a market in the Common Stock,
and we expect that additional market makers will be identified.
Irrevocability of Orders; Potential Delay in Completion of Offerings
Orders submitted in the Offering are irrevocable. Funds submitted in
connection with any purchase of Common Stock in the Offering will be held by the
Company until the completion or termination of the Reorganization, including any
extension of the expiration date. Because completion of the Reorganization will
be subject to an update of the independent appraisal prepared by RP Financial,
among other factors, there may be one or more delays in the completion of the
Reorganization. Subscribers will have no access to subscription funds and/or
shares of Common Stock until the Reorganization is completed or terminated.
Capability of the Bank's Data Information Systems to Accommodate the Year 2000
Like many financial institutions, the Bank relies upon computers for the
daily conduct of its business and for information systems processing. There is
concern among industry experts that on January 1, 2000 computers will be unable
to "read" the new year and there may be widespread computer malfunctions. The
Bank generally relies on software and hardware developed by independent third
parties to provide the information systems used by the Bank, and we have been
advised by our information systems providers that the issue is being addressed.
We are also in the process of reviewing internally developed programs to assure
year 2000 compliance. Based on information currently available, management does
not believe that significant additional costs will be incurred in connection
with the year 2000 issue.
NIAGARA BANCORP, INC.
Niagara Bancorp, Inc. was recently organized for the purpose of acquiring
all of the capital stock of Lockport Savings Bank upon completion of the
Reorganization. The Company has received approval from the Federal Reserve
Board to become a bank holding company and, upon completion of the
Reorganization, will be subject to regulation by the Federal Reserve Board. See
"The Reorganization and Offering--Description of and Reasons for the
Reorganization" and "Regulation--Holding Company Regulation." Upon completion of
the Reorganization, the Company will have no significant assets other than the
shares of the Bank's common stock and an amount equal to 50% of the net proceeds
of the Offering, including the loan to the ESOP, and will have no significant
liabilities. The Company intends to use a portion of the net proceeds it retains
to loan to the ESOP funds to enable the ESOP to purchase up to 8% of the stock
sold in the Offering. See "Use of Proceeds." The management of the Company is
set forth under "Management of the Company." Initially, the Company will neither
own nor lease any property, but will instead use the premises, equipment and
furniture of the Bank. At the present time, the Company does not intend to
employ any persons other than certain officers who are currently officers of the
Bank and will utilize the support staff of the Bank from time to time.
Additional employees will be hired as appropriate to the extent the Company
expands its business in the future.
Management believes that the holding company structure will provide the
Company additional flexibility to diversify its business activities through
existing or newly formed subsidiaries, or through acquisitions of, or mergers
with, other financial institutions and financial services related companies.
There are no current arrangements, understandings or agreements regarding any
such opportunities. However, subsequent to the Reorganization, the Company will
be in a position, subject to regulatory limitations and the Company's financial
position, to take advantage
15
<PAGE>
of any such acquisition and expansion opportunities that may arise. The initial
activities of the Company are anticipated to be funded by the proceeds to be
retained by the Company, income thereon and through dividends from the Bank.
The Company's executive office is located at the administrative offices of
the Bank, at 6950 South Transit Road, P.O. Box 908, Lockport, New York 14095-
0908. Its telephone number is (716) 625-7500.
LOCKPORT SAVINGS BANK
The Bank was organized in 1870 as a New York-chartered mutual savings bank.
The Bank's deposits are insured by the Bank Insurance Fund, as administered by
the FDIC, up to the maximum amount permitted by law. We are a community-
oriented savings bank engaged primarily in the business of accepting deposits
from customers through our fifteen branch offices in the Western New York
counties of Niagara, Orleans, Erie and Genesee, and investing those deposits,
together with funds generated from operations and borrowings, in one- to four-
family residential, multi-family residential and commercial real estate loans,
commercial business loans, consumer and other loans, and investment and mortgage
related securities.
Through our "Person to Person Commitment" approach to retail banking, we
emphasize personal service and customer convenience in serving the financial
needs of the individuals, families and businesses residing in Western New York.
Our business strategy is designed to improve our profitability, expand our
retail banking franchise, and remain an independent community bank.
At September 30, 1997, the Bank had total assets of $1.2 billion, total
deposits of $992.2 million and net worth of $126.7 million. At September 30,
1997, $386.5 million, or 61.8%, of the Bank's total loans were collateralized by
one- to four-family residential real estate. The Bank also originates multi-
family residential and commercial real estate loans, which totaled $72.8 million
and $69.6 million, or 11.6% and 11.1%, respectively, of the Bank's total loans
at September 30, 1997. Consumer and other loans totaled $65.4 million, or 10.5%
of the Bank's total loans, at September 30, 1997. The Bank's investment and
mortgage related securities portfolios totaled $502.5 million at September 30,
1997, representing 42.7% of total assets at such date.
The Bank's executive office is located at 6950 South Transit Road,
Lockport, New York 14095-0908. The Bank's telephone number is (716) 625-7500.
REGULATORY CAPITAL COMPLIANCE
At September 30, 1997, the Bank exceeded each of its regulatory capital
requirements. Set forth below is a summary of the Bank's compliance with the
FDIC capital standards as of September 30, 1997, on a historical and pro forma
basis assuming that the indicated number of shares were sold as of such date and
receipt by the Bank of 50% of the net proceeds. For purposes 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 restricted stock plan are deducted from pro
forma regulatory capital.
16
<PAGE>
<TABLE>
<CAPTION>
Pro Forma at September 30, 1997, Based Upon the Sale at $10.00 per Share of
---------------------------------------------------------------------------------
Historical at 8,677,747 10,209,115 11,740,482 13,501,554
September 30, 1997 Shares Shares Shares Shares(1)
------------------ ------------------ ------------------ ------------------ ------------------
Percent Percent Percent Percent Percent
of of of of of
Amount Assets(2) Amount Assets(2) Amount Assets(2) Amount Assets(2) Amount Assets(2)
------ --------- ------ --------- ------ --------- ------ --------- ------ ---------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
GAAP capital............... $126,720 10.77% $158,651 13.05% $164,372 13.45% $170,093 13.84% $176,688 14.28%
======== ====== ======== ====== ======== ====== ======== ====== ======== ======
Leverage capital:
Capital level (3)......... $125,383 10.75% $157,314 13.05% $163,035 13.45% $168,756 13.84% $175,351 14.29%
Requirement(4)............ 34,990 3.00% 36,157 3.00% 36,365 3.00% 36,574 3.00% 36,814 3.00%
-------- ------ -------- ------ -------- ------ -------- ------ -------- ------
Excess.................. $ 90,393 7.75% $121,157 10.05% $126,670 10.45% $132,182 10.84% $138,537 11.29%
======== ====== ======== ====== ======== ====== ======== ====== ======== ======
Risk-based capital:
Tier 1 Capital level
(3)(5).................... $125,383 20.69% $157,314 25.13% $163,035 25.90% $168,756 26.66% $175,351 27.52%
Requirement............... 24,235 4.00% 25,035 4.00% 25,179 4.00% 25,322 4.00% 25,487 4.00%
-------- ------ -------- ------ -------- ------ -------- ------ -------- ------
Excess.................. $101,148 16.69% $132,279 21.13% $137,856 21.90% $143,434 22.66% $149,864 23.52%
======== ====== ======== ====== ======== ====== ======== ====== ======== ======
Total capital level
(3)(5).................. $131,736 21.74% $163,667 26.15% $169,388 26.91% $175,109 27.66% $181,704 28.52%
Requirement............... 48,470 8.00% 50,071 8.00% 50,357 8.00% 50,643 8.00% 50,973 8.00%
-------- ------ -------- ------ -------- ------ -------- ------ -------- ------
Excess.................. $ 83,266 13.74% $113,596 18.15% $119,031 18.91% $124,466 19.66% $130,731 20.52%
======== ====== ======== ====== ======== ====== ======== ====== ======== ======
</TABLE>
- ------------------------------
(1) As adjusted to give effect to an increase in the number of shares which
could occur due to an increase in the Estimated Valuation Range of up to 15%
as a result of regulatory considerations, demand for the shares, or changes
in market conditions or general financial and economic conditions following
the commencement of the Subscription and Community Offerings.
(2) Leverage capital levels are shown as a percentage of tangible assets. Risk-
based capital levels are calculated on the basis of a percentage of risk-
weighted assets.
(3) Pro forma capital levels assume: funding by the Bank of the restricted
stock plan to enable the plan to acquire a number of shares equal to 4% of
the Common Stock sold in the Offering; the purchase by the ESOP of 8% of the
shares sold in the Offering; and the capitalization of the Mutual Holding
Company by the Bank with $100,000. See "Management of the Bank--Benefit
Plans" for a discussion of the restricted stock plan and ESOP.
(4) The current leverage capital requirement for savings banks is 3% of total
adjusted assets for savings banks that receive the highest supervisory
rating for safety and soundness and that are not experiencing or
anticipating significant growth. The current leverage capital ratio
applicable to all other savings banks is 4% to 5%. See "Regulation--FDIC
Regulations--Capital Requirements.
(5) Assumes net proceeds are invested in assets that carry a risk-weighting
equal to the average risk weighting of the Bank's risk-weighted assets as of
September 30, 1997.
USE OF PROCEEDS
Although the actual net proceeds from the sale of the Common Stock cannot
be determined until the Offering is completed, it is presently anticipated that
the net proceeds from the sale of the Common Stock will be between $85.3 million
and $115.7 million (or $133.2 million if the Estimated Valuation Range is
increased by 15%). See "Pro Forma Data" and "The Reorganization and Offering--
Stock Pricing and Number of Shares to Be Issued" as to the assumptions used to
arrive at such amounts. The Company will be unable to utilize any of the net
proceeds of the Offering until the consummation of the Reorganization.
The Company will contribute approximately 50% of the net proceeds of the
Offering to the Bank, or approximately $42.7 million to $66.6 million at the
minimum and adjusted maximum of the Estimated Valuation Range, respectively.
Such portion of net proceeds received by the Bank from the Company will be used
by the Bank for general corporate purposes, including investments in short- and
medium-term, investment grade debt securities, mortgage related securities and
marketable equity securities, and to increase the origination of mortgage,
consumer and commercial business loans. The Bank may also use such funds for the
continued expansion of its retail banking franchise, and to expand operations
through acquisitions of other financial institutions, branch offices or other
financial services companies. To the extent that the stock-based benefit
programs which the Company intends to adopt subsequent to the Offering are not
funded with authorized but unissued shares of Common Stock of the Company, the
Company or Bank may use net proceeds from the Offering to fund the purchase of
stock to be awarded under such stock benefit programs.
17
<PAGE>
See "Risk Factors--Possible Dilutive Effect of Issuance of Additional Shares"
and "Management of the Bank--Benefit Plans--Stock Option Plan" and "--
Recognition and Retention Plan."
The Company intends to use a portion of the net proceeds it retains to make
a loan directly to the ESOP to enable the ESOP to purchase 8% of the shares sold
in the Offering. Based upon the sale of 8,677,747 shares or 11,740,482 shares at
the minimum and maximum of the Offering Range, the amount of the loan to the
ESOP would be $6.9 million or $9.4 million, respectively (or $10.8 million if
the Estimated Valuation Range is increased by 15%). See "Management of the
Bank--Benefit Plans--Employee Stock Ownership Plan and Trust." The remaining net
proceeds retained by the Company will initially be invested in short- and
medium-term debt obligations, mortgage related securities and other marketable
equity securities.
The net proceeds retained by the Company may also be used to support the
future expansion of operations through the acquisition of financial institutions
or their assets, including those located within the Bank's market area, or
diversification into other banking related businesses. However, the Company and
the Bank have no current arrangements, understandings or agreements regarding
any such transactions. Upon completion of the Reorganization, the Company will
be a bank holding company, and will be permitted to engage only in those
activities that are permissible for bank holding companies under the Bank
Holding Company Act, as administered by the Federal Reserve Board. See
"Regulation --Bank Holding Company Regulation" for a description of certain
regulations applicable to the Company.
Upon completion of the Reorganization, the Board of Directors of the
Company will have the authority to adopt stock repurchase plans, subject to
statutory and regulatory requirements. Pursuant to New York regulations, and
without the prior approval of the Department, the Company may not repurchase any
Common Stock, in the first year after the Reorganization, and during each of the
next two following years, may not repurchase more than 5% of its shares
outstanding. In addition, the FDIC prohibits an insured savings bank which has
converted from the mutual to stock form of ownership from repurchasing its
capital stock within one year following the date of its Offering to stock form,
except that stock repurchases of no greater than 5% of a bank's outstanding
capital stock may be repurchased during this one-year period where compelling
and valid business reasons are established to the satisfaction of the FDIC.
Based upon facts and circumstances following completion of the Reorganization
and subject to applicable regulatory requirements, the Board of Directors may
determine to repurchase stock in the future. Such facts and circumstances may
include but not be limited to: (i) market and economic factors such as the price
at which the stock is trading in the market, the volume of trading, the
attractiveness of other investment alternatives in terms of the rate of return
and risk involved in the investment, the ability to increase the book value
and/or earnings per share of the remaining outstanding shares, and the
opportunity to improve 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; and (iii) any
other circumstances in which repurchases would be in the best interests of the
Company and its shareholders. In the event the Company determines to repurchase
stock, such repurchases may be made at market prices which may be in excess of
the Subscription Price in the Offering. Any stock repurchases will be subject to
the determination of the Company's 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 such capital will be adequate, taking into
account, among other things, the level of non-performing and other risk assets,
the Company's and the Bank's current and projected results of operations and
asset/liability structure, the economic environment, tax and other
considerations.
DIVIDEND POLICY
Upon completion of the Offering, the Board of Directors of the Company will
have the authority to declare dividends on the Common Stock, subject to
statutory and regulatory requirements. The Company intends to pay an annual cash
dividend of $0.12, payable quarterly at $0.03 per share. The payment of
dividends is expected to begin following the first full quarter after the
completion of the Reorganization.
18
<PAGE>
Under Delaware law, the Company is permitted to pay cash dividends,
provided that the amount of cash dividends paid may not exceed that amount by
which the net assets of the Company (the amount by which total assets exceed
total liabilities) exceeds its statutory capital, or if there is no such excess,
the net profits for the current and/or immediately preceding fiscal year. The
Company's source for the payment of cash dividends may in the future depend on
the receipt of cash dividends from the Bank. The Bank will not be permitted to
pay dividends on its common stock or repurchase shares of its common stock if
its stockholders' equity would be reduced below the amount required for the
liquidation account. See "The Reorganization and Offering--Liquidation Rights."
Under New York Banking Law, dividends may be declared and paid only out of the
net profits of the Bank. The approval of the Superintendent is required if the
total of all dividends declared in any calendar year will exceed net profits for
that year plus the retained net profits of the preceding two years, less any
required transfer to surplus or a fund for the retirement of any preferred
stock. In addition, no dividends may be declared, credited or paid if the effect
thereof would cause the Bank's capital to be reduced below the amount required
by the Superintendent or the FDIC. See "Regulation." Subsequent to the Offering,
the availability of the Bank's funds for the payment of dividends may be limited
by the liquidation account. See "The Reorganization and Offering--Liquidation
Rights." Dividends in excess of the Bank's current and accumulated earnings
could result in the realization by the Bank of taxable income. See "Federal and
State Taxation--Federal Taxation."
Additionally, in connection with the Reorganization, the Company and Bank
have committed to the FDIC that during the one-year period following the
consummation of the Reorganization, the Company will not declare an
extraordinary dividend to stockholders which would be treated by recipient
stockholders as a tax-free return of capital for federal income tax purposes
without prior approval of the FDIC.
MARKET FOR COMMON STOCK
The Company was recently formed and has never issued capital stock. The
Bank, as a mutual institution, has never issued capital stock. The Company has
received conditional approval to have its Common Stock quoted on the Nasdaq
National Market under the symbol "NBCP" subject to the completion of the
Offering and compliance with certain conditions including the presence of at
least three registered and active market makers. CIBC Oppenheimer Corp. and
Trident Securities, Inc. intend to make a market in the Common Stock and we
expect that additional market makers will be identified.
CAPITALIZATION
The following table presents the historical capitalization of the Bank at
September 30, 1997, and the pro forma consolidated capitalization of the Company
after giving effect to the Offering and the Reorganization, including the
issuance of shares to the foundation, based upon the sale of the number of
shares indicated in the table and the other assumptions set forth under "Pro
Forma Data."
19
<PAGE>
<TABLE>
<CAPTION>
COMPANY PRO FORMA BASED UPON THE SALE AT $10.00 PER SHARE
---------------------------------------------------------
13,501,554
8,677,747 10,209,115 11,740,482 SHARES
SHARES SHARES SHARES (ADJUSTED
HISTORICAL (MINIMUM) (MIDPOINT) (MAXIMUM) MAXIMUM)(1)
----------- ----------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Deposits(2)....................... $ 992,219 $ 992,219 $ 992,219 $ 992,219 $ 992,219
Other borrowings.................. 28,740 28,740 28,740 28,740 28,740
----------- ----------- ---------- ---------- ----------
Total deposits and
other borrowed funds............. $ 1,020,959 $ 1,020,959 $1,020,959 $1,020,959 $1,020,959
=========== =========== ========== ========== ==========
Stockholders' equity:
Preferred Stock, $.01 par value,
5,000,000 shares authorized;
none to be issued............. $ -- $ -- $ -- $ -- $ --
Common Stock, $.01 par value,
45,000,000 shares authorized;
shares to be issued as
reflected(3).................. -- 191 225 259 298
Additional paid-in
capital(4).................... -- 87,735 103,354 118,973 136,968
Retained earnings(5)............ 125,325 125,225 125,225 125,225 125,225
Less:
Expenses of contribution to
foundation.................... -- (4,339) (5,105) (5,870) (6,751)
Plus:
Tax benefit of contribution to
foundation (6)................ -- 1,519 1,787 2,055 2,363
Net unrealized gain on
securities available-for-sale,
net of taxes.................. 1,395 1,395 1,395 1,395 1,395
Less:
Common Stock acquired
by the ESOP(7)................ -- (6,942) (8,167) (9,392) (10,801)
Common Stock
acquired by the restricted
stock plan(8)................. -- (3,471) (4,084) (4,696) (5,401)
----------- ----------- ---------- ---------- ----------
Total stockholders'
equity........................... $ 126,720 $ 201,313 $ 214,630 $ 227,949 $ 243,296
=========== =========== ========== ========== ==========
</TABLE>
- --------------------------------
(1) As adjusted to give effect to an increase in the number of shares which
could occur due to an increase in the Estimated Valuation Range of up to 15%
as a result of regulatory considerations, demand for the shares, or changes
in market or general financial and economic conditions following the
commencement of the Offering.
(2) Does not reflect withdrawals from deposit accounts for the purchase of
Common Stock in the Offering. Such withdrawals would reduce pro forma
deposits by the amount of such withdrawals.
(3) Includes shares to be issued to depositors and the public in the Offering,
as indicated herein, and 10,447,253, 12,290,885, 14,134,518 and 16,254,696
shares to be issued to the Mutual Holding Company at the minimum, midpoint,
maximum and adjusted maximum of the Estimated Valuation Range, respectively.
(4) Reflects the sale of shares in the Offering. No effect has been given to the
issuance of additional shares of Common Stock pursuant to the stock option
plan to be adopted by the Company and presented for approval of stockholders
following the Offering. The stock option plan would provide for the grant of
stock options to purchase a number of shares of Common Stock equal to 10% of
the shares of Common Stock sold in the Offering. See "Management of the
Bank--Benefit Plans."
(5) The retained earnings of the Bank will be substantially restricted after the
Offering. See "The Reorganization and Offering--Liquidation Rights." Assumes
that the Mutual Holding Company will be capitalized by the Bank with
$100,000.
(6) Represents the tax effect of the contribution to the foundation based on a
35% tax rate. The realization of the deferred tax benefit is limited
annually to 10% of the Company's annual taxable income, subject to the
ability of the Company to carry forward any unused portion of the deduction
for five years following the year in which the contribution is made.
(7) Assumes that 8% of the shares sold in the Offering will be purchased by the
ESOP and that the funds used to acquire the ESOP shares will be borrowed
from the Company. The Common Stock acquired by the ESOP is reflected as a
reduction of stockholders' equity. See "Management of the Bank--Benefit
Plans--Employee Stock Ownership Plan and Trust."
(8) Assumes that, subsequent to the Offering, an amount equal to 4% of the
shares of Common Stock sold in the Offering is purchased by the restricted
stock plan through open market purchases at $10.00 per share. The Common
Stock to be purchased by the restricted stock plan is reflected as a
reduction to stockholders' equity. See "Risk
20
<PAGE>
Factors--Dilutive Effect of Issuance of Additional Shares," and Footnote 3 to
the tables under "Pro Forma Data" and "Management of the Bank--Benefit Plans--
Stock Plans."
PRO FORMA DATA
The actual net proceeds from the sale of the Common Stock cannot be
determined until the Offering is completed. However, net proceeds are currently
estimated to be between $85.3 million and $115.7 million (or up to $133.2
million) based upon the following assumptions: (i) $3.4 million will be sold to
executive officers and trustees of the Bank and Company, the ESOP will purchase
8% of the Common Stock sold in the Offering, and the remaining shares will be
sold in the Subscription and Community Offerings; (ii) CIBC Oppenheimer Corp.
and Trident Securities, Inc. will receive an aggregate fee equal to .95% of the
aggregate Subscription Price of shares sold to persons other than directors,
executive officers and the ESOP; (iii) the foundation will be funded with a
total contribution equal to 5% of the aggregate Subscription Price of the Common
Stock sold in the Offering, consisting of 3% of the shares of Common Stock sold
in the Offering and 2% in cash; (iv) Reorganization expenses, excluding the fees
payable to CIBC Oppenheimer Corp. and Trident Securities, Inc., will be
approximately $800,000; and (v) the Mutual Holding Company will be capitalized
by the Bank with $100,000. Actual expenses may vary from those estimated.
Pro forma consolidated net income of the Company for the nine months ended
September 30, 1997 and for the year ended December 31, 1996 have been calculated
as if the Common Stock had been sold at the beginning of the respective periods
and the net proceeds had been invested at 5.44% and 5.49% (the one year U.S.
Treasury bill rate as of September 30, 1997 and December 31, 1996). The tables
do not reflect the effect of withdrawals from deposit accounts for the purchase
of Common Stock. The pro forma after-tax yield for the Company and the Bank is
assumed to be 3.54% for the nine months ended September 30, 1997, and 3.57% for
the year ended December 31, 1996 (based on an assumed tax rate of 35%).
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, as adjusted to give effect to the purchase of shares by the ESOP. No
effect has been given in the pro forma stockholders' equity calculations for the
assumed earnings on the net proceeds. As discussed under "Use of Proceeds," the
Company will retain 50% of the net proceeds from the Offering.
The following pro forma information may not be representative of the
financial effects of the foregoing transactions at the dates on which such
transactions actually occur and should not be taken as indicative of future
results of operations. Pro forma consolidated stockholders' equity represents
the difference between the stated amount of assets and liabilities of the
Company. The pro forma stockholders' equity is not intended to represent the
fair market value of the Common Stock and may be greater than amounts that would
be available for distribution to stockholders in the event of liquidation.
The following tables summarize historical data of the Bank and pro forma
data of the Company at or for the nine months ended September 30, 1997, and at
or for the year ended December 31, 1996, based on the assumptions set forth
above and in the table and should not be used as a basis for projections of
market value of the Common Stock following the Offering. The tables below give
effect to the restricted stock plan, which is expected to be adopted by the
Company following the Offering and presented to stockholders for approval. See
Footnote 3 to the tables and "Management of the Bank--Benefit Plans--Recognition
and Retention Plan." No effect has been given in the tables to the possible
issuance of additional shares reserved for future issuance pursuant to the stock
option plan to be adopted by the Board of Directors of the Company and presented
to stockholders for approval, nor does book value as presented give any effect
to the liquidation account to be established for the benefit of Eligible Account
Holders or Supplemental Eligible Account Holders or, in the event of liquidation
of the Bank, to the tax effect of the bad debt reserve and other factors. See
Footnote 4 to the tables below, "The Reorganization and Offering--Liquidation
Rights" and "Management of the Bank--Benefit Plans--Stock Option Plan."
21
<PAGE>
<TABLE>
<CAPTION>
AT OR FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1997
---------------------------------------------------
<S> <C> <C> <C> <C>
8,677,747 10,209,115 11,740,482 13,501,554
SHARES SHARES SHARES SHARES SOLD
SOLD AT SOLD AT SOLD AT AT $10.00
$10.00 $10.00 $10.00 PER SHARE
PER SHARE PER SHARE PER SHARE (ADJUSTED
(MINIMUM) (MIDPOINT) (MAXIMUM) MAXIMUM)(8)
---------- --------- ---------- -----------
(Dollars in Thousands, Except per Share Amounts)
Gross proceeds............. $ 86,777 $ 102,091 $ 117,405 $ 135,016
Plus: Shares acquired by
foundation............. 2,603 3,063 3,522 4,050
---------- ----------- ----------- -----------
Pro forma market
capitalization............ $ 89,380 $ 105,154 $ 120,927 $ 139,066
========== =========== =========== ===========
Gross proceeds............. $ 86,777 $ 102,091 $ 117,405 $ 135,016
Less: Cash contribution
to foundation......... 1,736 2,042 2,348 2,700
Expenses................ 1,455 1,575 1,695 1,800
---------- ----------- ----------- -----------
Estimated net proceeds..... 83,586 98,474 113,362 130,516
Less: Common Stock pur-
chased by ESOP..... (6,942) (8,167) (9,392) (10,801)
Common Stock purchased
by restricted
stock plan........... (3,471) (4,084) (4,696) (5,401)
---------- ----------- ----------- -----------
Estimated net proceeds,
as adjusted.............. $ 73,173 $ 86,223 $ 99,274 $ 114,314
========== =========== =========== ===========
Consolidated net income(1):
Historical............... $ 8,635 $ 8,635 $ 8,635 $ 8,635
Pro forma income on net
proceeds, as adjusted... 1,938 2,284 2,630 3,029
Pro forma ESOP
adjustment(2)........... (226) (265) (305) (351)
Pro forma restricted
stock plan
adjustment(3)........... (338) (398) (450) (527)
---------- ----------- ----------- -----------
Pro forma net income(1).... $ 10,009 $ 10,256 $ 10,510 $ 10,786
========== =========== =========== ===========
Per share net income(1):
Historical............... $ 0.47 $ 0.40 $ 0.35 $ 0.30
Pro forma income on net
proceeds, as adjusted... 0.11 0.11 0.11 0.11
Pro forma ESOP
adjustment(2)........... (0.01) (0.01) (0.01) (0.01)
Pro forma restricted
stock plan
adjustment (3).......... (0.02) (0.02) (0.02) (0.02)
---------- ----------- ----------- -----------
Pro forma net income
per share(1)............. $ 0.55 $ 0.48 $ 0.43 $ 0.38
========== =========== =========== ===========
</TABLE>
22
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
Stockholders' equity:
Historical..................... $126,720 $126,720 $126,720 $126,720
Estimated net proceeds......... 83,587 98,474 113,362 130,515
Capitalization of the Mutual
Holding Company.............. (100) (100) (100) (100)
Plus: Shares issued to
foundation.................. 2,603 3,063 3,522 4,050
Less: Contribution to
foundation.................. (2,603) (3,063) (3,522) (4,050)
Plus: Tax benefit of
contribution to
foundation............. 1,519 1,787 2,055 2,363
Less: Common Stock ac-
quired by ESOP(2)....... (6,942) (8,167) (9,392) (10,801)
Common Stock
acquired by
restricted
stock plan(3)........... (3,471) (4,084) (4,696) (5,401)
-------- -------- -------- --------
Pro forma stockholders'
equity(3)(5)(6).............. $201,313 $214,630 $227,949 $243,296
======== ======== ======== ========
Stockholders' equity per
share(4):
Historical..................... $ 6.63 $ 5.64 $ 4.90 $ 4.27
Estimated net proceeds......... 4.37 4.38 4.38 4.39
Capitalization of the Mutual
Holding Company.............. (.01) (.01) (.01) (.01)
Plus: Shares issued to
foundation.................. 0.14 0.14 0.14 0.14
Less: Contribution to
foundation.................. (0.14) (0.14) (0.14) (0.14)
Plus: Tax benefit of
contribution to
foundation............ 0.08 0.08 0.08 0.08
Less: Common Stock
acquired by ESOP(2)... (0.36) (0.36) (0.36) (0.36)
Common Stock acquired
by restricted
stock plan............ (0.18) (0.18) (0.18) (0.18)
-------- -------- -------- --------
Pro forma stockholders'
equity per
share(3)(5)(6)............... $ 10.53 $ 9.55 $ 8.81 $ 8.19
======== ======== ======== ========
Offering price to pro
forma net income per
share(7)..................... 13.64x 15.63x 17.44x 19.74x
Offering price as a
percentage of pro forma
stockholders' equity
per share(4)................. 94.97% 104.71% 113.51% 122.10%
</TABLE>
_________________________
(1) Does not give effect to the non-recurring expense that will be recognized in
1998 as a result of the establishment of the foundation. The Company will
recognize an after-tax expense for the amount of the contribution to the
foundation which is expected to be $2.8 million, $3.3 million, $3.8 million
and $4.4 million at the minimum, midpoint, maximum and adjusted maximum of
the Estimated Valuation Range, respectively. Assuming the contribution to
the foundation was incurred during the nine months ended September 30, 1997,
pro forma net income per share would be $0.38, $0.32, $0.27 and $0.22 at the
minimum, midpoint, maximum and adjusted maximum, respectively. Per share net
income data is based on 18,448,136, 21,703,689, 24,959,243 and 28,703,128
shares outstanding, which represents shares sold in the Reorganization,
shares contributed to the foundation and shares to be allocated or
distributed under the ESOP and restricted stock plan for the period
presented.
(2) It is assumed that 8% of the shares sold in the Offering will be purchased
by the ESOP. For purposes of this table, the funds used to acquire such
shares are assumed to have been borrowed by the ESOP from the Company. The
amount to be borrowed is reflected as a reduction to stockholders' equity.
The Bank intends to make annual contributions to the ESOP in an amount at
least equal to the principal and interest requirement of the debt. The
Bank's total annual payment of the ESOP debt is based upon fifteen equal
annual installments of principal, with an assumed interest rate at 8.5%. The
pro forma net income assumes: (i) that the Bank's contribution to the ESOP
is equivalent to the debt service requirement for the nine months ended
September 30, 1997, and was made at the end of the period; (ii) that 17,355,
20,418, 23,481 and 27,003 shares at the minimum, midpoint, maximum and
adjusted maximum of the Estimated Valuation Range, respectively, were
committed to be released during the nine months ended September 30, 1997, at
an average fair value of $10.00 per share in accordance with Statement of
Position
23
<PAGE>
("SOP") 93-6; and (iii) only the ESOP shares committed to be released were
considered outstanding for purposes of the net income per share
calculations. See "Management of the Bank--Benefit Plans--Employee Stock
Ownership Plan and Trust."
(3) Gives effect to the restricted stock plan expected to be adopted by the
Company following the Offering. This plan intends to acquire a number of
shares of Common Stock equal to 4% of the shares of Common Stock sold in the
Offering or 347,110, 408,365, 469,619 and 540,061 shares of Common Stock at
the minimum, midpoint, maximum and adjusted maximum of the Estimated
Valuation Range, respectively, either through open market purchases, if
permissible, or from authorized but unissued shares of Common Stock or
treasury stock of the Company, if any. Funds used by the restricted stock
plan to purchase the shares will be contributed to the plan by the Bank. In
calculating the pro forma effect of the restricted stock plan, it is assumed
that the shares were acquired by the restricted stock plan at the beginning
of the period presented in open market purchases at the Subscription Price
and that 20% of the amount contributed was an amortized expense during such
period. The issuance of authorized but unissued shares of the Company's
Common Stock to the restricted stock plan instead of open market purchases
would dilute the voting interests of existing stockholders by approximately
1.88% and pro forma net income per share would be $0.54, $0.47, $0.42 and
$0.32 at the minimum, midpoint, maximum and adjusted maximum of the
Estimated Valuation Range, respectively, and pro forma stockholders' equity
per share would be $10.51, $9.55, $8.83 and $8.21 at the minimum, midpoint,
maximum and adjusted maximum of the Estimated Valuation Range, respectively.
There can be no assurance that the actual purchase price of the shares
granted under the restricted stock plan will be equal to the Subscription
Price. See "Management of the Bank--Benefit Plans--Recognition and Retention
Plan."
(4) Stockholders' equity per share data is based upon 19,125,000, 22,500,000,
and 25,875,000 and 29,756,250 shares outstanding representing shares sold in
the Offering, shares purchased by the ESOP and the restricted stock plan,
and shares contributed to the foundation.
(5) No effect has been given to the issuance of additional shares of Common
Stock pursuant to the stock option plan expected to be adopted by the
Company following the Offering. Under the stock option plan, an amount equal
to 10% of the Common Stock sold in the Offering, or 867,775, 1,020,912,
1,174,048 and 1,350,155 shares at the minimum, midpoint, maximum and
adjusted maximum of the Estimated Valuation Range, respectively, will be
reserved for future issuance upon the exercise of options to be granted
under the stock option plan. The issuance of Common Stock pursuant to the
exercise of options under the stock option plan will result in the dilution
of existing stockholders' interests. Assuming all options were exercised at
the end of the period at an exercise price of $10.00 per share, the pro
forma net income per share would be $0.53, $0.46, $0.41 and $0.37,
respectively, and the pro forma stockholders' equity per share would be
$10.50, $9.56, $8.87 and $8.26, respectively. See "Management of the Bank--
Benefit Plans--Stock Option Plan."
(6) The retained earnings of the Bank will continue to be substantially
restricted after the Offering. See "Dividend Policy," "The Reorganization
and Offering-- Liquidation Rights" and "Regulation--New York Bank
Regulation."
(7) Based on pro forma net income for the nine months ended September 30, 1997
that have been annualized.
(8) As adjusted to give effect to an increase in the number of shares which
could occur due to an increase in the Estimated Valuation Range of up to 15%
as a result of regulatory considerations, demand for the shares, or changes
in market or general financial and economic conditions following the
commencement of the Subscription and Community Offerings.
24
<PAGE>
<TABLE>
<CAPTION>
AT OR FOR THE YEAR ENDED DECEMBER 31, 1996
---------------------------------------------------------------------------------------
8,677,747 10,209,115 11,740,482 13,501,554
SHARES SOLD AT SHARES SOLD AT SHARES SOLD AT SHARES SOLD AT
$10.00 PER SHARE $10.00 PER SHARE $10.00 PER SHARE $10.00 PER SHARE
(MINIMUM) (MIDPOINT) (MAXIMUM) (ADJUSTED MAXIMUM)(7)
---------------- ---------------- ---------------- ---------------------
(Dollars in Thousands, Except per Share Amounts)
<S> <C> <C> <C> <C>
Gross proceeds............. $ 86,777 $ 102,091 $ 117,405 $ 135,016
Plus: Shares acquired by
foundation........ 2,603 3,063 3,522 4,050
---------- ----------- ----------- -----------
Pro forma market
capitalization............ $ 89,380 $ 105,154 $ 120,927 $ 139,066
========== =========== =========== ===========
Gross proceeds............. $ 86,777 $ 102,091 $ 117,405 $ 135,016
Less: Cash contribution to
foundation........... 1,736 2,042 2,348 2,700
Expenses.............. 1,455 1,575 1,695 1,800
---------- ----------- ----------- -----------
Estimated net proceeds..... 83,586 98,474 113,362 130,516
Less: Common Stock pur-
chased by ESOP..... (6,942) (8,167) (9,392) (10,801)
Common Stock purchased
by restricted
stock plan....... (3,471) (4,084) (4,696) (5,401)
---------- ----------- ----------- -----------
Estimated net proceeds,
as adjusted.............. $ 73,173 $ 86,223 $ 99,274 $ 114,314
========== =========== =========== ===========
Consolidated net income(1):
Historical............... $ 10,768 $ 10,768 $ 10,768 $ 10,768
Pro forma income on net
proceeds, as adjusted.. 2,608 3,073 3,539 4,076
Pro forma ESOP
adjustment(2).......... (301) (354) (407) (468)
Pro forma restricted
stock plan
adjustment(3).......... (451) (531) (611) (702)
---------- ----------- ----------- -----------
Pro forma net income(1).... $ 12,624 $ 12,956 $ 13,289 $ 13,674
========== =========== =========== ===========
Per share net income(1):
Historical............... $ 0.58 $ 0.50 $ 0.43 $ 0.38
Pro forma income on net
proceeds, as adjusted.... 0.14 0.14 0.14 0.14
Pro forma ESOP
adjustment(2)............ (0.02) (0.02) (0.02) (0.02)
Pro forma restricted
stock plan
adjustment(3)............ (0.02) (0.02) (0.02) (0.02)
---------- ----------- ----------- -----------
Pro forma net income
per share(1)............. $ 0.68 $ 0.60 $ 0.53 $ 0.48
========== =========== =========== ===========
Stockholders' equity:
Historical............... $ 115,664 $ 115,664 $ 115,664 $ 115,664
Estimated net proceeds... 83,587 98,474 113,362 130,515
Capitalization of the
Mutual Holding Company.... (100) (100) (100) (100)
Plus: Shares issued to foundation 2,603 3,063 3,522 4,050
Less: Contribution to foundation (2,603) (3,063) (3,522) (4,050)
Plus: Tax benefit of contribution
to foundation........... 1,519 1,787 2,055 2,363
Less: Common Stock ac-
quired by ESOP(2)........ (6,942) (8,167) (9,392) (10,801)
Less: Common Stock
acquired by restricted
stock plan(3)............ (3,471) (4,084) (4,696) (5,401)
---------- ----------- ----------- -----------
Pro forma stockhold-
ers' equity(3)(5)(6)....... $ 190,257 $ 203,574 $ 216,893 $ 232,240
=========== =========== =========== ===========
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
AT OR FOR THE YEAR ENDED DECEMBER 31, 1996
---------------------------------------------------------------------------------------
8,677,747 10,209,115 11,740,482 13,501,554
SHARES SOLD AT SHARES SOLD AT SHARES SOLD AT SHARES SOLD AT
$10.00 PER SHARE $10.00 PER SHARE $10.00 PER SHARE $10.00 PER SHARE
(MINIMUM) (MIDPOINT) (MAXIMUM) (ADJUSTED MAXIMUM)(7)
---------------- ---------------- ---------------- ---------------------
(Dollars in Thousands, Except per Share Amounts)
<S> <C> <C> <C> <C>
Stockholders' equity per
share(4):
Historical............... $ 6.05 $ 5.15 $ 4.48 $ 3.89
Estimated net proceeds..... 4.37 4.38 4.38 4.39
Capitalization of the
Mutual Holding Company.... (.01) (.01) (.01) (.01)
Plus: Shares issued to
foundation.............. 0.14 0.14 0.14 0.14
Less: Contributions to
foundation.............. (0.14) (0.14) (0.14) (0.14)
Plus: Tax benefit of
contribution to
foundation......... 0.08 0.08 0.08 0.08
Less: Common Stock
acquired by
ESOP(2)............ (0.36) (0.36) (0.36) (0.36)
Common Stock
acquired
by restricted
stock plan(3)...... (0.18) (0.18) (0.18) (0.18)
---------- ----------- ----------- -----------
Pro forma stockholders'
equity per
share(3)(5)(6)........... $ 9.95 $ 9.06 $ 8.39 $ 7.81
========== =========== =========== ===========
Offering price to pro
forma net income per
share.................... 14.71x 16.67x 18.87x 20.83x
Offering price as a per-
centage of pro forma
stockholders' equity
per share(4)............. 100.50% 110.38% 119.19% 128.04%
</TABLE>
- ---------------------------
(1) Does not give effect to the non-recurring expense that will be recognized in
1998 as a result of the establishment of the foundation. The Company will
recognize an after-tax expense for the amount of the contribution to the
foundation which is expected to be $2.8 million, $3.3 million, $3.8 million
and $4.4 million at the minimum, midpoint, maximum and adjusted maximum of
the Estimated Valuation Range, respectively. Assuming the contribution to
the foundation was incurred during the year ended December 31, 1996, pro
forma net income per share would be $0.52, $0.44, $0.38 and $0.32, at the
minimum, midpoint, maximum and adjusted maximum, respectively. Per share net
income data is based on 18,453,921, 21,710,495, 24,967,070 and 28,712,129
shares outstanding which represents shares issued in the Reorganization,
shares contributed to the foundation and shares to be allocated or
distributed under the ESOP and recognition and retention plan
to the for the period presented.
(2) It is assumed that 8% of the shares sold in the Offering will be purchased
by the ESOP. For purposes of this table, the funds used to acquire such
shares are assumed to have been borrowed by the ESOP from the Company. The
amount to be borrowed is reflected as a reduction of stockholders' equity.
The Bank intends to make annual contributions to the ESOP in an amount at
least equal to the principal and interest requirement of the debt. The
Bank's total annual payment of the ESOP debt is based upon fifteen equal
annual installments of principal, with an assumed interest rate at 8.5%. The
pro forma net income assumes: (i) that the Bank's contribution to the ESOP
is equivalent to the debt service requirement for the year ended December
31, 1996, and was made at the end of the period; (ii) that 23,141, 27,224,
31,308 and 36,004 shares at the minimum, midpoint, maximum and adjusted
maximum of the Estimated Valuation Range, respectively, were committed to be
released during the year ended December 31, 1996, at an average fair value
of $10.00 per share in accordance with Statement of Position ("SOP") 93-6;
and (iii) only the ESOP shares committed to be released were considered
outstanding for purposes of the net income per share calculations. See
"Management of the Bank--Benefit Plans--Employee Stock Ownership Plan and
Trust."
(3) Gives effect to the restricted stock plan expected to be adopted by the
Company following the Offering. This plan intends to acquire a number of
shares of Common Stock equal to 4% of the shares of Common Stock sold in the
Offering, or 347,110, 408,365, 469,619 and 540,062 shares of Common Stock at
the minimum, midpoint, maximum and adjusted maximum of the Estimated
Valuation Range, respectively, either through open market purchases, if
permissible, or from authorized but unissued shares of Common Stock or
treasury stock of the Company, if any. Funds used by the restricted stock
plan to purchase the shares will be contributed to the plan by the Bank. In
calculating the pro forma effect of the restricted stock plan, it is assumed
that the shares were acquired by the restricted stock plan at the beginning
of the period presented in open market purchases at the Subscription Price
and that 20% of the amount contributed was an amortized expense during such
period. The issuance of authorized but unissued shares of the Company's
Common Stock to the restricted stock plan instead of open market purchases
would dilute the voting interests of existing stockholders by approximately
1.88% and pro forma net income per share would be $0.68, $0.60, $0.53 and
$0.48 at the minimum, midpoint, maximum and adjusted maximum of the
Estimated Valuation Range, respectively, and pro forma stockholders' equity
per share would be $9.94, $9.06, $8.41 and $7.84 at the minimum, midpoint,
maximum and adjusted maximum of the Estimated Valuation Range, respectively.
There can be no assurance that the actual purchase price of the shares
granted under the restricted stock plan will be equal to the Subscription
Price. See "Management of the Bank--Benefit Plans--Recognition and Retention
Plan."
(4) Stockholders' equity per share data is based upon 19,125,000, 22,500,000,
and 25,875,000 and 29,756,250 shares outstanding representing shares sold in
the Offering, shares purchased by the ESOP and retention and restricted
stock plan, and shares contributed to the foundation.
(5) No effect has been given to the issuance of additional shares of Common
Stock pursuant to the stock option plan expected to be adopted by the
Company following the Offering. Under the stock option plan, an amount equal
to 10% of the Common Stock sold in the Offering, or 867,775, 1,020,912,
1,174,048 and 1,350,155 shares at the minimum, midpoint, maximum and
adjusted maximum of the Estimated Valuation Range, respectively, will be
reserved for future issuance upon the exercise of options to be granted
under the stock option plan. The issuance of Common
26
<PAGE>
Stock pursuant to the exercise of options under the stock option plan will
result in the dilution of existing stockholders' interests. Assuming all
options were exercised at the end of the period at an exercise price of
$10.00 per share, the pro forma net income per share would be $0.53, $0.46,
$0.41 and $0.37, respectively, and the pro forma stockholders' equity per
share would be $10.50, $9.56, $8.87 and $8.26, respectively. See "Management
of the Bank--Benefit Plans--Stock Option Plan."
(6) The retained earnings of the Bank will continue to be substantially
restricted after the Offering. See "Dividend Policy," "The Reorganization
and Offering-- Liquidation Rights" and "Regulation--New York Bank
Regulation."
(7) As adjusted to give effect to an increase in the number of shares which
could occur due to an increase in the Estimated Valuation Range of up to 15%
as a result of regulatory considerations, demand for the shares, or changes
in market or general financial and economic conditions following the
commencement of the Subscription and Community Offerings.
27
<PAGE>
COMPARISON OF VALUATION AND PRO FORMA INFORMATION WITHOUT FOUNDATION
In the event that the foundation was not being established as part of
the Reorganization, RP Financial has estimated that the pro forma aggregate
market capitalization of the Company would be approximately $110.4 million at
the midpoint, which is approximately $5.2 million greater than the pro forma
aggregate market capitalization of the Company if the foundation is included,
and would result in an approximately $8.3 million increase in the amount of
Common Stock offered for sale in the Reorganization. The pro forma price to
book ratio and pro forma price to earnings ratio would be approximately the same
under both the current appraisal and the estimate of the value of the Company
without the foundation. Further, assuming the midpoint of the Estimated
Valuation Range, pro forma stockholders' equity per share and pro forma net
income per share would be substantially the same at $9.55 and $9.26,
respectively, and $0.48 and $0.45, respectively, with the foundation or without
the foundation. The pro forma price to book ratio and the pro forma price to
earnings ratio are substantially the same with and without the foundation at the
midpoint at 104.71% and 107.99%, respectively, and 15.63x and 16.67x,
respectively. There is no assurance that in the event the foundation was not
formed that the appraisal prepared at the time would have concluded that the pro
forma market value of the Company would be the same as that estimated herein.
Any appraisals prepared at that time would be based on the facts and
circumstances existing at that time, including, among other things, market and
economic conditions.
For comparative purposes only, set forth below are certain pricing
ratios and financial data and ratios, at the minimum, midpoint, maximum and
adjusted maximum of the Estimated Valuation Range, assuming the Reorganization
was completed at September 30, 1997.
<TABLE>
<CAPTION>
Minimum Midpoint Maximum Adjusted Maximum
------------------------ ------------------------ ------------------------ ------------------------
With Without With Without With Without With Without
Foundation Foundation Foundation Foundation Foundation Foundation Foundation Foundation
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
(Dollars in Thousands, Except Per Share Amounts)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Estimated offering amount.. $ 86,777 93,840 102,091 110,400 117,405 126,960 135,016 146,004
Pro forma market
capitalization............ 89,380 93,840 105,154 110,400 120,927 126,960 139,066 146,004
Total assets............... 1,251,043 1,257,419 1,264,361 1,271,863 1,277,679 1,286,306 1,293,027 1,303,035
Total liabilities.......... 1,049,731 1,049,731 1,049,731 1,049,731 1,049,731 1,049,731 1,049,731 1,049,731
Pro forma stockholders'
equity.................... 201,313 207,688 214,630 222,132 227,949 236,575 243,296 253,304
Pro forma net income....... 10,009 10,172 10,256 10,447 10,510 10,723 10,786 11,043
Pro forma stockholders'
equity per share.......... 10.53 10.19 9.55 9.26 8.81 8.58 8.19 7.98
Pro forma net income per
share..................... 0.55 0.52 0.48 0.45 0.43 0.40 0.38 0.36
Pro forma pricing ratios:
- -------------------------
Offering price as a
percentage of pro forma
stockholders' equity per
share..................... 94.97% 98.14% 104.71% 107.99% 113.51% 116.55% 122.10% 125.31%
Offering price to pro
forma net income per
share (1)................. 13.64 14.42 15.63 16.67 17.44 18.75 19.74 20.83
Pro forma market
capitalization to assets.. 7.14% 7.46% 8.32% 8.68% 9.46% 9.87% 10.76% 11.20%
Pro forma financial ratios:
- ---------------------------
Return on assets (2)....... 1.07% 1.08% 1.08% 1.10% 1.10% 1.11% 1.11% 1.13%
Return on equity (3)....... 6.63% 6.53% 6.37% 6.27% 6.14% 6.04% 5.91% 5.81%
Equity to assets........... 16.09% 16.52% 16.98% 17.47% 17.84% 18.39% 18.82% 19.44%
</TABLE>
- ----------
(1) If the contribution to the foundation had been incurred during the nine
months ended September 30, 1997, the offering price to pro forma net income
per share would have been 26.04x,31.28x,37.83x, and 44.86x at the minimum,
midpoint, maximum and adjusted maximum, respectively.
(2) If the contribution to the foundation had been incurred during the nine
months ended September 30, 1997, return on assets would have been 0.79%,
0.73%, 0.70%, and 0.66% at the minimum, midpoint, maximum and adjusted
maximum, respectively.
(3) If the contribution to the foundation had been incurred during the nine
months ended September 30, 1997, return on equity would have been
4.71%,4.31%, 3.91%, and 3.51%, respectively.
28
<PAGE>
PARTICIPATION BY MANAGEMENT
The following table sets forth information regarding intended Common Stock
purchases by each of the Trustees and executive officers of the Bank and their
families, and by all Trustees and executive officers as a group. In the event
the individual maximum purchase limitation is increased, persons subscribing for
the maximum amount may increase their purchase order. This table excludes
shares to be purchased by the ESOP, as well as any restricted stock plan awards
or stock option grants that may be made no earlier than six months after the
completion of the Reorganization. See "Management of the Bank--Benefit Plans--
Recognition and Retention Plan" and "--Stock Option Plan." The Trustees and
officers of the Bank have indicated their intention to purchase in the Offering
an aggregate of $3.4 million of Common Stock, equal to 4.0%, 3.4%, 2.9%, and
2.5% of the number of shares to be issued in the Subscription and Community
Offering, at the minimum, midpoint, maximum and adjusted maximum of the
Estimated Valuation Range, respectively.
<TABLE>
<CAPTION>
Aggregate Number Percent
Purchase of at
Name Price (1) Shares (1) Midpoint
- ---- --------- ---------- --------
<S> <C> <C> <C>
Gordon P. Assad $ 50,000 5,000 *
Diane Allegro 200,000 20,000 .2
G. Gary Berner 100,000 10,000 .1
Christa R. Caldwell 75,000 7,500 .1
James W. Currie 400,000 40,000 .4
Gary B. Fitch 10,000 1,000 *
David W. Heinrich 400,000 40,000 .4
Daniel W. Judge 200,000 20,000 .2
Paul J. Kolkmeyer 400,000 40,000 .4
B. Thomas Mancuso 200,000 20,000 .2
James Miklinski 200,000 20,000 .2
Kathleen P. Monti 200,000 20,000 .2
Barton G. Smith 400,000 40,000 .4
William E. Swan 400,000 40,000 .4
Robert G. Weber 200,000 20,000 .2
---------- ------- ---
All Trustees and executive officers
as a group $3,435,000 343,500 3.4%
========== ======= ===
</TABLE>
- ---------------------
*less than .1%
(1) Includes purchases by associates.
29
<PAGE>
THE REORGANIZATION AND OFFERING
The Superintendent has approved the Plan and the offering of the Common
Stock subject to the approval of the Bank's depositors and the satisfaction of
certain conditions imposed by the Superintendent. However, such approval does
not constitute a recommendation or endorsement of the Offering or the Plan by
the Superintendent.
Description of and Reasons for the Reorganization
Our Board of Trustees unanimously adopted the Plan and the Superintendent
has approved the Plan of Reorganization (the "Plan"). Pursuant to our Plan, we
will reorganize into what we call a "two-tier" mutual holding company structure.
We call it a two-tier structure because we will have two levels of holding
companies--a "mid-tier" stock holding company and a "top-tier" mutual holding
company. Under the terms of the Plan (i) we will form the Company as a
Delaware corporation; (ii) we will form the Mutual Holding Company as a New York
mutual holding company; (iii) we will reorganize the Bank into a capital stock
form of organization and issue 100% of our to-be outstanding common stock to the
Company; and (iv) the Company will issue shares of Common Stock to the public
and the Mutual Holding Company. The number of shares of Common Stock sold to
depositors and the public pursuant to this Prospectus will be equal to 45.4% of
the shares issued in the Reorganization and the number of shares issued to the
Mutual Holding Company will be equal to 53.3% of the shares issued in the
Reorganization. In this Prospectus we will refer to all of these steps that are
part of this transaction as the "Reorganization," and we will refer to the
issuance of 45.4% of the Company's Common Stock pursuant to this Prospectus as
the "Offering." The two-tier mutual holding company structure is most easily
understood by considering the following schematic:
------------------------ ------------------
The Mutual Holding Public
Company Stockholders
(a New York mutual
holding company)
------------------------ ------------------
54% of the 46% of the
Common Common
Stock Stock
--------------------------------------------------
The Company (a Delaware corporation)
--------------------------------------------------
100% of the
Common Stock
--------------------------------------------------
The Bank
(a New York stock savings bank)
--------------------------------------------------
In adopting the Plan, our Board of Trustees determined that the
Reorganization is in the best interest of the Bank. The primary purpose of the
Reorganization is to establish a structure that will enable us to compete and
expand more effectively in the financial services marketplace, and that will
enable our depositors, employees, management and trustees to obtain an equity
ownership interest in the Bank. Our new structure will permit the Company to
issue capital stock, which is a source of capital not available to a mutual
savings bank, and we will take advantage of this new ability by issuing Common
Stock in the Offering. Since the Company is not offering all of its Common
Stock for sale to depositors and the public in the Offering (but is issuing a
majority of its stock to the Mutual Holding Company), the Reorganization will
result in less capital raised in comparison to a standard mutual-to-stock
conversion. The Reorganization, however, will also offer the Bank the
opportunity to raise additional capital since the stock held by the
30
<PAGE>
Mutual Holding Company will be available for sale in the future in the event of
the Mutual Holding Company decides to convert to the capital stock form of
organization. See "Regulation--Mutual Holding Company Regulation." The
Reorganization will also give us greater flexibility to structure and finance
the expansion of our operations, including the potential acquisition of other
financial institutions, and to diversify into other financial services. The
holding company form of organization is expected to provide additional
flexibility to diversify the Bank's business activities through existing or
newly formed subsidiaries, or through acquisitions of or mergers with other
financial institutions, as well as other companies. Although we have no current
arrangements, understandings or agreements regarding any such opportunities, the
Company will be in a position after the Reorganization, subject to regulatory
limitations and the Company's financial position, to take advantage of any such
opportunities that may arise. Lastly, the Reorganization will enable us to
better manage our capital by giving us broader investment opportunities through
the holding company structure, and enable us to distribute capital to
stockholders of the Company in the form of dividends and stock repurchases.
Because only a minority of the Common Stock will be offered for sale in the
Offering, our current mutual form of ownership and our ability to remain an
independent savings bank and to provide community-oriented financial services
will be preserved through the mutual holding company structure.
The Board of Trustees believes that these advantages outweigh the potential
disadvantages of the mutual holding company structure, which may include: (i)
the inability of stockholders other than the Mutual Holding Company to obtain
majority ownership of the Company and the Bank, which may result in the
perpetuation of the management and Board of Directors of the Bank and the
Company; and (ii) that the mutual holding company structure is a relatively new
form of corporate ownership, and new regulatory policies relating to the mutual
interest in the Mutual Holding Company that may be adopted from time-to-time may
have an adverse impact on minority stockholders. A majority of the voting stock
of the Company will be owned by the Mutual Holding Company, which is a mutual
institution that will be controlled by the existing Board of Trustees of the
Bank. While this structure will permit management to focus on the Company's and
the Bank's long-term business strategy for growth and capital redeployment
without undue pressure from stockholders, it will also serve to perpetuate the
existing management and trustees of the Bank. The Mutual Holding Company will
be able to elect all members of the Board of Directors of the Company, and will
be able to control the outcome of all matters presented to the stockholders of
the Company for resolution by vote except for certain matters that must be
approved by more than a majority of stockholders of the Company. No assurance
can be given that the Company will not take action adverse to the interests of
the minority stockholders. For example, the Company could revise the dividend
policy or defeat a candidate for the Board of Directors of the Bank or other
proposals put forth by the minority stockholders.
The Reorganization does not preclude the conversion of the Mutual Holding
Company from the mutual to stock form of organization which would be effected
through a merger of the Mutual Holding Company into the Company or the Bank and
the concurrent sale of the shares held by the Mutual Holding Company in a
subscription offering. A conversion of the Mutual Holding Company from the
mutual to stock form of organization is not anticipated for the foreseeable
future.
Following the completion of the Reorganization, all depositors who had
liquidation rights with respect to the Bank as of the effective date of the
Reorganization will continue to have such rights solely with respect to the
Mutual Holding Company so long as they continue to hold deposit accounts with
the Bank. In addition, all persons who become depositors of the Bank subsequent
to the Reorganization will have such liquidation rights with respect to the
Mutual Holding Company. Borrowers currently do not have ownership or voting
rights in the Bank and will not receive ownership or voting rights with respect
to the Mutual Holding Company.
All insured deposit accounts of the Bank that are transferred to the Bank
will continue to be federally insured by the FDIC and the BIF up to the legal
maximum limit in the same manner as deposit accounts existing in the Bank
immediately prior to the Reorganization. Upon completion of the Reorganization,
the Bank may exercise any and all powers, rights and privileges of, and shall be
subject to all limitations applicable to, capital stock savings banks under New
York law. As long as the Mutual Holding Company is in existence, the Mutual
Holding Company will be required to own at least 51% of the voting stock of the
Company, and the Company will own 100% of the voting stock of the Bank. The
Bank and the Company may issue any amount of non-voting stock or debt to persons
other than the Mutual Holding Company.
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The Offering
Concurrent with the Reorganization, the Company is offering shares of
Common Stock to persons other than the Mutual Holding Company. An offering of
between 8,677,747 and 11,740,482 shares of the Common Stock (subject to
adjustment to up to 13,501,554) pursuant to this Prospectus is being made
concurrently with the Reorganization. The shares of Common Stock that will be
sold in the Offering will constitute no more than 45.4% of the shares that will
be outstanding after the Offering (the "Minority Ownership Interest"). Following
the Reorganization and the Offering, the Company also will be authorized to
issue additional Common Stock or preferred stock to persons other than the
Mutual Holding Company, without prior approval of the holders of the Common
Stock.
The shares of Common Stock are being offered for sale at a fixed price of
$10.00 per share in the Subscription Offering pursuant to subscription rights in
the following order of priority to: (i) holders of deposit accounts with a
balance of $100 or more on August 31, 1996 ("Eligible Account Holders"); (ii)
the Bank's Employee Plans, including the ESOP; and (iii) depositors whose
accounts in the Bank totaled $100 or more on December 31, 1997 ("Supplemental
Eligible Account Holders"). Concurrently, and subject to the prior rights of
holders of subscription rights, any shares of Common Stock not subscribed for in
the Subscription Offering are being offered in the Community Offering at $10.00
per share to certain members of the general public, with a preference given to
natural persons residing in Niagara, Orleans, Erie and Genesee Counties, New
York. Subscription rights will expire if not exercised by 5:00 p.m., New York
time, on March _____, 1998 unless extended by the Bank and the Company.
Stock Pricing and Number of Shares to be Issued
The Plan of Reorganization and Federal and state regulations require that
the aggregate purchase price of the Common Stock sold in the Offering must be
based on the appraised pro forma market value of the Common Stock, as determined
by an independent valuation. The Bank has retained RP Financial to make such
valuation. For its services in making such appraisal, RP Financial will receive
a fee of $55,000 (which amount does not include a fee of $7,500 to be paid to RP
Financial for assistance in preparation of a business plan). The Bank and the
Company have agreed to indemnify RP Financial and its employees and affiliates
against certain losses (including any losses in connection with claims under the
federal securities laws) arising out of its services as appraiser, except where
RP Financial's liability results from its negligence or bad faith.
The Independent Valuation was prepared by RP Financial in reliance upon the
information contained in the Prospectus, including the Consolidated Financial
Statements. RP Financial also considered the following factors, among others:
the present and projected operating results and financial condition of the Bank
and the economic and demographic conditions in the Bank's existing market
area; certain historical, financial and other information relating to the Bank;
a comparative evaluation of the operating and financial statistics of the Bank
with those of other publicly traded subsidiaries of mutual holding companies;
the aggregate size of the Offering; the impact of the Reorganization on the
Bank's stockholders' equity and earnings potential; the proposed dividend policy
of the Company; and the trading market for securities of comparable institutions
and general conditions in the market for such securities.
The Independent Valuation states that as of November 28, 1997, the
estimated pro forma market value of the Common Stock ranged from a minimum of
$191,250,000 to a maximum of $258,750,000 with a midpoint of $225,000,000 (the
Estimated Valuation Range). The Board determined to offer the shares in the
Offering at the Subscription Price of $10.00 per share, the price most commonly
used in stock offerings involving mutual to stock conversions. Based on the
Estimated Valuation Range and the Subscription Price, the number of shares of
Common Stock that the Company will issue will range from between 19,125,000
shares to 25,875,000 shares, with a midpoint of 22,500,000 shares. The Board
determined to offer 45.4% of such shares, or between 8,677,747 shares and
11,740,482 shares with a midpoint of 10,209,115 shares (the Offering Range), to
depositors and the public pursuant to this Prospectus. In addition, shares are
being issued to the foundation as part of the Reorganization, which will result
in Minority Stockholders owning 46.7% of the shares of the Common Stock
outstanding at the conclusion of the Reorganization. The 53.3% of the shares of
the Company's Common Stock that are not sold in the Offering or contributed to
the foundation will be issued to the Mutual Holding Company.
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The Board reviewed the Independent Valuation and, in particular, considered
(i) the Bank's financial condition and results of operations for the nine months
ended September 30, 1997, and the year ended December 31, 1996, (ii) financial
comparisons of the Bank in relation to other financial institutions primarily
including other publicly traded mutual holding companies, and (iii) stock market
conditions generally and in particular for financial institutions, all of which
are set forth in the Independent Valuation. The Board also reviewed the
methodology and the assumptions used by RP Financial in preparing the
Independent Valuation. The Estimated Valuation Range may be amended with the
approval of the Superintendent and the FDIC (if required), if necessitated by
subsequent developments in the financial condition of the Bank or market
conditions generally.
Following commencement of the Subscription Offering, the maximum of the
Estimated Valuation Range may be increased by up to 15% to up to $297,562,500,
which will result in a corresponding increase in the maximum of the Offering
Range to up to 13,501,554 shares to reflect changes in the market and financial
conditions, without the resolicitation of subscribers. The minimum of the
Estimated Valuation Range and the minimum of the Offering Range may not be
decreased without a resolicitation of subscribers. The Subscription Price of
$10.00 per share will remain fixed. See "--Limitations on Common Stock
Purchases" as to the method of distribution and allocation of additional shares
that may be issued in the event of an increase in the Offering Range to fill
unfilled orders in the Subscription and Community Offerings.
The Independent Valuation, however, is not intended, and must not be
construed, as a recommendation of any kind as to the advisability of purchasing
such shares. RP Financial did not independently verify the Consolidated
Financial Statements and other information provided by the Bank, nor did RP
Financial value independently the assets or liabilities of the Bank. The
Independent Valuation considers the Bank as a going concern and should not be
considered as an indication of the liquidation value of the Bank. Moreover,
because such valuation is necessarily based upon estimates and projections of a
number of matters, all of which are subject to change from time to time, no
assurance can be given that persons purchasing such shares in the Offering will
thereafter be able to sell such shares at prices at or above the Subscription
Price.
The Independent Valuation will be updated at the time of the completion of
the Offering. If the update to the Independent Valuation at the conclusion of
the Offering results in an increase in the maximum of the Estimated Valuation
Range to more than $297,562,500 and a corresponding increase in the Offering
Range to more than 13,501,554 shares, or a decrease in the minimum of the
Estimated Valuation Range to less than $191,250,000 and a corresponding decrease
in the Offering Range to fewer than 8,677,747 shares, then the Company, after
consulting with the Superintendent and the FDIC, may terminate the Plan and
return all funds promptly, with interest on payments made by check, certified
or teller's check, bank draft or money order, extend or hold a new Subscription
Offering, Community Offering, or both, establish a new Offering Range, commence
a resolicitation of subscribers or take such other actions as permitted by the
Superintendent and the FDIC in order to complete the Reorganization and the
Offering. In the event that a resolicitation is commenced, unless an
affirmative response is received within a reasonable period of time, all funds
will be promptly returned to investors as described above. A resolicitation, if
any, following the conclusion of the Subscription and Community Offerings would
not exceed 45 days unless further extended by the Superintendent and the FDIC
for periods of up to 90 days not to extend beyond 24 months following the
special meeting of depositors, or ____________, 2000.
An increase in the Independent Valuation and the number of shares to be
issued in the Offering would decrease both a subscriber's ownership interest and
the Company's pro forma earnings and stockholders equity on a per share basis
while increasing pro forma earnings and stockholder's equity on an aggregate
basis. A decrease in the Independent Valuation and the number of shares to be
issued in the Offering would increase both a subscriber's ownership interest and
the Company's pro forma earnings and stockholder's equity on a per share basis
while decreasing pro forma net income and stockholder's equity on an aggregate
basis. For a presentation of the effects of such changes, see "Pro Forma
Data."
Copies of the appraisal report of RP Financial and the detailed memorandum
of the appraiser setting forth the method and assumptions for such appraisal are
available for inspection at the Main Office of the Bank and the other locations
specified under "Additional Information."
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No sale of shares of Common Stock may be consummated unless, prior to such
consummation, RP confirms to the Bank and the Superintendent that, to the best
of its knowledge, nothing of a material nature has occurred that, taking into
account all relevant factors, would cause RP to conclude that the Independent
Valuation is incompatible with its estimate of the pro forma market value of the
Common Stock of the Company at the conclusion of the Offering. Any change that
would result in an aggregate purchase price that is below the minimum or above
the maximum of the Estimated Valuation Range would be subject to
Superintendent's approval. If such confirmation is not received, the Bank may
extend the Offering, reopen or commence a new offering, establish a new
Estimated Valuation Range and commence a resolicitation of all purchasers with
the approval of the Superintendent or take such other actions as permitted by
the Superintendent in order to complete the Offering.
Purchase Priorities and Method of Offering Shares
The Bank shall have the right, in its sole discretion, to determine whether
prospective purchasers are "residents," "associates," or "acting in concert" as
defined by the Plan and in interpreting any and all other provisions of the
Plan. All such determinations are in the sole discretion of the Bank, and may be
based on whatever evidence the Bank chooses to use in making any such
determination.
Subject to the preceding paragraph and the limitations set forth in the
"--Limitations upon Purchases of Common Stock" section, the priorities for the
purchase of shares are as follows:
Priority 1: Eligible Account Holders. Each Eligible Account Holder shall be
given the opportunity to purchase up to 20,000 shares, or $200,000, of Common
Stock; provided that the Company may, in its sole discretion and without further
notice to or solicitation of subscribers or other prospective purchasers,
increase such maximum purchase limitation to up to 5% of the maximum number of
shares issued in the Offering or decrease such maximum purchase limitation to as
low as 0.1% of the maximum number of shares issued in the Offering, subject to
the overall purchase limitation set forth in the section herein titled
"Limitations upon Purchases of Common Stock." If there are insufficient shares
available to satisfy all subscriptions of Eligible Account Holders, shares will
be allocated to Eligible Account Holders so as to permit each such subscribing
Eligible Account Holder to purchase a number of shares sufficient to make his
total allocation equal to the lesser of 100 shares or the number of shares
subscribed for. Thereafter, unallocated shares will be allocated pro rata to
remaining subscribing Eligible Account Holders whose subscriptions remain
unfilled in the same proportion that each such subscriber's aggregate deposit
account balances as of the Eligibility Record Date ("Qualifying Deposits") bears
to the total amount of Qualifying Deposits of all subscribing Eligible Account
Holders whose subscriptions remain unfilled. Subscription rights to purchase
Common Stock received by executive officers and trustees of the Bank including
associates of executive officers and trustees, based on their increased deposits
in the Bank in the one year preceding the Eligibility Record Date, shall be
subordinated to the subscription rights of other Eligible Account Holders. To
ensure proper allocation of stock, each Eligible Account Holder must list on
their subscription order form all deposit accounts in which they had an
ownership interest as of the Eligibility Record Date.
Priority 2: Tax-Qualified Employee Plans. The Tax-Qualified Employee Plans
shall be given the opportunity to purchase in the aggregate up to 10% of the
Common Stock issued in the Offering. In the event of an oversubscription in the
Offering, subscriptions for shares by the Tax-Qualified Employee Plans may be
satisfied, in whole or in part, out of authorized but unissued shares of the
Company subject to the maximum purchase limitations applicable to such plans as
set forth in the section herein titled "Limitations Upon Purchases of Common
Stock," or may be satisfied, in whole or in part, through open market purchases
by the Tax-Qualified Employee Plans subsequent to the closing of the Offering.
Priority 3: Supplemental Eligible Account Holders. To the extent there are
sufficient shares remaining after satisfaction of subscriptions by Eligible
Account Holders and the Tax-Qualified Employee Plans, each Supplemental Eligible
Account Holder shall have the opportunity to purchase up to 20,000 shares, or
$200,000, of Common Stock; provided that the Company may, in its sole discretion
and without further notice to or solicitation of subscribers or other
prospective purchasers, increase such maximum purchase limitation to up to 5% of
the maximum number of shares issued in the Offering or decrease such maximum
purchase limitation to as low as 0.1% of the maximum number of
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shares issued in the Offering subject to the overall purchase limitations set
forth in the section herein titled "Limitations Upon Purchases of Common Stock."
In the event Supplemental Eligible Account Holders subscribe for a number of
shares which, when added to the shares subscribed for by Eligible Account
Holders and the Tax-Qualified Employee Plans, exceed available shares, the
shares of Common Stock will be allocated among subscribing Supplemental Eligible
Account Holders so as to permit each subscribing Supplemental Eligible Account
Holder to purchase a number of shares sufficient to make their total allocation
equal to the lesser of 100 shares or the number of shares subscribed for.
Thereafter, unallocated shares will be allocated to each subscribing
Supplemental Eligible Account Holder whose subscription remains unfilled in the
same proportion that such subscriber's aggregate deposit account balances as of
the Supplemental Eligibility Record Date ("Supplemental Qualifying Deposits")
bear to the total amount of Supplemental Qualifying Deposits of all subscribing
Supplemental Eligible Account Holders whose subscriptions remain unfilled.
Establishment of the Charitable Foundation
General. In furtherance of our commitment to the communities that we serve,
we intend to voluntarily establish a charitable foundation in connection with
the Reorganization. The Plan provides that the Bank and the Company will
establish the foundation, which will be incorporated under Delaware law as a
non-stock corporation and will be funded with cash and shares of Common Stock
contributed by the Company. We will make a contribution to the foundation, in
the form of shares of Common Stock and cash, in a total amount equal to 5% of
the aggregate Subscription Price of the shares of Common Stock sold in the
Offering. The number of shares of Common Stock to be contributed to the
foundation will equal 3% of the shares sold in the Offering. The balance of the
contribution will consist of cash. The contribution of Common Stock to the
foundation will be dilutive to the interests of stockholders and will have an
adverse impact on the reported earnings of the Company in 1998, the year in
which the foundation is established.
Purpose of the Foundation. The purpose of the foundation is to provide
funding to support charitable causes and community development activities. In
recent years, the Bank has emphasized community lending and development
activities within the communities that we serve. The foundation is being formed
as a complement to our existing community activities, not as a replacement for
such activities. While we intend to continue to emphasize community lending and
development activities following the Reorganization, such activities are not our
sole corporate purpose. The foundation, conversely, will be completely dedicated
to community activities and the promotion of charitable causes, and may be able
to support such activities in ways that are not currently available to the Bank.
We believe that the foundation will enable the Company and the Bank to assist
our local community in areas beyond community lending and development. We
believe the establishment of a charitable foundation is consistent with the
Bank's commitment to community service. The Board further believes that the
funding of the foundation with Common Stock of the Company is a means of
enabling the communities served by us to share in the growth and success of the
Company long after completion of the Reorganization. The foundation will
accomplish that goal by providing for continued ties between the foundation and
Bank, thereby forming a partnership with the Bank's community. The establishment
of the foundation will also enable the Company and the Bank to develop a unified
charitable donation strategy and will centralize the responsibility for
administration and allocation of corporate charitable funds. Charitable
foundations have been formed by other financial institutions for this purpose,
among others. We do not, however, expect the contribution to the foundation to
take the place of our traditional community lending activities.
Structure of the Foundation. The foundation will be incorporated under
Delaware law as a non-stock corporation. Pursuant to the foundation's Bylaws,
the foundation's initial board of directors will be comprised of persons who are
existing directors and officers of the Company. Subsequent to the
Reorganization, other individuals may be chosen in light of their commitment and
service to charitable and community purposes. The members of the foundation, who
are comprised of its board members, will elect the directors at the annual
meeting of the foundation from those nominated by the Nominating Committee. Only
persons serving as directors of the foundation qualify as members of the
foundation, with voting authority. Directors will be divided into three classes
with each class appointed for three-year terms. The certificate of incorporation
of the foundation provides that the corporation is organized exclusively for
charitable purposes, including community development, as set forth in
Section 501(c)(3) of the Code. The foundation's certificate of incorporation
further provides that no part of the net earnings of the foundation will inure
to the benefit of, or be distributable to its directors, officers or members.
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The authority for the affairs of the foundation will be vested in the board
of directors of the foundation. The directors of the foundation will be
responsible for establishing the policies of the foundation with respect to
grants or donations by the foundation, consistent with the purpose for which the
foundation was established. Although no formal policy governing foundation
grants exists at this time, the foundation's board of directors will adopt such
a policy upon establishment of the foundation. As directors of a nonprofit
corporation, directors of the foundation will at all times be bound by their
fiduciary duty to advance the foundation's charitable goals, to protect the
assets of the foundation and to act in a manner consistent with the charitable
purpose for which the foundation is established. The directors of the foundation
will also be responsible for directing the activities of the foundation,
including the management of the Common Stock of the Company and the cash held by
the foundation. However, as a condition to receiving the non-objection of the
Reorganization, the foundation has been required to commit to the FDIC and the
Department that all shares of Common Stock held by the foundation will be voted
in the same ratio as all other shares of the Company's Common Stock on all
proposals considered by stockholders of the Company; provided, however, that,
consistent with such condition, the FDIC and the Department would waive this
voting restriction under certain circumstances if compliance with the voting
restriction would: (i) cause a violation of the law of the State of Delaware;
(ii) would cause the foundation to lose its tax-exempt status, or cause the
Internal Revenue Service to deny the foundation's request for a determination
that it is an exempt organization or otherwise have a material and adverse tax
consequence on the foundation; or (iii) would cause the foundation to be subject
to an excise tax under Section 4941 of the Code. In order for the FDIC and the
Department to waive such voting restriction, the Company's or the foundation's
legal counsel would be required to render an opinion satisfactory to the FDIC
and the Department that compliance with the voting requirement would have the
effect described in clauses (i), (ii) or (iii) above. Under those circumstances,
the FDIC and the Department would grant waivers of the voting restriction upon
submission of such legal opinion(s) by the Company or the foundation that are
satisfactory to the FDIC and the Department. In the event that the FDIC and the
Department were to waive the voting requirement, the directors would direct the
voting of the Common Stock held by the foundation.
The foundation's place of business will be located at the Bank's
administrative offices and initially the foundation is expected to have no
employees but will utilize the members of the staff of the Company or the Bank.
The board of directors of the foundation will appoint such officers as may be
necessary to manage the operation of the foundation. In this regard, it is
expected that the Bank will be required to provide the FDIC with a commitment
that, to the extent applicable, the Bank will comply with the affiliate
restrictions set forth in Sections 23A and 23B of the Federal Reserve Act with
respect to any transactions between the Bank and the foundation.
As a private foundation under Section 501(c)(3) of the Code, the foundation
will be required to distribute annually in grants or donations, a minimum of 5%
of the average fair market value of its net investment assets. One of the
conditions imposed on the gift of Common Stock by the Company is that the amount
of Common Stock that may be sold by the foundation in any one year shall not
exceed 5% of the average market value of the assets held by the foundation,
except where the board of directors of the foundation determines that the
failure to sell an amount of common stock greater than such amount would result
in a longer-term reduction of the value of the foundation's assets and as such
would jeopardize the foundation's capacity to carry out its charitable purposes.
Upon completion of the Reorganization and the contribution of shares to the
foundation, the Company would have 19,125,000, 22,500,000 and 25,875,000 shares
issued and outstanding at the minimum, midpoint and maximum of the Estimated
Valuation Range. Because the Company will have an increased number of shares
outstanding, the voting and ownership interests of shareholders in the Company's
Common Stock would be diluted by 1.3%, as compared to their interests in the
Company if the foundation was not established. For additional discussion of the
dilutive effect, see "Pro Forma Data."
Impact on Earnings. The contribution of cash and Common Stock to the
foundation will have an adverse impact on the Company's and the Bank's earnings
in the year in which the contribution is made. The Company will recognize the
full expense in the amount of the contribution of cash and Common Stock to the
foundation in the quarter in which it occurs, which is expected to be the second
quarter of 1998. The amount of the contribution will range from $4.3 million to
$5.9 million, based on the minimum and maximum of the Estimated Valuation Range,
respectively. The contribution expense will be partially offset by the tax
benefit related to the expense. The Company and the Bank have been advised by
their independent tax advisors that the contribution to the foundation will be
tax deductible, subject to an annual limitation based on 10% of the Company's
annual taxable income. Assuming an aggregate contribution of $5.9 million (based
on
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the maximum of the Estimated Valuation Range), the Company estimates a net tax
effected expense of $3.8 million (based upon a 35% tax rate). Management cannot
predict earnings for 1998, but expects that the establishment and funding of the
foundation will have an adverse impact on the Company's earnings for the year.
In addition to the contribution to the foundation, the Bank expects in the
future to continue making ordinary charitable contributions within its
community.
Tax Considerations. The Company and the Bank have been advised by their
independent tax advisors that an organization created for the above purposes
would qualify as a Section 501(c)(3) exempt organization under the Internal
Revenue Code of 1986, as amended (the "Code"), and would be classified as a
private foundation. The foundation will submit a request to the IRS to be
recognized as an exempt organization. The Company and the Bank have received an
opinion of their independent tax advisors that the foundation would qualify as a
Section 501(c)(3) exempt organization under the Code, except that such opinion
does not consider the impact of the condition to be agreed to by the foundation
that Common Stock issued to the foundation be voted in the same ratio as all
other shares of the Company's Common Stock on all proposals considered by
stockholders of the Company. Consistent with this condition, in the event that
the Company or the foundation receives an opinion of their legal counsel that
compliance with the voting restriction would have the effect of causing the
foundation to lose its tax-exempt status, or otherwise have a material and
adverse tax consequence on the foundation or subject the foundation to an excise
tax under Section 4941 of the Code, the FDIC shall waive such voting restriction
upon submission of a legal opinion by the Company or the foundation that is
satisfactory to the FDIC. The independent tax advisors' opinion further provides
that there is substantial authority for the position that the Company's
contribution of its own stock to the foundation would not constitute an act of
self-dealing, and that the Company would be entitled to a deduction in the
amount of the fair market value of the stock at the time of the contribution
less the nominal par value that the foundation is required to pay to the Company
for such stock, subject to an annual limitation based on 10% of the Company's
annual taxable income. The Company, however, would be able to carry forward any
unused portion of the deduction for five years following the contribution.
Assuming the sale of Common Stock at the adjusted maximum of the Estimated
Valuation Range, the Company estimates that all of the deduction should be
deductible over the six-year period. Although the Company and the Bank have
received an opinion of their independent tax advisors that the Company will be
entitled to the deduction for the charitable contribution, there can be no
assurances that the IRS will recognize the foundation as a Section 501(c)(3)
exempt organization or that the deduction will be permitted. In such event, the
Company's tax benefit related to the foundation would have to be fully expensed,
resulting in a further reduction in earnings in the year in which the IRS makes
such a determination.
As a private foundation, earnings and gains, if any, from the sale of
Common Stock or other assets are generally exempt from federal and state
corporate income taxation. However, investment income, such as interest,
dividends and capital gains, of a private foundation will generally be subject
to a federal excise tax of 2.0%. The foundation will be required to make an
annual filing with the IRS within four and one-half months after the close of
the foundation's fiscal year to maintain its tax-exempt status. The foundation
will be required to publish a notice that the annual information return will be
available for public inspection for a period of 180 days after the date of such
public notice. The information return for a private foundation must include,
among other things, an itemized list of all grants made or approved, showing the
amount of each grant, the recipient, any relationship between a grant recipient
and the foundation's managers and a concise statement of the purpose of each
grant. The foundation will also be required to file an annual report with the
Charities Bureau of the Office of the Attorney General of the State of New York.
Comparison of Valuation and Other Factors Assuming the Foundation is Not
Established as Part of the Reorganization. The establishment of the foundation
was taken into account by RP Financial in determining the estimated pro forma
market value of the Common Stock of the Company. The aggregate price of the
shares of Common Stock being offered in the subscription and community offerings
is based upon the independent appraisal conducted by RP Financial of the
estimated pro forma market value of the Common Stock of the Company. The pro
forma aggregate price of the Common Stock being offered for sale in the
Reorganization is currently estimated to be between $86.8 million and
$117.4 million, with a midpoint of $102.1 million. The pro forma price to book
ratio and the pro forma price to earnings ratio, at and for the nine months
ended September 30, 1997, are 104.7% and 15.6x, respectively, at the midpoint of
the Estimated Valuation Range. In the event that the Reorganization did not
include the foundation, RP Financial has estimated that the estimated pro forma
market value of the Common Stock being offered for sale in the Offering would be
$110.4 million at the midpoint based on a pro forma price to book ratio and the
pro forma price
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to earnings ratio that of 108.0% and 16.7x, respectively. The amount of Common
Stock being offered for sale in the Reorganization at the midpoint of the
Estimated Valuation Range is approximately $8.3 million less than the estimated
amount of Common Stock that would be sold in the Offering without the foundation
based on the estimate provided by RP Financial. Accordingly, certain
accountholders of the Bank who subscribe to purchase Common Stock in the
Subscription Offering would receive fewer shares depending on the size of a
depositor's stock order and the amount of his or her qualifying deposits in the
Bank and the overall level of subscriptions. See "Comparison of Valuation and
Pro Forma Information Without Foundation." This estimate by RP Financial was
prepared solely for purposes of providing subscribers with information with
which to make an informed decision on the Reorganization.
The decrease in the amount of Common Stock being offered as a result of the
contribution of Common Stock to the foundation will not have a significant
effect on the Company or the Bank's capital position. The Bank's regulatory
capital is significantly in excess of its regulatory capital requirements and
will further exceed such requirements following the Reorganization. The Bank's
leverage and risk-based capital ratios at September 30, 1997 were 10.75% and
21.74%, respectively. Assuming the sale of shares at the midpoint of the
Estimated Valuation Range, the Bank's pro forma leverage and risk-based capital
ratios at September 30, 1997 would be 13.5% and 26.9%, respectively. On a
consolidated basis, the Company's pro forma stockholders' equity would be
$214.6 million, or approximately 17.0% of pro forma consolidated assets,
assuming the sale of shares at the midpoint of the Estimated Price Range. Pro
forma stockholders' equity per share and pro forma net income per share would be
$9.55 and $0.48, respectively. If the foundation was not being established in
the Reorganization, based on the RP Financial estimate, the Company's pro forma
stockholders' equity would be approximately $222.1 million, or approximately
17.5% of pro forma consolidated assets at the midpoint of the estimate, and pro
forma stockholder's equity per share and pro forma net income per share would be
substantially similar with the foundation as without the establishment of the
foundation. See "Comparison of Valuation and Pro Forma Information with No
Foundation."
Regulatory Conditions Imposed on the Foundation. Establishment of the
foundation is subject to the following conditions agreed to by the foundation in
writing as a condition to receiving the FDIC's non-objection to and
Superintendent's approval of the Reorganization: (i) the foundation will be
subject to examination by the FDIC and the Department; (ii) the foundation must
comply with supervisory directives imposed by the FDIC and the Department;
(iii) the foundation will operate in accordance with written policies adopted by
the board of directors, including a conflict of interest policy; and (iv) any
shares of Common Stock held by the foundation must be voted in the same ratio as
all other outstanding shares of Common Stock on all proposals considered by
stockholders of the Company; provided, however, that, consistent with the
condition, the FDIC and the Department would waive this voting restriction under
certain circumstances if compliance with the voting restriction would: (a) cause
a violation of the law of the State of Delaware; (b) would cause the foundation
to lose its tax-exempt status or otherwise have a material and adverse tax
consequence on the foundation; or (c) would cause the foundation to be subject
to an excise tax under Section 4941 of the Code. In order for the foundation's
legal counsel would be required to render an opinion satisfactory to the FDIC
and the Department. There can be no assurances that a legal opinion addressing
these issues could be rendered, or if rendered, that the FDIC and the Department
would grant unconditional waivers of the voting restriction. In no event would
the voting restriction survive the sale of shares of the Common Stock held by
the foundation.
Potential Challenges. The establishment and funding of a charitable
foundation as part of a conversion of a mutual savings institution to stock form
has only recently occurred. As such, the foundation, and the Superintendent's
approval of the Reorganization and the FDIC's nonobjection to the Reorganization
may be subject to potential challenges notwithstanding that the Board of
Directors of the Company and the Board of Trustees of the Bank have carefully
considered the various factors involved in the establishment of the foundation
in reaching their determination to establish the foundation as part of the
Reorganization. If challenges were to be instituted seeking to require the Bank
to eliminate establishment of the foundation in connection with the
Reorganization, no assurances can be made that the resolution of such challenges
would not result in a delay in the consummation of the Reorganization or that
any objecting persons would not be ultimately successful in obtaining such
removal or other relief against the Company or the Bank. Additionally, if the
Company and the Bank are forced to eliminate the foundation, the Company may be
required to resolicit subscribers in the Offerings.
Community Offering
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Any shares of Common Stock not subscribed for in the Subscription Offering
will be offered for sale in a Community Offering. This will involve an offering
of all unsubscribed shares directly to the general public. The Community
Offering, if any, shall be for a period of not more than 45 days unless extended
by the Company and the Bank, and shall commence concurrently with, during or
promptly after the Subscription Offering. The Common Stock will be offered and
sold in the Community Offering, in accordance with FDIC and Department
regulations, so as to achieve the widest distribution of the Common Stock. No
person, by himself or herself, or with an associate or group of persons acting
in concert, may subscribe for or purchase more than $200,000 of Common Stock
offered in the Community Offering. Further, the Company may limit total
subscriptions so as to assure that the number of shares available for the public
offering may be up to a specified percentage of the number of shares of Common
Stock. Finally, the Company may reserve shares offered in the Community Offering
for sales to institutional investors.
In the event of an oversubscription for shares in the Community Offering,
shares will be allocated (to the extent shares remain available) first to
natural persons residing in Niagara, Orleans, Erie and Genesee Counties, New
York and secondly to natural persons residing in the remaining four counties of
Western New York, Wyoming, Allegany, Cattaraugus and Chautauqua counties (the
"Community"), and then to cover any reservation of shares for institutional
orders, and then to cover the orders of any other person subscribing for shares
in the Community Offering so that each such person may receive 1,000 shares, and
thereafter, on a pro rata basis to such persons based on the amount of their
respective subscriptions.
The terms "residence," "reside," "resided" or "residing" as used herein
with respect to any person shall mean any person who occupied a dwelling within
the Bank's Community, has an intent to remain within the Community for a period
of time, and manifests the genuineness 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. The Bank may utilize deposit or loan records or such other 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.
The Bank and the Holding Company, in their sole discretion, may reject
subscriptions, in whole or in part, received from any person.
Syndicated Community Offering
Any shares of Common Stock not sold in the Subscription Offering or in the
Community Offering, if any, may be offered for sale to the general public by a
selling group of broker-dealers in a Syndicated Community Offering, subject to
terms, conditions and procedures as may be determined by the Bank and the
Company in a manner that is intended to achieve the widest distribution of the
Common Stock subject to the rights of the Company to accept or reject in whole
or in part all order in the Syndicated Community Offering. It is expected that
the Syndicated Community Offering will commence as soon as practicable after
termination of the Subscription Offering and the Community Offering, if any. The
Syndicated Community Offering shall be completed within 45 days after the
termination of the Subscription Offering, unless such period is extended as
provided herein.
If for any reason a Syndicated Community Offering of unsubscribed shares of
Common Stock cannot be effected and any shares remain unsold after the
Subscription Offering and the Community Offering, if any, the Boards of
Directors of the Company and the Bank will seek to make other arrangements for
the sale of the remaining shares. Such other arrangements will be subject to the
approval of the Department and the FDIC and to compliance with applicable state
and federal securities laws.
Restrictions on Sale of Stock by Trustees and Officers
All shares of the Common Stock purchased by Trustees and officers of the
Bank or the Company in the Offering will be subject to the restriction that such
shares may not be sold or otherwise disposed of for value for a period of one
year following the date of purchase, except for any disposition of such shares
(i) following the death of the original purchaser or (ii) by reason of an
exchange of securities in connection with a merger or acquisition approved
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by the applicable regulatory authorities. Sales of shares of the Common Stock by
the Company's directors and officers will also be subject to certain insider
trading and other transfer restrictions under the federal securities laws. See
"Regulation--Federal Securities Laws" and "Description of Capital Stock."
Each certificate for such restricted shares will bear a legend prominently
stamped on its face giving notice of the restrictions on transfer, and
instructions will be issued to the Company's transfer agent to the effect that
any transfer within such time period of any certificate or record ownership of
such shares other than as provided above is a violation of the restriction. Any
shares of common stock issued pursuant to a stock dividend, stock split or
otherwise with respect to restricted shares will be subject to the same
restrictions on sale.
Restrictions on Agreements or Understandings Regarding Transfer of Common Stock
to be Purchased in the Offering
Prior to the completion of the Offering, no depositor or borrower may
transfer or enter into an agreement or understanding to transfer the legal or
beneficial ownership of the shares of Common Stock to be purchased by such
person in the Offering. Each depositor and borrower who submits an Order Form
will be required to certify that the purchase of Common Stock by such person is
solely for the purchaser's own account and there is no agreement or
understanding regarding the sale or transfer of such shares. The Bank intends to
pursue any and all legal and equitable remedies in the event it becomes aware of
any such agreement or understanding, and will not honor orders reasonably
believed by the Bank to involve such an agreement or understanding.
Procedure for Purchasing Shares
To ensure that each purchaser receives a Prospectus at least 48 hours
before the Expiration Date, Prospectuses may not be mailed any later than five
days prior to such date or be hand delivered any later than two days prior to
such date. Order forms may only be distributed with a Prospectus.
Expiration Date. The Offering will terminate at 5:00 p.m. New York Time on
March __, 1998, unless extended by the Bank for up to an additional 45 days or,
if approved by the Superintendent, for an additional period after such 45-day
extension (as so extended, the "Expiration Date"). The Bank is not required to
give purchasers notice of any extension unless the Expiration Date is later than
__________, 1998, in which event purchasers will be given the right to increase,
decrease, confirm, or rescind their orders. If the minimum number of shares
issued in the Offering (_________ shares) is not sold by the Expiration Date,
the Bank may terminate the Offering and promptly refund all orders for Common
Stock. A reduction in the number of shares below the minimum of the Estimated
Valuation Range will not require the approval of depositors or an amendment to
the Independent Valuation. If the number of shares is reduced below the minimum
of the Estimated Valuation Range, purchasers will be given an opportunity to
increase, decrease, or rescind their orders.
Use of Order Forms. In order to purchase the Common Stock, each purchaser
must complete an Order Form except for certain persons purchasing in the
Syndicated Community Offering as more fully described below. Any person
receiving an Order Form who desires to purchase Common Stock may do so by
delivering (by mail or in person) to the Bank a properly executed and completed
Order Form, together with full payment for the shares purchased. The Order Form
must be received prior to 5:00 p.m. New York Time on March __, 1998. Once
tendered, an Order Form cannot be modified or revoked without the consent of the
Bank. Each person ordering shares is required to represent that they are
purchasing such shares for their own account. The interpretation by the Bank of
the terms and conditions of the Plan and of the acceptability of the Order Forms
will be final. The Bank is not required to accept copies of Order Forms.
Payment for Shares. Payment for all shares will be required to accompany
all completed Order Forms for the purchase to be valid. Payment for shares may
be made by (i) check or money order, or (ii) authorization of withdrawal from a
deposit account maintained with the Bank. Third party checks will not be
accepted as payment for a subscriber's order. Appropriate means by which such
withdrawals may be authorized are provided in the Order Forms. Once such
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a withdrawal amount has been authorized, a hold will be placed on such funds,
making them unavailable to the depositor until the Offering has been completed
or terminated. In the case of payments authorized to be made through withdrawal
from deposit accounts, all funds authorized for withdrawal will continue to earn
interest at the contract rate until the Offering is completed or terminated.
Interest penalties for early withdrawal applicable to certificate accounts will
not apply to withdrawals authorized for the purchase of shares; however, if a
withdrawal results in a certificate account with a balance less than 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 Bank's passbook rate subsequent to the withdrawal. Payments made by check
or money order will be placed in a segregated savings account and will be paid
interest at the Bank's passbook rate of 3.2% (calculated using the simple
interest method), from the date payment is received until the Offering is
completed or terminated. Such interest will be paid by check, on all funds held,
including funds accepted as payment for shares of Common Stock, promptly
following completion or termination of the Offering. An executed Order Form,
once received by the Bank, may not be modified, amended or rescinded without the
consent of the Bank, unless the Offering is not completed by __________, 1998,
in which event purchasers may be given the opportunity to increase, decrease,
confirm or rescind their orders for a specified period of time.
Depending on market conditions, the Common Stock may be offered for sale to
the general public on a best efforts basis in the Syndicated Community Offering
by a selling group of broker-dealers to be managed by CIBC Oppenheimer Corp. and
Trident Securities, Inc. CIBC Oppenheimer Corp. and Trident Securities, Inc., in
their discretion, will instruct Selected Dealers as to the number of shares to
be allocated to each Selected Dealer. Only upon allocation of shares to Selected
Dealers may Selected Dealers take orders from their customers. Investors who
desire to purchase shares in the Community Offering directly through a Selected
Dealer, which may include CIBC Oppenheimer Corp. and Trident Securities, Inc.,
are advised that the members of the Selling Group are required either (a) upon
receipt of an executed Order Form or direction to execute an Order Form on
behalf of an investor, to forward the appropriate purchase price to the Bank for
deposit in a segregated account on or before twelve noon, prevailing time, of
the business day next following such receipt or execution; or (b) upon receipt
of confirmation by such member of the Selling Group of an investor's interest in
purchasing shares, and following a mailing of an acknowledgment by such member
to such investor on the business day next following receipt of confirmation, to
debit the account of such investor on the fifth business day next following
receipt of confirmation and to forward the appropriate purchase price to the
Bank for deposit in the segregated account on or before twelve noon, prevailing
time, of the business day next following such debiting. Payment for any shares
purchased pursuant to alternative (a) above must be made by check in full
payment therefor. Payment for shares purchased pursuant to alternative (b) above
may be made by wire transfer to the Bank.
Owners of self-directed IRAs may use the assets of such IRAs to purchase
shares of Common Stock in the Offering. Individuals who are participants in
self-directed tax qualified plans maintained by self-employed individuals may
use the assets in their self-directed Keogh Plan accounts to purchase shares of
Common Stock in the Offering. In addition, the provisions of ERISA and IRS
regulations require that executive officers, trustees, and 10% stockholders who
use self-directed IRA funds and/or Keogh Plan accounts to purchase shares of
Common Stock in the Offering, make such purchase for the exclusive benefit of
the IRA and/or Keogh Plan participant.
If the ESOP purchases shares of the Common Stock, such plan will not be
required to pay for such shares until consummation of the Offering.
Delivery of Stock Certificates. Certificates representing Common Stock
issued in the Offering will be mailed by the Bank to the persons entitled
thereto at the registration address noted on the Order Form, as soon as
practicable following consummation of the Offering. Any certificates returned as
undeliverable will be held by the Bank until claimed by persons legally entitled
thereto or otherwise disposed of in accordance with applicable law. Until
certificates for the Common Stock are available and delivered to purchasers,
purchasers may not be able to sell the shares of stock which they ordered.
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Plan of Distribution and Selling Commissions
Offering materials for the Offering initially have been distributed to
certain persons by mail, with additional copies made available at the Bank's
offices and by CIBC Oppenheimer Corp. and Trident Securities, Inc. All
prospective purchasers are to send payment directly to the Bank, where such
funds will be held in a segregated special escrow account and not released until
the Offering is completed or terminated.
To assist in the marketing of the Common Stock, the Bank has retained CIBC
Oppenheimer Corp. and Trident Securities, Inc., both of which are broker-dealers
registered with the NASD. CIBC Oppenheimer Corp. and Trident Securities, Inc.
will assist the Bank in the Offering as follows: (i) in training and educating
the Bank's employees regarding the mechanics and regulatory requirements of the
Offering; (ii) in conducting informational meetings for employees, customers and
the general public; (iii) in coordinating the selling efforts in the Bank's
local communities; and (iv) in soliciting orders for Common Stock. For these
services, CIBC Oppenheimer Corp. and Trident Securities, Inc. will receive an
aggregate fee of .95% of the dollar amount of the Common Stock sold in the
Offering to residents of Niagara, Orleans, Erie and Genesee Counties, New York
(and counties contiguous thereto) and .75% of the dollar amount of the Common
Stock sold in the Offering to other persons. If there is a Syndicated Community
Offering, the aggregate fee shall not exceed 4.5% of the Common Stock sold by
CIBC Oppenheimer Corp. and Trident Securities, Inc. and other NASD member firms
under selected dealer agreements.
The Bank also will reimburse CIBC Oppenheimer Corp. and Trident Securities,
Inc. for its reasonable out-of-pocket expenses (including legal fees and
expenses up to a maximum of $85,000) associated with its marketing effort. The
Bank has made an advance payment of $10,000 to each of CIBC Oppenheimer Corp.
and Trident Securities, Inc. If the Plan is terminated by the Bank, the Offering
is not completed by __________, 1998, or if CIBC Oppenheimer Corp. and Trident
Securities, Inc. terminate their agreement with the Bank in accordance with the
provisions of the agreement, CIBC Oppenheimer Corp. and Trident Securities, Inc.
will only receive reimbursement of their reasonable out-of-pocket expenses. The
Bank will indemnify CIBC Oppenheimer Corp. and Trident Securities, Inc. against
liabilities and expenses (including legal fees) incurred in connection with
certain claims or litigation arising out of or based upon untrue statements or
omissions contained in the offering material for the Common Stock, including
liabilities under the Securities Act of 1933.
Trustees and executive officers of the Bank may participate in the
solicitation of offers to purchase Common Stock. Other trained employees of the
Bank may participate in the Offering in ministerial capacities, providing
clerical work in effecting a sales transaction or answering questions of a
ministerial nature. Other questions of prospective purchasers will be directed
to executive officers or registered representatives. The Bank will rely on
Rule 3a4-1 of the Exchange Act, so as to permit officers, trustees, and
employees to participate in the sale of the Common Stock. No officer, trustee,
or employee of the Bank will be compensated for his participation by the payment
of commissions or other remuneration based either directly or indirectly on the
transactions in the Common Stock.
A Stock Information Center will be established at the Bank's main office,
in an area separated from the Bank's banking operations. Employees will inform
prospective purchasers to direct their questions to the Stock Information Center
and will provide such persons with the telephone number of the Center.
Other Restrictions. Notwithstanding any other provision of the Plan, no
person is entitled to purchase any Common Stock to the extent such purchase
would be illegal under any federal or state law or regulation (including state
"blue-sky" laws and regulations), or would violate regulations or policies of
the NASD, particularly those regarding free riding and withholding. The Bank
and/or its agents may ask for an acceptable legal opinion from any purchaser as
to the legality of such purchase and may refuse to honor any such purchase order
if such opinion is not timely furnished. The Plan prohibits the Bank from
lending funds or extending credit to any persons to purchase Common Stock in the
Offering.
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Limitations upon Purchases of Common Stock
The following additional limitations have been imposed upon purchases of
shares of Common Stock. Defined terms used in this section and not otherwise
defined in this Prospectus shall have the meaning set forth in the Plan.
A. The aggregate amount of outstanding Common Stock of the Company owned
or controlled by persons other than Mutual Holding Company at the
close of the Offering shall not exceed 49% of the Company's total
outstanding Common Stock.
B. No Person or group of persons Acting in Concert, may purchase more
than 40,000 shares, or $400,000, of Common Stock in the Offering,
except that: (i) the Company may, in its sole discretion and without
further notice to or solicitation of subscribers or other prospective
purchasers, increase such maximum purchase limitation to up to 5% of
the number of shares issued in the Offering; (ii) Tax-Qualified
Employee Plans may purchase up to 10% of the shares issued in the
Offering; and (iii) for purposes of this paragraph shares to be held
by any Tax-Qualified Employee Plan and attributable to a person shall
not be aggregated with other shares purchased directly by or
otherwise attributable to such person.
C. The aggregate amount of Common Stock acquired in the Offering by all
Management Persons and their Associates, exclusive of any stock
acquired by such persons in the secondary market, shall not exceed
25% of the outstanding shares of Common Stock of the Company sold in
the Offering. In calculating the number of shares held by Management
Persons and their Associates under this paragraph or under the
provisions of paragraph D below, shares held by any Tax-Qualified
Employee Benefit Plan or any Non-Tax-Qualified Employee Benefit Plan
of the Bank that are attributable to such persons shall not be
counted.
D. The aggregate amount of Common Stock acquired in the Offering by all
Management Persons and their Associates, exclusive of any Common
Stock acquired by such persons in the secondary market, shall not
exceed 25% of the stockholders' equity of the Bank. In calculating
the number of shares held by Management Persons and their Associates
under this paragraph or under the provisions of paragraph C of this
section, shares held by any Tax-Qualified Employee Benefit Plan or
any Non-Tax-Qualified Employee Benefit Plan of the Bank that are
attributable to such persons shall not be counted.
E. The Boards of Directors of the Bank and the Company may, in their
sole discretion, increase the maximum purchase limitation set forth
in paragraph B to up to 9.9%, provided that orders for Common Stock
in excess of 5% of the number of shares of Common Stock issued in the
Offering shall not in the aggregate exceed 10% of the total shares of
Common Stock issued in the Offering (except that this limitation
shall not apply to purchases by Tax-Qualified Employee Plans). If
such 5% limitation is increased, subscribers for the maximum amount
will be, and certain other large subscribers in the sole discretion
of the Company and the Bank may be, given the opportunity to increase
their subscriptions up to the then applicable limit. Requests to
purchase additional shares of Common Stock under this provision will
be determined by the Board of Directors of the Company, in its sole
discretion.
F. In the event of an increase in the total number of shares offered in
the Subscription Offering due to an increase in the maximum of the
Estimated Valuation Range of up to 15% (the "Adjusted Maximum"), the
additional shares will be issued 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, or employee,
officer and trustee categories, to fill unfulfilled subscriptions of
such subscribers according to their respective priorities set forth
in the Plan.
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G. Notwithstanding any other provision of the Plan, no person shall be
entitled to purchase any Common Stock to the extent such purchase
would be illegal under any federal law or state law or regulation or
would violate regulations or policies of the National Association of
Securities Dealers, Inc., particularly those regarding free riding
and withholding. The Company and/or its agents may ask for an
acceptable legal opinion from any purchaser as to the legality of
such purchase and may refuse to honor any purchase order if such
opinion is not timely furnished.
H. The Board of Directors of the Company has the right in its sole
discretion to reject any order submitted by a person whose
representations the Board of Directors believes to be false or who it
otherwise believes, either alone or acting in concert with others, is
violating, circumventing, or intends to violate, evade or circumvent
the terms and conditions of the Plan.
The Company, in its sole discretion, may make reasonable efforts to comply
with the securities laws of any state in the United States in which its
depositors reside, and will only offer and sell the Common Stock in states in
which the offers and sales comply with such states' securities laws. However,
no person will be offered or allowed to purchase any Common Stock under the Plan
if they resides in a foreign country or in a state of the United States with
respect to which any of the following apply: (i) a small number of persons
otherwise eligible to purchase shares under the Plan reside in such state or
foreign county; (ii) the offer or sale of shares of Common Stock to such persons
would require the Bank or its employees to register, under the securities laws
of such state or foreign country, as a broker or dealer or to register or
otherwise qualify its securities for sale in such state or foreign country; or
(iii) such registration or qualification would be impracticable for reasons of
cost or otherwise.
Liquidation Rights
In the unlikely event of a complete liquidation of the Bank in its present
mutual form, each depositor would have a claim to receive his pro rata share of
any assets of the Bank remaining after payment of claims of all creditors
(including the claims of all depositors to the withdrawal value of their
accounts). To the extent there are remaining assets, a depositor may have a
claim to receive a pro rata share of the remaining assets in the same proportion
as the value of such depositor's deposit accounts to the total value of all
deposit accounts in the Bank at the time of liquidation, subject to the right of
the State of New York to garnish such assets. After the Reorganization, each
depositor, in the event of a complete liquidation, 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, this claim would be
solely in the amount of the balance in the deposit account plus accrued
interest. A depositor would not have an interest in the value or assets of the
Bank above that amount.
The Plan provides for the establishment, upon the completion of the
Reorganization, of a special "liquidation account" for the benefit of Eligible
Account Holders and Supplemental Eligible Account Holders in an amount equal to
the surplus and reserves of the Bank as of the date of its latest balance sheet
contained in the final Offering Circular used in connection with the
Reorganization. Each Eligible Account Holder and Supplemental Eligible Account
Holder, if he were to continue to maintain his deposit account at the Bank,
would, on a complete liquidation of the Bank, have a claim to an interest in the
liquidation account after payment of all creditors prior to any payment to the
stockholders 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, with a balance of $100 or more held in the Bank on
August 31, 1996 and December 31, 1997, respectively ("Deposit Account"). Each
Eligible Account Holder and Supplemental Eligible Account Holder will have a
claim to 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 August 31, 1996 and December 31, 1997, respectively, bore to the
balance of all Deposit Accounts in the Bank on such date.
If, however, on any December 31 annual closing date of the Bank, commencing
after December 31, 1996, the amount in any Deposit Account is less than the
amount in such Deposit Account on December 31, 1996 or any other annual closing
date, then such person's interest in the liquidation account relating to such
Deposit Account would be reduced from time to time by the proportion of any such
reduction, and such interest will cease to exist if such Deposit
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Account is withdrawn or closed. In addition, no interest in the liquidation
account would ever be increased despite any subsequent increase in the related
Deposit Account.
Federal and State Tax Consequences of the Reorganization
Consummation of the Reorganization is conditioned on prior receipt by the
Bank of (i) either an IRS ruling or an opinion of counsel with respect to the
federal income tax consequences of the Reorganization, and (ii) either a ruling
from the New York Department of Revenue or an opinion of counsel or tax advisor
with respect to the New York tax consequences of the Reorganization. Unlike
private letter rulings, opinions of counsel are not binding on the IRS or the
New York Department of Revenue, and either agency could disagree with such
opinions. In the event of such disagreement, there can be no assurance that the
Bank or the depositors would prevail in a judicial proceeding.
In the following discussion, "Mutual Bank" refers to the Bank before the
Reorganization and "Stock Bank" refers to the Bank after the Reorganization. The
Mutual Bank will receive an opinion of counsel from Luse Lehman Gorman
Pomerenk & Schick, A Professional Corporation, to the effect that, for federal
income tax purposes, (1) the conversion of the De Novo Bank into the Mutual
Holding Company, a New York mutual holding company, will qualify as a tax-free
Reorganization under Code Section 368(a)(1)(F); (2) provided that the merger of
the Mutual Bank into the Stock Bank qualifies as a merger under New York law,
the merger of the Bank into the Stock Bank with the Stock Bank as the survivor
and the transfer of the depositors' equity interest in the Bank to the Mutual
Holding Company in exchange for equity interests in the Mutual Holding Company
qualifies as a tax-free reorganization described in Code Sections 368(a)(1)(A)
and 368(a)(2)(D). The Bank, Stock Bank and Mutual Holding Company are each "a
party to the reorganization," as defined in Code Section 368(b); (3) the Bank
will recognize no gain or loss upon the transfer of substantially all its assets
to the Stock Bank solely in exchange for equity interests (voting and
liquidation rights) in the Mutual Holding Company and the Stock Bank's
assumption of its liabilities, if any; (4) neither the Stock Bank nor the Mutual
Holding Company will recognize gain or loss upon the receipt by the Stock Bank
of substantially all of the assets of the Bank in exchange for equity interests
in the Mutual Holding Company and the Stock Bank's assumption of the Bank's
liabilities; (5) the Mutual Holding Company's basis in the stock of the Stock
Bank will increase by an amount equal to the Bank's net basis in the property
transferred to the Stock Bank; (6) the Stock Bank's basis in the property
received from the Bank will be the same as the basis of such property in the
hands of the Bank immediately prior to the Reorganization; (7) the Stock Bank's
holding period for the property received from the Bank will include the period
during which such property was held by the Bank; (8) subject to the conditions
and limitations set forth in Code Sections 381, 382, 383, and 384 and the
Treasury regulations promulgated thereunder, the Stock Bank will succeed to and
take into account the items of the Bank described in Code Section 381(c); (9) no
gain or loss will be recognized by the depositors of the Bank on the receipt of
equity interests with respect to the Mutual Holding Company in exchange for
their equity interests surrendered therefor; (10) each depositor's aggregate
basis, if any, in the Mutual Holding Company equity interest received in the
exchange will equal the aggregate basis, if any, of each depositor's equity
interest in the Bank; (11) the holding period of the Mutual Holding Company
equity interests received by the depositors of Bank will include the period
during which the Bank equity interests surrendered in exchange therefor were
held; (12) the Mutual Holding Company and the minority stockholders of the
Company ("Minority Stockholders") will recognize no gain or loss upon the
transfer of the Stock Bank stock and cash, respectively, to the Company in
exchange for stock of the Company; (13) the Company will recognize no gain or
loss upon its receipt of property from the Mutual Holding Company and Minority
Stockholders in exchange for Common Stock of the Company; (14) the Mutual
Holding Company will increase its basis in its shares of the Company Common
Stock by the Mutual Holding Company's basis in its Stock Bank stock. The tax
opinions set forth above are based in part on the letter from RP Financial
concluding that the subscription rights to be received by eligible account
holders and supplemental eligible account holders do not have any economic value
at the time of distribution or the time the subscription rights are exercised,
and are given in reliance thereon.
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LOCKPORT SAVINGS BANK
CONSOLIDATED STATEMENTS OF INCOME
The following Consolidated Statements of Income of the Bank for each of the
years in the three year period ended December 31, 1996 have been audited by KPMG
Peat Marwick LLP, independent certified public accountants, whose report thereon
appears elsewhere in this Prospectus. With respect to information for the nine
months ended September 30, 1997 and 1996, which is unaudited, in the opinion of
management, all adjustments necessary for a fair presentation of such periods
have been included and are of a normal recurring nature. Results for the nine
months ended September 30, 1997 are not necessarily indicative of the results
that may be expected for the year ended December 31, 1997. These statements
should be read in conjunction with the Consolidated Financial Statements and
Notes thereto and Management's Discussion and Analysis of Financial Condition
and Results of Operations included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
Nine Months Ended
September 30, Year Ended December 31,
------------------ -----------------------------
1997 1996 1996 1995 1994
------- --------- ------- ------- -------
(unaudited)
(In thousands)
<S> <C> <C> <C> <C> <C>
Interest income:
Federal funds sold.............................. $ 825 $ 1,087 $ 1,313 $ 1,726 $ 849
Securities available for sale................... 20,866 18,177 24,766 22,002 22,197
Securities held to maturity..................... 1,258 1,293 1,698 2,780 2,394
Real estate loans............................... 33,072 29,844 40,440 36,948 31,985
Other loans..................................... 5,289 5,057 6,845 6,400 5,719
------- ------- ------- ------- -------
Total interest income.......................... 61,310 55,458 75,062 69,856 63,144
Interest expense:
Deposits (note 7)............................... 32,145 29,551 39,814 39,034 31,754
Other borrowed funds (note 8)................... 1,190 473 841 -- --
------- ------- ------- ------- -------
Total interest expense......................... 33,335 30,024 40,655 39,034 31,754
------- ------- ------- ------- -------
Net interest income............................ 27,975 25,434 34,407 30,822 31,390
Provision for loan lossses (note 4).............. 975 1,861 2,187 1,016 948
------- ------- ------- ------- -------
Net interest income after
provision for loan losses....................... 27,000 23,573 32,220 29,806 30,442
------- ------- ------- ------- -------
Other operating income:
Banking service charges and fees................ 2,223 1,785 2,468 1,837 1,567
Loan fees....................................... 814 779 1,027 855 716
Net gain (loss) on sale of securities
available for sale (note 2).................... 875 532 576 1,477 (849)
Other........................................... 1,044 1,223 1,681 1,237 952
------- ------- ------- ------- -------
Total other operating income................... 4,956 4,319 5,752 5,406 2,386
------- ------- ------- ------- -------
Operating and other expenses:
Salaries and employee benefits (note 11)........ 9,735 8,439 11,477 9,706 9,259
Occupancy and equipment (note 5)................ 2,689 2,327 3,178 2,635 2,298
Network interchange fees........................ 882 730 984 877 723
Deposit insurance............................... 90 2 2 983 1,873
Marketing and advertising....................... 1,017 934 1,355 978 951
Other (note 6).................................. 4,003 2,567 3,930 4,964 3,295
------- ------- ------- ------- -------
Total operating and other expenses............. 18,416 14,999 20,926 20,143 18,399
------- ------- ------- ------- -------
Income before income taxes and cumulative
effect of change in accounting principle........ 13,540 12,893 17,046 15,069 14,429
Income taxes (note 10)........................... 4,905 4,667 6,278 5,144 4,704
------- ------- ------- ------- -------
Income before cumulative effect of change in
accounting principle............................ 8,635 8,226 10,768 9,925 9,725
Cumulative effect of change in accounting
principle (note 11)............................. -- -- -- -- (924)
------- ------- ------- ------- -------
Net income..................................... $ 8,635 $ 8,226 $10,768 $ 9,925 $ 8,801
======= ======= ======= ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
46
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
The Company has only recently been formed and accordingly, has no results
of operations. Our results of operations are dependent primarily on net
interest income, which is the difference between the income earned on its loan
and securities portfolios and its cost of funds, consisting of the interest paid
on deposits and borrowings. Results of operations are also affected by the
provision for loan losses, securities and loan sale activities, loan servicing
activities and service charges and fees collected on its deposit accounts. Our
non-interest expense primarily consists of salaries and employee benefits,
occupancy and equipment expense, federal deposit insurance premiums, marketing
expenses and other expenses. Results of operations are also significantly
affected by general economic and competitive conditions, particularly changes in
interest rates, government policies and actions of regulatory authorities.
Our equity position (as well as our regulatory capital) will significantly
increase as a result of the net proceeds that we receive in the Offering, and we
anticipate that it will take time to prudently deploy such capital. Although our
earnings will increase as a result of the investment of the net proceeds, until
we have leveraged the capital we receive in the Offering by increasing our
interest-earning assets (and our interest-bearing liabilities) and thereby
reducing our equity as a percentage of assets, our return on average equity is
expected to be below our historical levels and the industry average. Moreover,
the Company's earnings in 1998 will be adversely affected by the funding of the
charitable foundation. The net proceeds will be used for general corporate
purposes, including investments in short- and medium-term, investment grade debt
securities, mortgage related securities and marketable equity securities, and to
increase the origination of mortgage, consumer and commercial business loans.
Management of Interest Rate Risk
The principal objective of our interest rate risk management is to evaluate
the interest rate risk inherent in certain assets and liabilities, determine the
appropriate level of risk given our business strategy, operating environment,
capital and liquidity requirements and performance objectives, and manage the
risk consistent with the Board's approved guidelines to reduce the vulnerability
of its operations to changes in interest rates. The Asset/Liability Committee
is comprised of senior management under the direction of the Board, with senior
management responsible for reviewing with the Board its activities and
strategies, the effect of those strategies on our net interest margin, the fair
value of the portfolio and the effect that changes in interest rates will have
on the portfolio and our exposure limits. See "Risk Factors --Potential Effects
of Changes in Interest Rates and the Current Interest Rate Environment."
In recent years, we have used the following strategies to manage interest
rate risk: (1) emphasizing the origination and retention of residential monthly
and bi-weekly fixed-rate mortgage loans having terms to maturity of not more
than twenty years, residential and commercial adjustable-rate mortgage loans,
and consumer loans consisting primarily of mobile home loans, home equity loans
and student loans; (2) selling substantially all newly originated 25-30 year
fixed-rate, residential mortgage loans into the secondary market without
recourse and on a servicing retained basis (except for such loans with interest
rates of 9% or greater, which the Bank retains in its portfolio); and (3)
investing in shorter term securities which generally bear lower yields as
compared to longer term investments, but which better position the Bank for
increases in market interest rates. Shortening the maturities of our interest-
earning assets by increasing shorter term investments better matches the
maturities of our deposit accounts, in particular our certificates of deposit
that mature in one year or less, which, at September 30, 1997 totaled $364.5
million, or 36.4% of total interest-bearing liabilities. These strategies may
adversely impact net interest income due to lower initial yields on these
investments in comparison to longer term, fixed rate loans and investments.
However, management believes that reducing the exposure to interest rate
fluctuations will enhance long-term profitability.
Gap Analysis. The matching of assets and liabilities may be analyzed by
examining the extent to which such assets and liabilities are "interest rate
sensitive" and by monitoring a bank's interest rate sensitivity "gap." An asset
or
47
<PAGE>
liability is said to be interest rate sensitive within a specific time period
if it will mature or reprice within that time period. The interest rate
sensitivity gap is defined as the difference between the amount of interest-
earning assets maturing or repricing within a specific time period and the
amount of interest-bearing liabilities maturing or repricing within that same
time period. At September 30, 1997, the Bank's one-year gap position, the
difference between the amount of interest-earning assets maturing or repricing
within one year and interest-bearing liabilities maturing or repricing within
one year, was a negative 22.2%. A gap is considered positive when the amount of
interest rate sensitive assets exceeds the amount of interest rate sensitive
liabilities. A gap is considered negative when the amount of interest rate
sensitive liabilities exceeds the amount of interest rate sensitive assets.
Accordingly, during a period of rising interest rates, an institution with a
negative gap position is likely to experience a decline in net interest income
as the cost of its interest-bearing liabilities increase at a rate faster than
its yield on interest-earning assets. In comparison, an institution with a
positive gap is likely to realize an increase in its net interest income in a
rising interest rate environment. Given the Bank's existing liquidity position
and its ability to sell securities from its available for sale portfolio,
management believes that its negative gap position will not have a material
adverse effect on its operating results or liquidity position. If interest
rates decrease, there may be a positive effect on the Bank's interest rate
spread and corresponding operating results.
The following table sets forth the amounts of interest-earning assets and
interest-bearing liabilities outstanding at September 30, 1997, which are
anticipated by the Bank, based upon certain assumptions, to reprice or mature in
each of the future time periods shown (the "GAP Table"). Except as stated
below, the amount of assets and liabilities shown which reprice or mature during
a particular period were determined in accordance with the earlier of the
repricing date or the contractual maturity of the asset or liability. The table
sets forth an approximation of the projected repricing of assets and liabilities
at September 30, 1997, on the basis of contractual maturities, anticipated
prepayments, and scheduled rate adjustments within the selected time intervals.
For adjustable and fixed-rate loans on residential properties, prepayment rates
were assumed to range from 3.6% to 10.44% annually. Mortgage related securities
were assumed to prepay at rates between 7.56% and 12.00% annually. Savings
accounts were assumed to decay at 10.24%, 10.24%, 20.48%, 12.28%, 9.72%, 16.36%
and 20.69%; NOW checking accounts were assumed to decay at 22.14%, 22.14%,
44.28%, 2.38%, 1.89%, 3.17% and 4.01%; and money market savings accounts were
assumed to decay at 46.49%, 4.86%, 9.73%, 38.92%, 0%, 0%, and 0% for the periods
of three months or less, three to six months, six to 12 months, one to three
years, three to five years, five to ten years and more than ten years,
respectively. Prepayment and deposit decay rates can have a significant impact
on the Bank's estimated gap. While the Bank believes such assumptions to be
reasonable, there can be no assurance that assumed prepayment rates and decay
rates will approximate actual future loan prepayment and deposit withdrawal
activity. See "Business of the Bank - Lending Activities", "--Securities
Investment Activities" and "-- Sources of Funds".
48
<PAGE>
<TABLE>
<CAPTION>
Amounts Maturing or Repricing as of September 30, 1997
-------------------------------------------------------------------------------------------
Less Than 6
Three 3-6 Months to Over 10
Three Months Months 1 Year 1-3 Years 3-5 Years 5-10 Years Years Total
------------ ------ --------- ---------- --------- --------- --------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Federal funds sold........ $ 2,200 - - - - - - $ 2,200
Mortgage related
securities (1)........... 10,883 11,538 25,536 117,436 84,516 35,095 - 285,004
Investment securities (1). 58,956 6,700 19,092 101,801 21,627 - 6,892 215,068
Loans (2)................. 80,597 50,228 95,074 156,079 94,751 119,235 30,861 626,825
--------- -------- --------- ---------- --------- -------- --------- ---------
Total interest-earning
assets.................. 152,636 68,466 139,702 375,316 200,894 154,330 37,753 1,129,097
--------- -------- --------- ---------- --------- -------- --------- ---------
Interest-bearing liabilities:
Savings accounts........... 32,680 31,273 62,544 36,581 28,975 48,750 61,644 302,447
Interest-bearing checking.. 52,361 17,948 35,897 33,667 1,186 1,996 2,524 145,579
Certificate account........ 107,203 92,612 164,641 138,500 11,530 2,382 - 516,868
Mortgagor's payments held
in escrow................ 269 2,424 2,694 - - - 3,000 8,387
Other borrowed funds...... 9,906 8,935 105 454 5,518 1,637 2,185 28,740
--------- -------- --------- ---------- --------- -------- --------- ---------
Total interest-bearing
liabilities.............. 202,419 153,192 265,881 209,202 47,209 54,765 69,353 1,002,021
--------- -------- --------- ---------- --------- -------- --------- ---------
Interest sensitivity gap... ($49,783) ($84,726) ($126,179) $ 166,114 $ 153,685 $ 99,565 ($31,600) $127,076
========= ======== ========= ========== ========= ======== ========= =========
Cumulative interest rate
sensitivity gap............ ($49,783) ($134,509) ($260,688) ($94,574) $ 59,111 $158,676 $ 127,076
========= ======== ========= ========== ========= ======== =========
Ratio of cumulative gap to
total interest-earning
assets.................... (4.41)% (11.91)% (23.09)% (8.38)% 5.24% 14.05% 11.26%
Ratio of cumulative gap to
total assets.............. (4.23)% (11.43)% (22.16)% (8.04)% 5.02% 13.49% 10.80%
Ratio of interest-earning
assets to
interest-bearing
liabilities.............. 75.41% 44.69% 52.54% 179.40% 425.54% 281.80% 54.44% 112.68%
</TABLE>
- --------------------------------
(1) Amounts shown are amortized cost.
(2) Amounts shown include principal balance net of deferred loan fees and
expenses, unamortized premiums and discounts, and non-accruing loans.
Certain shortcomings are inherent in the method of analysis presented in
the GAP 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
rates. Additionally, certain assets, such as adjustable-rate loans, have
features which restrict changes in interest rates, both on a short-term basis
and over the life of the asset. Further, in the event of changes in interest
rates, prepayment and early withdrawal levels would likely deviate significantly
from those assumed in calculating the table. Finally, the ability of many
borrowers to service their adjustable-rate loans may decrease in the event of an
interest rate increase.
As a result of these shortcomings, the Bank focuses more attention on
simulation modeling, such as the Net Income and Portfolio Value Analysis
discussed below, rather than Gap Analysis. Even though the Gap Analysis
reflects a ratio of cumulative gap to total assets within the Bank's targeted
range of acceptable limits, the net income and net portfolio value simulation
modeling is considered by management to be more informative in forecasting
future income and economic value trends.
Net Income and Portfolio Value Analysis. The Bank's interest rate
sensitivity is also monitored by management through the use of a net income
model and a net portfolio value model which generates estimates of the change in
the Bank's net income and net portfolio value ("NPV") over a range of interest
rate scenarios. NPV is the present value of expected cash flows from assets and
liabilities. The model assumes estimated loan prepayment rates, reinvestment
rates
49
<PAGE>
and deposit decay rates similar to the assumptions utilized for the GAP
Table. The following sets forth the Bank's net income and NPV as of September
30, 1997.
<TABLE>
<CAPTION>
Change in
Interest Rates Net Income Net Portfolio Value
In Basis Points ----------------------------- ------------------------------------
(Rate Shock) $ Amount $ Change % Change $ Amount $ Change % Change
---------------- -------- -------- -------- -------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
400............ 8,214 (2,890) (26.0)% 105,002 (44,100) (29.6)%
300............ 8,805 (2,299) (20.7)% 116,614 (32,488) (21.8)%
200............ 9,434 (1,670) (15.0)% 127,969 (21,133) (14.2)%
100............ 10,272 (832) (7.5)% 139,230 (9,872) (6.6)%
Static........... 11,104 -- -- 149,102 -- --
(100)........... 11,529 425 3.8% 156,097 6,995 4.7%
(200)........... 11,939 835 7.5% 157,353 8,251 5.5%
(300)........... 12,309 1,205 10.9% 162,851 13,749 9.2%
(400)........... 12,622 1,518 13.7% 174,889 25,787 17.3%
</TABLE>
As is the case with the GAP Table, certain shortcomings are inherent in the
methodology used in the above interest rate risk measurements. Modeling changes
in Net Income and NPV requires the making of certain assumptions which may or
may not reflect the manner in which actual yields and costs respond to changes
in market interest rates. In this regard, the Net Income and NPV Table presented
assumes that the composition of the Bank's interest sensitive assets and
liabilities existing at the beginning of a period remains constant over the
period being measured and also assumes that a particular change in interest
rates is reflected uniformly across the yield curve regardless of the duration
to maturity or repricing of specific assets and liabilities. Accordingly,
although the Net Income and NPV Table provides an indication of the Bank's
interest rate risk exposure at a particular point in time, such measurements are
not intended to and do not provide a precise forecast of the effect of changes
in market interest rates on the Bank's net interest income and will differ from
actual results.
Analysis of Net Interest Income
Net interest income represents the difference between income on interest-
earning assets and expense on interest-bearing liabilities. Net interest income
also depends on the relative amounts of interest-earning assets and interest-
bearing liabilities and the interest rate earned or paid on them, respectively.
Average Balance Sheet. The following table sets forth certain information
relating to the Bank at September 30, 1997 and for the nine months ended
September 30, 1997 and 1996 and for the years ended December 31, 1996, 1995 and
1994. For the periods indicated, the total dollar amount of interest income
from average interest-earning assets and the resultant yields, as well as the
interest expense on average interest-bearing liabilities, is expressed both in
dollars and rates. No tax equivalent adjustments were made. The average
balance for federal funds sold is an average daily balance, while all other
average balances are monthly averages. Non-accruing loans have been excluded
from the yield calculations in this table.
50
<PAGE>
<TABLE>
<CAPTION>
Nine Months Ended September 30,
---------------------------------------------------------------
At September 30, 1997 1997 1996
----------------------- --------------------------------- ----------------------------
Average Interest Average Interest
Outstanding Yield/ Outstanding Earned/ Yield/ Outstanding Earned/ Yield/
Balance Rate Balance Paid Rate Balance Paid Rate
----------- --------- ----------- --------- --------- ----------- -------- -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Federal funds sold....................... $ 2,200 6.50% $ 19,936 $ 825 5.52% $ 27,420 $ 1,087 5.29%
Investment securities (1)................ 215,068 5.78 185,660 7,816 5.61 142,727 5,695 5.32
Mortgage related securities (1).......... 285,004 6.81 286,991 14,308 6.65 280,241 13,775 6.55
Loans (2)................................ 626,825 8.39 611,517 38,361 8.36 554,199 34,901 8.40
---------- ---------- ------- ---------- -------
Total interest-earning assets........... 1,129,097 7.49 1,104,104 61,310 7.40 1,004,587 55,458 7.36
---------- ------- ---------- ------- -------- ---------- ------- ----
Interest-bearing liabilities:
Savings accounts (3)..................... 302,447 3.34 304,106 7,626 3.34 310,040 7,814 3.36
Interest-bearing checking (3)............ 145,579 3.19 120,413 2,436 2.70 104,782 2,147 2.73
Certificates of deposit (3).............. 516,868 5.82 510,124 21,964 5.74 446,521 19,467 5.81
Mortgagor's payments held in escrow...... 8,387 1.55 8,116 119 1.95 8,308 123 1.97
Other borrowed funds..................... 28,740 5.85 28,919 1,190 5.49 13,147 473 4.80
---------- ---------- ------- ---------- -------
Total interest-bearing liabilities...... 1,002,021 4.65 971,678 33,335 4.57 882,798 30,024 4.53
---------- ------- ---------- ------- -------- ---------- ------- ----
Net interest income....................... $ 27,975 $25,434
========== =======
Net interest rate spread.................. 2.84% 2.83% 2.83%
===== ===== =====
Net earning assets........................ $ 127,076 $132,426 $ 121,789
========== ======== =========
Net interest income as a percentage
of average interest-earning assets....... 3.38% 3.38%
======= ======
Ratio of average interest-earning assets
to average interest-bearing liabilities.. 113.63% 113.80%
======= =======
</TABLE>
(Footnotes on next page)
51
<PAGE>
<TABLE>
<CAPTION>
Year ended December 31,
-------------------------------------------------------------------------------------------------------
1996 1995 1994
--------------------------------- ------------------------------- --------------------------------
Average Interest Average Interest Average Interest
Outstanding Earned/ Yield/ Outstanding Earned/ Yield/ Outstanding Earned/ Yield/
Balance Paid Rate Balance Paid Rate Balance Paid Rate
------------ -------- -------- ---------- -------- ------------ -------- --------- ---------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Federal funds sold........ $ 24,683 $ 1,313 5.32% $ 31,357 $ 1,726 5.50% $ 20,740 $ 849 4.09%
Investment securities(1).. 147,220 7,916 5.38 119,100 6,843 5.75 124,155 6,317 5.09
Mortgage related
securities(1)............ 281,843 18,547 6.58 275,448 17,939 6.51 302,430 18,274 6.04
Loans (2)................. 564,049 47,286 8.38 506,600 43,348 8.56 448,902 37,704 8.40
---------- ------- -------- ------- -------- -------
Total interest-earning
assets.................. 1,017,795 75,062 7.37 932,505 69,856 7.49 896,227 63,144 7.05
---------- ------- -------- -------- ------- ------- -------- ------- ------
Interest-bearing
liabilities:
Savings accounts (3)...... 307,530 10,353 3.37 326,125 11,154 3.42 415,843 12,869 3.09
Interest-bearing checking
(3)...................... 105,717 2,871 2.72 96,551 2,909 3.01 86,057 2,283 2.65
Certificates of deposit
(3)...................... 455,230 26,432 5.81 386,648 23,546 6.09 287,661 16,443 5.72
Mortgagor's payments held
in escrow................ 8,174 158 1.93 9,222 174 1.89 8,471 159 1.88
Other borrowed funds...... 16,674 841 5.04 - - - - - -
---------- ------- -------- ------- -------- -------
Total interest-bearing
liabilities............. 893,325 40,655 4.55 818,546 37,783 4.61 798,032 31,754 3.98
---------- ------- -------- -------- ------- ------- -------- ------- ------
Net interest income........ $34,407 $32,073 $31,390
======= ======= =======
Net interest rate spread... 2.82% 2.88% 3.07%
======= ======= ======
Net earning assets......... $ 124,470 $113,959 $ 98,195
========== ======== ========
Net interest income as a
percentage of
average interest-earning
assets................... 3.38% 3.44% 3.50%
======= ======= =======
Ratio of average
interest-earning assets
to average interest-bearing
liabilities.............. 113.93% 113.92% 112.30%
======= ======= =======
</TABLE>
- --------------------
(1) Amounts shown are amortized cost.
(2) Net of deferred loan fees and expenses, loan discounts, loans in process
and non-accruing loans.
(3) Excludes $1.25 million paid for a special interest payment in 1995 which
was approved by the Bank's Board of Trustees and paid on a pro rata basis
on all interest-bearing savings, NOW, money market, and certificate
accounts in recognition of the Bank's 125th anniversary.
Rate/Volume Analysis. The following table presents the extent to which
changes in interest rates and changes in the volume of interest-earning
assets and interest-bearing liabilities have affected the Bank's interest
income and interest expense during the periods indicated. Information is
provided in each category with respect to: (i) changes attributable to
changes in volume (changes in volume multiplied by prior rate); (ii)
changes attributable to changes in rate (changes in rate multiplied by
prior volume); and (iii) the net change. The changes attributable to the
combined impact of volume and rate have been allocated proportionately to
the changes due to volume and the changes due to rate.
52
<PAGE>
<TABLE>
<CAPTION>
Nine Months Ended September 30, Year Ended December 31,
--------------------------------- -------------------------------------------------------------------
1997 vs. 1996 1996 vs. 1995 1994 vs. 1995
--------------------------------- -------------------------------- --------------------------------
Increase (Decrease) Increase (Decrease) Increase (Decrease)
Due to Total Due to Total Due to Total
--------------------- Increase --------------------- Increase --------------------- Increase
Volume Rate (Decrease) Volume Rate (Decrease) Volume Rate (Decrease)
---------- --------- ---------- ---------- --------- ---------- ---------- --------- ----------
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Federal funds sold........ $ (330) $ 68 $ (262) $ (280) $ (133) $ (413) $ 410 $ 467 $ 877
Investment securities..... 1,793 328 2,121 1,535 (461) 1,074 (265) 791 526
Mortgage related
securities............... 335 198 533 419 189 608 (1,698) 1,363 (335)
Loans..................... 3,683 (223) 3,460 4,830 (893) 3,937 4,925 719 5,644
------ ----- ------ ------ ------- ------ ------- ------ -------
Total interest-earning
assets.................. 5,481 371 5,852 6,504 (1,298) 5,206 3,372 3,340 6,712
------ ----- ------ ------ ------- ------ ------- ------ -------
Interest-bearing
liabilities:
Savings accounts.......... (149) (39) (188) (628) (173) (801) (2,973) 1,258 (1,715)
Interest-bearing checking. 332 (43) 289 263 (301) (38) 296 330 626
Certificates of deposit... 2,888 (391) 2,497 4,022 (1,136) 2,886 5,969 1,134 7,103
Mortgagors' payments held
in escrow................ (3) (1) (4) (20) 4 (16) 14 1 15
Other borrowed funds...... 631 86 717 841 - 841 - - -
------ ----- ------ ------ ------- ------ ------- ------ -------
Total interest-bearing
liabilities............. $3,699 $(388) $3,311 $4,478 $(1,606) $2,872 $ 3,306 $2,723 $ 6,029
====== ===== ====== ====== ======= ====== ======= ====== =======
Net interest income........ $2,541 $2,334 $ 683
====== ====== =======
</TABLE>
Calculations for the above table exclude $1.25 million paid as a special
interest payment in 1995, which was paid on a pro rata basis on all interest-
bearing savings, NOW, money market and certificate accounts in recognition of
the Bank's 125th anniversary.
Comparison of Financial Condition at September 30, 1997 and December 31, 1996
Total assets increased by $83.1 million, or 7.6%, from $1.093 billion at
December 31, 1996 to $1.176 billion at September 30, 1997. The growth in assets
is primarily attributable to a $48.9 million increase in debt, equity and asset-
backed securities available for sale, a $31.5 million increase in real estate
loans and a $9.0 million increase in accrued interest receivable, premises and
equipment, and other assets, primarily the building of the Bank's new
administrative center. Asset growth was funded through deposit inflows
resulting from the continued expansion of the Bank's branch network. The asset
growth was partially offset by a $7.9 million decrease in consumer loans which
resulted from a $12.5 million early repayment of the automobile lease portfolio.
Investment securities at September 30, 1997, totaled $216.7 million, an increase
of $48.4 million, compared to $168.3 million at December 31, 1996. Substantially
all the increase in these securities was attributable to purchases of one- to
three-year weighted average life, fixed-rate corporate bonds and asset-backed
securities, as well as common stock of corporate issuers. While the rates
earned on these securities is lower than rates earned on longer-term securities,
the Bank was specifically looking to shorten its interest rate risk exposure and
obtain more consistent cash flows in this low rate, flat yield curve
environment. Real estate loans increased from $524.4 million at December 31,
1996 to $555.9 million at September 30, 1997, primarily due to increased one- to
four-family, bi-weekly residential mortgage loans, an enhanced home equity loan
product, and increased originations in commercial real estate loans as we
continued to emphasize the expansion of our real estate lending. Premises and
equipment increased by $8.8 million, or 66.3%, primarily due to the construction
of a new building which was occupied in August 1997 and provides office space
for our administrative functions and lending departments.
At September 30, 1997, the Bank's allowance for possible loan losses as a
percentage of total non-performing loans was 330.0%, compared to 118.6% at
September 30, 1996, due to a slight increase in the provision and a significant
decrease in non-performing loans from $5.3 million at September 30, 1996 to $1.9
million at September 30, 1997. This decrease was attributable to repayments,
writedowns to net realizable values, a settlement with a bankruptcy trustee and
an aggressive approach to address past due and non-performing loans. At
September 30, 1997, the Bank's allowance for possible loan losses as a
percentage of total loans was 1.02%. While management uses available
information to
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recognize losses on loans, future loan loss provisions may be necessary based on
changes in economic conditions. In addition, various regulatory agencies, as an
integral part of their examination process, periodically review the allowance
for loan losses and may require the Bank to recognize additional provisions
based on their judgement of information available to them at the time of their
examination. See "Risk Factors - Lending Risks Associated With Commercial Real
Estate, Multi-Family and Consumer Lending" and "Business of the Bank -
Delinquencies and Classified Assets" and "-Allowance for Possible Loan Losses".
Total deposits at September 30, 1997 were $992.2 million, an increase of
$72.1 million, or 7.8%, compared to $920.1 million at December 31, 1996. The
increase was primarily due to the introduction of a new money market deposit
account, which from a rate perspective competes against mutual fund money market
accounts, and grew to $34.4 million by September 30, 1997. The Bank's
certificates of deposit grew from $484.7 million at December 31, 1996 to $516.9
million at September 30, 1997. The increase in certificates of deposit was
primarily attributable to the Bank's strategy of offering introductory rates on
certain certificates of deposit whenever a new branch is opened, as was the case
in both March and May of 1997. Offsetting these increases, borrowed funds
decreased $3.3 million, or 10.3%, from $32.0 million at December 31, 1996 to
$28.7 million at September 30, 1997. This decrease was primarily attributable
to the payment of a short-term FHLB advance of $7.0 million, which matured in
early January. Another $5.0 million, fifteen year, amortizing FHLB borrowing
was obtained in July 1997 at a rate of 6.59%. Other borrowings, primarily in
the form of reverse repurchase agreements, declined $1.3 million. These
borrowings are used to fund the Bank's borrowing/reinvestment program which
takes advantage of low rate short-term borrowings, typically three- to six-
month repos, and invests in one- to two-year securities, primarily U.S. Treasury
securities, to earn additional net interest income. The relatively flat yield
curve in 1997 made it less attractive to enter into more borrowing/reinvestment
transactions due to the very low spreads the Bank could earn.
Net worth increased to $126.7 million at September 30, 1997 from $115.7
million at December 31, 1996. This increase was the result of net income of
$8.6 million and a $2.4 million increase in the after-tax net unrealized gain on
available for sale securities due to the lower market interest rates at
September 30, 1997 which positively affected the market value of the Bank's
securities.
Comparison of Financial Condition at December 31, 1996 and December 31, 1995
Total assets at December 31, 1996 were $1.093 billion as compared to total
assets of $994.3 million at December 31, 1995, an increase of $99.1 million, or
10.0%. The asset growth was primarily attributable to a $63.4 million increase
in real estate and consumer loans, and a $60.0 million increase in securities.
Asset growth was funded with a $59.0 million increase in deposits and a $32.0
million increase in other borrowings. Federal funds sold decreased $20.6
million as proceeds were invested in loans and securities. Asset growth during
the year ended December 31, 1996 was concentrated in one- to four-family and
commercial real estate loans, vehicle loans, mortgage related securities and
U.S. Treasury securities. Net loans increased $62.5 million, from $536.0
million at December 31, 1995 to $598.5 million on December 31, 1996. One- to
four-family real estate loans increased $41.2 million, commercial real estate
loans increased $6.5 million, and vehicle loans increased $6.2 million. The
increase in the one- to four-family real estate loans was primarily the result
of $13.9 million in additional adjustable rate loans and $24.1 million in
additional bi-weekly fixed rate loans, as we continued to originate and hold in
portfolio one- to four-family real estate loans which meet the asset/liability
management objectives of either variable rate or shorter term mortgage loans.
The commercial real estate loan portfolio increased from $62.0 million at
December 31, 1995 to $68.6 million at December 31, 1996, as the Bank continued
its emphasis on originating assets which provide higher yields and are more
sensitive to current market interest rates than those obtainable on one- to
four-family, long term, fixed rate real estate loans. Consumer and other loans
increased $10.0 million from $63.3 million at December 31, 1995 to $73.3 million
at December 31, 1996. This increase was primarily the result of the $6.2 million
increase in vehicle loans and auto lease financing. While consumer loans
generally entail greater credit risk than one- to four-family real estate loans,
they are also shorter term, higher yielding assets which also meet the
asset/liability objectives of the Bank.
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The securities portfolio increased by $60.0 million, from $393.1 million at
December 31, 1995 to $453.1 million at December 31, 1996. The growth in the
securities portfolio was primarily in U.S. Treasury securities, asset-backed
securities and mortgage related securities. The $29.5 million increase in U.S.
Treasury securities was a result of the Bank's continued development of a five
year laddered portfolio of U.S. Treasuries and the start-up of the Bank's
borrowing/reinvestment program. The $22.7 million increase in asset-backed
securities was required to meet the need for shorter term average life
securities with tighter payment windows than most mortgage related securities.
The $23.3 million increase in mortgage related assets was largely funded with
deposits and borrowings during 1996. It represented a repositioning of assets
from the lower yielding, short-term CMO sector and federal funds sold into
mortgage related securities.
The increase in deposit growth was attributable to the net deposit inflows
of $19.9 million and interest credited to deposit accounts of $39.1 million
during the period. The composition of the Bank's deposits continued to change,
as reflected in the shift out of lower yielding savings accounts and into higher
yielding certificates of deposit as the Bank paid slightly lower rates on
transaction accounts in 1996. The Bank's cost of funds for certificates of
deposit was also lower in 1996 than 1995 although the balances increased from
$422.5 million at December 31, 1995 to $484.7 million at December 31, 1996. The
generally lower interest rate environment in 1996, as well as approximately
$19.0 million in long-term, high interest rate (9.00%-10.00%) certificates of
deposit maturities in the first four months of 1996 assisted in lowering the
overall cost of funds. On the other hand, two new branch openings in 1996
increased the cost of funds as the Bank used certificates of deposit promotions
to attract new customers. In 1996, we initiated a wholesale borrowing strategy
on two fronts. After joining the FHLB in 1995, the Bank entered into its first
$5.0 million, 5-year FHLB advance at 5.72% in January 1996. By year end, $12.0
million in FHLB advances were recorded on the Bank's books. In June 1996, we
initiated a borrowing/reinvestment program and entered into $20.0 million in
reverse repurchase agreements by December 31, 1996. See "Management of Interest
Rate Risk".
Net worth increased to $115.7 million at December 31, 1996 from $107.7
million at December 31, 1995. This increase was the result of net income of
$10.8 million, partially offset by a $2.8 million decrease in the after-tax net
unrealized gain on available for sale securities. As interest rates increased
at December 31, 1996, the market value of the Bank's securities was negatively
affected.
Comparison of Operating Results For the Nine Months Ended September 30, 1997 and
September 30, 1996.
General. The earnings of the Bank depend primarily on its level of net
interest income, which is the difference between interest earned on the Bank's
interest-earning assets, consisting primarily of residential and commercial real
estate loans, consumer loans, securities available for sale and securities held
to maturity, and the interest paid on interest-bearing liabilities, consisting
primarily of deposits and other borrowed funds. Net interest income is a
function of the Bank's interest rate spread, which is the difference between the
average yield earned on interest-earning assets and the average rate paid on
interest-bearing liabilities, as well as a function of the average balance of
interest-earning assets as compared to interest-bearing liabilities. The Bank's
earnings also are affected by its level of service charges and gains on sale of
loans and securities, as well as its level of operating and other expenses,
including salaries and employee benefits, occupancy and equipment costs, and
marketing and advertising costs.
Net income for the nine months ended September 30, 1997 increased by
$409,000, or 5.0%, from $8.2 million for the nine months ended September 30,
1996 to $8.6 million for the same period in 1997. The increase was due
primarily to an increase in interest income which resulted from an increase in
the average balance of interest-earning assets, as well as an increase in other
operating income related to fees and service charges on deposits, increased
gains on the sale of securities available for sale, and lower provisions for
loan losses. The increases were partially offset by increased interest expense
which resulted primarily from an increase in average interest-bearing
liabilities and a $3.4 million increase in operating and other expenses
reflecting the expansion of the Bank's branch network.
Interest Income. Interest income increased by $5.8 million, or 10.6%, to
$61.3 million for the nine months ended September 30, 1997 from $55.5 million
for the nine months ended September 30, 1996. The increase was
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primarily due to a $3.5 million increase in income from loans, a $2.1 million
increase in income from investment securities, and a $533,000 increase in income
from mortgage related securities. These increases were partially offset by a
$262,000 decrease in income from federal funds sold. The increase in income from
loans was attributable to a $57.3 million increase in the average balance of
loans to $611.5 million from $554.2 million, partially offset by a 4 basis point
decrease in the average yield on loans from 8.40% to 8.36%. The continued
origination and portfolio growth of the Bank's one- to four-family real estate
loans was responsible for over 60% of the loan increase. The increase in income
from investment securities was attributable to a $42.9 million increase in the
average balance of investment securities to $185.6 million from $142.7 million,
and a 29 basis point increase in the average yield on investment securities to
5.61% from 5.32%. The Bank invested in U.S. Treasury securities and asset-backed
securities during the first nine months of 1997 to take advantage of their
shorter weighted average lives and their 6.00% or higher yields which increased
the Bank's overall yield on its investment securities. The increase in income
from mortgage related securities was attributable to a $6.8 million increase in
the average balance of mortgage related securities to $287.0 million from $280.2
million, and a 10 basis point increase in the average yield on mortgage related
securities to 6.65% from 6.55%. As interest rates increased during the first
four months of 1997, the Bank invested in CMO's, 7-year balloons and 30-year
mortgage related securities which provided yields of 6.93% to 7.03% and
increased the Bank's overall yield on its mortgage related securities. The
decrease in income from federal funds sold was due to a $7.5 million decrease in
the average balance of federal funds sold to $19.9 million from $27.4 million,
partially offset by a 23 basis point increase in the yield on the Bank's federal
funds sold to 5.52% from 5.29%. This decrease was the result of the redeployment
of excess funds, mainly in investment securities.
Interest Expense. Interest expense increased by $3.3 million, or 11.0%, to
$33.3 million for the nine months ended September 30, 1997 from $30.0 million
for the nine months ended September 30, 1996. This increase was the result of
an $88.9 million increase in the average balance of interest-bearing liabilities
in the 1997 period compared to the 1996 period, and a 4 basis point increase in
the average rate paid on such liabilities over the same period. In particular,
the increase resulted primarily from a $2.5 million increase in interest expense
on certificates of deposit, a $717,000 increase in interest expense on other
borrowings, and a $289,000 increase in interest expense on interest-bearing
checking accounts. These increases were partially offset by a $188,000 decrease
in interest expense on savings accounts. The increase in interest expense
attributable to certificates of deposit resulted from a $63.6 million increase
in the average balance of certificates of deposit to $510.1 million in 1997 from
$446.5 million in 1996, which was partially offset by a 7 basis point decrease
in the average cost of certificates of deposit from 5.81% to 5.74%. Assisting
the decline was the slightly lower interest rate environment during the 1997
period, as well as the Bank closely monitoring maturing certificates of deposit
with high rates and promoting alternative certificates of deposit to lower the
overall rate paid on these accounts. Two new branch openings in early 1997 and
one new branch opening in late 1996 contributed to the large increase in average
certificates of deposit balances. The increase in interest expense attributable
to other borrowings resulted from a $15.8 million increase in the average
balance of other borrowings to $28.9 million in 1997 from $13.1 million in 1996
and a 69 basis point increase in the average borrowing cost to 5.49% from 4.80%.
The increase in other borrowed funds in 1997 reflects management's decision to
implement a borrowing/reinvestment program which utilizes reverse repurchase
agreements to fund investments in securities as long as such agreements are a
cost effective source of funds. As short-term interest rates increased and the
yield curve flattened in mid-1997, the rates being paid on these borrowings
increased and the spread earned on the transactions began to narrow, thus
reducing the attractiveness of these transactions. The increase in interest
expense attributable to interest-bearing checking accounts resulted from a $15.6
million increase in the average balance of interest-bearing checking accounts to
$120.4 million in 1997 from $104.8 million in 1996, partially offset by a 3
basis point decrease in the average cost of interest-bearing checking accounts
to 2.70% from 2.73%. The decrease in interest expense attributable to savings
accounts resulted from a $5.9 million decrease in the average balance of total
savings accounts to $304.1 million from $310.0 million, and a 2 basis point
decrease in the average cost of savings accounts to 3.34% from 3.36%. See
"Business of the Bank - Source of Funds - Borrowed Funds".
Provision for Loan Losses. The Bank establishes provisions for loan
losses, which are charged to operations, in order to maintain the allowance for
loan losses at a level which is deemed appropriate to absorb future charge-offs
of loans deemed uncollectible. In determining the appropriate level of the
allowance for loan losses, management
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considers past and anticipated loss experience, evaluations of real estate
collateral, current and anticipated economic conditions, volume and type of
lending and the levels of non-performing and other classified loans. The amount
of the allowance is based on estimates and the ultimate losses may vary from
such estimates. Management of the Bank assesses the allowance for loan losses on
a quarterly basis and makes provisions for loan losses in order to maintain the
adequacy of the allowance.
The Bank provided $975,000 and $1.9 million in loan loss provisions during
the nine months ended September 30, 1997 and September 30, 1996, respectively.
During the first nine months of 1996, management provided $800,000 of provisions
for potential losses on approximately $1.8 million of loans to a borrower that
had filed for bankruptcy protection. The Bank charged-off $486,000 of this loan
during 1997 after a settlement was reached with the bankruptcy trustee. This
amount is reflected in the increase in the net charge-offs to average loans
outstanding to .19% from .04% during the nine months ending September 30, 1997
and September 30, 1996, respectively.
Other Operating Income. Other operating income is composed of fee income
for bank services and profits from the sale of loans and securities. Total
other operating income for the nine months ended September 30, 1997 increased
$637,000, or 14.7%, from $4.3 million for the nine months ended September 30,
1996 to $5.0 million for the nine months ended September 30, 1997. The primary
reasons for the improvement were net gains of $875,000 on the sale of securities
available for sale during the nine months ended September 30, 1997 as compared
to net gains of $532,000 in the comparable period for 1996. The increases are
primarily reflective of the Bank's desire to realize some of the gains on
marketable equity securities which occurred in 1997 as a result of the strong
performance of the stock market. Bank service charges and fees on deposit
accounts increased $438,000 for the nine months ending September 30, 1997 to
$2.2 million from $1.8 million for the nine months ending September 30, 1996.
This increase was primarily the result of increased fee income of $148,000 on
the Bank's debit card which was introduced in 1995 and continues to see
significant growth in customer acceptance and usage. In addition, service
charges and charges for insufficient funds on checking accounts increased
$267,000 from September 30, 1996 to September 30, 1997 as a result of the Bank's
continued promotion of its low fee checking account products. Other changes in
other operating income included a $35,000 increase in loan origination and
servicing fees and increased commissions of $38,000 on the sale of annuities and
mutual funds. These increases were partially offset by writedowns taken in
1997, on real estate owned ("REO") and investments in real estate development
projects, which totaled $387,000 in 1997 in comparison to $18,000 in 1996. These
properties were written-down to their revised net realizable values.
Operating and Other Expenses. Operating and other expenses increased by
$3.4 million, or 22.8%, to $18.4 million for the nine months ended September 30,
1997 from $15.0 million for the nine months ended September 30, 1996. The
increase was due to a $1.4 million increase in other expenses, a $1.3 million
increase in salaries and employee benefits, a $362,000 increase in occupancy and
equipment, a $152,000 increase in network interchange fees, an $88,000 increase
in deposit insurance and an $83,000 increase in marketing and advertising.
Other expenses increased to $4.0 million for the nine months ended
September 30, 1997 from $2.6 million for the nine months ended September 30,
1996. The September 30, 1996 other expenses reflects the benefit recognized for
the reversal of a $600,000 provision for possible loss on demand balances held
at Nationar, Inc. ("Nationar"), which had originally been made in 1995. This is
discussed further in the comparison of operating results for fiscal years 1996
and 1995. Without this reversal, the net increase in other expenses would have
been $836,000 including professional fees mainly associated with the
implementation of various tax planning strategies, additional charitable
contributions, additional costs incurred as a result of the growth in the number
of checking accounts, and expenses associated with settling a real estate tax
escrow lawsuit. Salaries and employee benefits increased to $9.7 million for the
nine months ended September 30, 1997 from $8.4 million for the same period in
1996. The increase is primarily a result of an additional 41 full time
equivalent employees hired by the Bank, primarily at the three new branch
locations established by the Bank since August of 1996. These new branches also
contributed to the increase in occupancy and equipment to $2.7 million for the
nine months ended September 30, 1997 from $2.3 million for the same period in
1996. Included in occupancy and equipment is $417,000 of depreciation on the
furniture and equipment and leasehold improvements for the new facilities and
$234,000 of building-related operating expenses. Occupancy and equipment also
reflects
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approximately $79,000 of technology equipment writedowns related to the Bank's
continued upgrading of its technology, communications and information systems,
primarily personal computers and related software. Network interchange fees
increased to $882,000 for the nine months ended September 30, 1997 from $730,000
for the same period in 1996 reflecting the costs associated with the continued
growth in the number of customer transactions performed utilizing the Bank's
debit card product. Deposit insurance increased to $90,000 for the nine months
ended September 30, 1997 from $2,000 for the same period in 1996, resulting from
the FDIC's decision to raise the assessment for deposit insurance in 1997 to
$0.013/per one hundred dollars of deposits from the minimal assessment in 1996.
Marketing and advertising costs increased to $1.0 million for the nine months
ended September 30, 1997 from $934,000 for the nine months ended September 30,
1996 and was primarily due to promotional costs relating to the Bank's opening
of the new branches.
Income Taxes. Income tax expense was $4.9 million for the nine months
ended September 30, 1997 compared to $4.7 million for the same period in 1996.
The effective tax rate was 36.2% for both periods.
Comparison of Operating Results For the Years Ended December 31, 1996 and
December 31, 1995
General. Net income for the year ended December 31, 1996 increased by
$843,000, or 8.5%, from $9.9 million for the year ended December 31, 1995 to
$10.8 million for the fiscal year 1996. The increase was due primarily to an
increase in interest income which primarily resulted from an increase in the
average balance of interest-earning assets and an increase in other operating
income related to fees and service charges on deposits. The increases were
partially offset by increased interest expense which resulted primarily from an
increase in average interest-bearing liabilities, decreased gains on the sale of
securities available for sale, higher provisions for loan losses, increases in
operating and other expenses, and increased income taxes.
Interest Income. Interest income increased by $5.2 million, or 7.5%, to
$75.1 million for the year ended December 31, 1996 from $69.9 million for the
year ended December 31, 1995. The increase was primarily due to a $3.9 million
increase in income from loans, a $1.1 million increase in income from investment
securities, and a $608,000 increase in income from mortgage related securities.
These increases were partially offset by a $413,000 decrease in income from
federal funds sold. The increase in income from loans was attributable to a
$57.4 million increase in the average balance of loans to $564.0 million from
$506.6 million, partially offset by an 18 basis point decrease in the average
yield on loans from 8.56% to 8.38%. The origination and portfolio growth of the
Bank's one- to four-family real estate loans was responsible for over 64% of the
total loan growth. Since interest rates decreased throughout 1995, refinancings
increased during the last quarter of 1995 and into early 1996 which assisted in
lowering the total portfolio yield in 1996. The increase in income from
investment securities was attributable to a $28.1 million increase in the
average balance of investment securities to $147.2 million from $119.1 million,
partially offset by a 37 basis point decrease in the average yield on investment
securities to 5.38% from 5.75%. The $1.1 million increase in 1996 interest
income was the result of the development of a five year laddered portfolio of
U.S. Treasury securities and the start-up of the Bank's borrowing/reinvestment
program which was initiated in 1996 and mainly invested in two year U.S.
Treasury securities. The increase in income from mortgage related securities
was attributable to a $6.4 million increase in the average balance of mortgage
related securities to $281.8 million from $275.4 million, and a 7 basis point
increase in the average yield on mortgage related securities to 6.58% from
6.51%. The $608,000 increase in 1996 interest income is attributable to the
repositioning of the Bank's mortgage related securities in early 1996 to achieve
a higher yielding portfolio. The decrease in income from federal funds sold was
due to a $6.7 million decrease in the average balance of federal funds sold to
$24.7 million from $31.4 million, and an 18 basis point decrease in the yield on
the Bank's federal funds sold to 5.32% from 5.50%. This decrease was the result
of our continuing deployment of excess funds, mainly in investment securities.
Interest Expense. Interest expense increased by $1.7 million, or 4.2%, to
$40.7 million for the year ended December 31, 1996 from $39.0 million for the
year ended December 31, 1995. Interest expense for the year ended December 31,
1995 includes a special interest payment of $1.25 million paid in connection
with our 125th anniversary. Excluding this special interest payment, interest
expense increased by $2.9 million, or 7.6%, to $40.7 million from $37.8
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million for the prior year. Overall, the average balance of interest-bearing
liabilities increased by $74.8 million in 1996, while the average rate paid on
these liabilities decreased 6 basis points since year end 1995. In particular,
this increase resulted primarily from a $2.9 million increase in interest
expense on certificates of deposit, and an $841,000 increase in interest expense
on other borrowings. These were partially offset by an $801,000 decrease in
interest expense on savings accounts and a decrease of $38,000 in interest
expense on interest-bearing checking accounts. The increase in interest expense
attributable to certificates of deposit resulted from a $68.6 million increase
in the average balance of certificates of deposit to $455.2 million in 1996 from
$386.6 million in 1995 which was partially offset by a 28 basis point decrease
in the average cost of certificates of deposit to 5.81% from 6.09%. The Bank's
customers continued to move deposits from core savings accounts into
certificates of deposit as a result of the higher rates being paid on
certificates of deposit. The Bank benefitted from $19.0 million of matured 9% to
10% interest-bearing certificates of deposit which occurred in early 1996 and
helped to reduce the Bank's overall cost of funds. The increase in interest
expense on other borrowings was due to the Bank's average borrowings of $16.7
million during 1996, as compared to no borrowings during 1995. The Bank's first
FHLB advance, a 5-year advance, was recorded in January 1996 when interest rates
declined to their lowest point since late 1993. In addition, the Bank initiated
a short-term borrowing/reinvestment program during 1996 which included
borrowings with reverse repurchase agreements and corresponding investments
mainly in short-term U.S. Treasury securities. By year end 1996, the Bank had
averaged over $11.1 million in reverse repurchase agreements. The decrease in
interest expense attributable to savings accounts was due to an $18.6 million
decrease in the average balance of total savings accounts to $307.5 million in
1996 from $326.1 million in 1995, and a 5 basis point decrease in the average
cost of savings accounts to 3.37% from 3.42%.
Provision for Loan Losses. The Bank's provision for loan losses increased
by $1.2 million, from $1.0 million for the year ended December 31, 1995 to $2.2
million for the year ended December 31, 1996. As previously indicated, the
increase in the provision was due primarily to management's assessment of the
potential losses that ultimately would be recognized on the $1.8 million of
loans to a borrower that had filed for bankruptcy protection. The increase is
also reflective of management's objective to increase the allowance for loan
losses as a percentage of total loans due to the growth in the loan portfolios.
Other Operating Income. Total other operating income was $5.8 million for
the year ended December 31, 1996, a $346,000, or 6.4%, increase from $5.4
million for the year ended December 31, 1995. Banking service charges and fees
on deposit accounts increased $631,000 for the year ended December 31, 1996,
from $1.8 million for 1995 to $2.5 million for 1996. The increase was primarily
attributable to a $222,000 increase in fees charged for insufficient funds on
the Bank's checking accounts resulting from modifications to the Bank's
insufficient funds policy, $220,000 in additional revenue generated because of
the increased usage of the Bank's new debit card product, and $138,000 of
additional service charges received due to the growth in the Bank's interest-
bearing checking accounts. Loan origination and servicing fees increased
$172,000 for the year ended December 31, 1996, to $1.0 million from $855,000 for
1995, reflective of the Bank's increased loan origination activity.
Additionally, all other operating income increased $444,000, from $1.2 million
for 1995 to $1.7 million for 1996. This increase was primarily due to an
additional $218,000 of commissions received on increased sales of annuity
products during 1996. The 1995 amount is also reflective of $200,000 in reserves
that were charged to operations in connection with the Bank's investments in
real estate development projects. These increases were partially offset by a
$901,000 decline in net gains on the sale of securities available for sale from
$1.5 million during 1995 to $576,000 during 1996 due to the market driven
reduced sales opportunities in 1996.
Operating and Other Expenses. Operating and other expenses increased by
$783,000, or 3.9%, to $20.9 million for the year ended December 31, 1996 from
$20.1 million for the year ended December 31, 1995. The increase was due to a
$1.8 million increase in salaries and employee benefits, a $543,000 increase in
occupancy and equipment, a $377,000 increase in marketing and advertising and a
$107,000 increase in network interchange fees. These increases were partially
offset by a $981,000 decrease in deposit insurance and a $1.0 million decrease
in other expenses.
Salaries and employee benefits increased to $11.5 million for 1996 from
$9.7 million for 1995. Occupancy and equipment expenses increased to $3.2
million in 1996 from $2.6 million for 1995. Both expense categories were
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impacted by the opening of two new branch locations during 1996. Besides the
costs related to expansion, salaries and employee benefits and occupancy and
equipment reflects the first full year of operating costs related to the 1995
start up and implementation of the Bank's new item processing center and
telephone service center. The item processing center, designed to be the first
area bank to utilize imaging technology, was established to perform check
clearing and statement rendering functions previously outsourced to a third
party. The telephone service center was established to enhance the Bank's retail
delivery system by minimizing the number of telephone calls into the branches
thereby enabling branch personnel to focus on more personalized service and
cross selling opportunities to branch walk-in customers.
The increase in marketing and advertising, to $1.4 million for 1996 from
$978,000 for 1995, was attributable to the Bank's efforts to expand its
marketing coverage area to include localities where the Bank had opened new
branches, primarily in Erie County. The significant decrease in deposit
insurance, from $983,000 for 1995 to $2,000 for 1996, reflects the FDIC's
decision to lower the insurance premiums paid by BIF-insured institutions to the
legal minimum effective January 1, 1996. The Bank's "well capitalized" risk
classification allowed the Bank to pay the minimum annual assessment during
1996.
Other operating expenses decreased from $5.0 million for 1995 to $3.9
million for 1996. The significant decrease was related to circumstances
involving the Bank's relationship with Nationar. On February 6, 1995, the
Superintendent of Banks for the State of New York seized Nationar, a checking-
clearing and trust company, placing it in receivership, and freezing all of its
assets. The Bank and its Savings Bank Life Insurance affiliate had $5.8 million
of demand deposits at Nationar frozen by this action. Since there were numerous
uncertainties regarding the total amount of claims filed against Nationar, the
priorities thereof, the proceeds remaining after disposition of assets and the
ultimate cost of the liquidation, management believed there to be reasonable
likelihood that the Bank would not recover all amounts due it from Nationar.
Because of these uncertainties, a $600,000 loss provision was reflected in other
operating expenses for 1995. However, during 1996 the Bank received all funds
due from Nationar and therefore reversed the allowance for possible loss with
the benefit reflected as a reduction in other operating expenses.
Income Taxes. Income tax expense was $6.3 million for the year ended
December 31, 1996 compared to $5.1 million for the year ended December 31, 1995.
The effective tax rate increased from 34.1% for 1995 to 36.8% for 1996,
primarily related to a decrease in tax-exempt income and an increase in the
valuation allowance on its deferred tax assets.
Comparison of Operating Results for the Years Ended December 31, 1995 and
December 31, 1994
General. Net income for the year ended December 31, 1995 was $9.9 million,
compared to $8.8 million for the year ended December 31, 1994. Interest rates
rose sharply in early 1994, then gradually declined after January 1995,
resulting in a higher yield on interest-earning assets and a higher cost of
interest-bearing liabilities in 1995 than in 1994. In addition, the yield curve
narrowed significantly from December 31, 1994 to December 31, 1995, which caused
added pressure on spreads during 1995. The increase in net income for 1995 as
compared to 1994 resulted primarily from increases in interest income, other
operating income, and gains on the sale of securities available for sale, which
were partially offset by increases in interest expense and operating and other
expenses. Additionally, net income in 1994 was negatively impacted by the
recognition of the cumulative effect of implementing the provisions of SFAS 106,
"Employers' Accounting for Post Retirement Benefits Other Than Pensions".
Interest Income. Interest income increased by $6.7 million, or 10.6%, to
$69.9 million for the year ended December 31, 1995 from $63.2 million for the
year ended December 31, 1994. The increase was primarily due to a $5.6 million
increase in income from loans, an $877,000 increase in income from federal funds
sold, and a $526,000 increase in income from investment securities. These
increases were partially offset by a $335,000 decease in income from mortgage
related securities. The increase in income from loans was attributable to a
$57.7 million increase in the average balance of loans to $506.6 million from
$448.9 million, and a 16 basis point increase in the average yield on loans to
8.56% from 8.40%. The Bank continued its focus on growing the loan portfolio in
1995 as one- to four-family,
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multi-family and commercial real estate loans, and consumer loans had 7% to 15%
increases in year end portfolios, which combined with the higher rates in early
1995, assisted in increasing the overall yields on all loans. The increase in
income from federal funds sold was attributable to a $10.7 million increase in
the average balance of federal funds sold to $31.4 million from $20.7 million,
and a 141 basis point increase in the average yield on federal funds sold to
5.50% from 4.09%. The increase in income from investment securities was
attributable to a 66 basis point increase in the average yield on investment
securities to 5.75% from 5.09%, partially offset by a $5.1 million decrease in
the average balance of investment securities to $119.1 million from $124.2
million. The decrease in income from mortgage related securities was due to a
$27.0 million decrease in the average balance of mortgage related securities to
$275.4 million from $302.4 million, partially offset by a 47 basis point
increase in the average yield for mortgage related securities to 6.51% from
6.04%. Both investment securities as well as mortgage related securities
decreased during 1995 as the Bank sold securities to assist in funding its loan
portfolio growth. In addition, as spreads narrowed throughout 1995, the risk was
greater than the reward for investing long-term, so the Bank maintained higher
balances in federal funds sold which were earning close to 6.00% at year end.
Interest Expense. Interest expense increased by $7.3 million, or 22.9%, to
$39.0 million for the year ended December 31, 1995 from $31.8 million for the
year ended December 31, 1994. Excluding the $1.25 million special interest
payment in 1995, interest expense increased $6.0 million to $37.8 million for
the year ended December 31, 1995 from $31.8 million for the year ended December
31, 1994. This increase resulted primarily from a $7.1 million increase in
interest expense on certificates of deposit, and a $626,000 increase in interest
expense on interest-bearing checking accounts. These increases were partially
offset by a $1.7 million decrease in interest expense on savings accounts. The
increase in interest expense on certificates of deposit was the result of a
$98.9 million increase in the average balance of certificates of deposit to
$386.6 million from $287.7 million, and a 37 basis point increase in the average
cost of certificates of deposit to 6.09% from 5.72%,. The increase in interest
expense on interest-bearing checking accounts was the result of a $10.5 million
increase in the average balance of interest-bearing checking accounts to $96.6
million from $86.1 million, and a 36 basis point increase in the average cost of
interest-bearing checking accounts to 3.01% from 2.65%. The decrease in
interest expense on savings accounts was due to an $89.7 million decrease in the
average balance of total savings accounts to $326.1 million from $415.8 million,
partially offset by a 33 basis point increase in the average cost of savings
accounts to 3.42% from 3.09%. The increase in the average balance of
certificates of deposit accounts and the decrease in the average balance of
savings accounts was due primarily to customers shifting funds from lower
yielding savings accounts to higher yielding certificates of deposit.
Provision for Loan Losses. The Bank's provision for loan losses increased
from $948,000 for the year ended December 31, 1994 to $1.0 million for the year
ended December 31, 1995. This increase enabled the Bank to maintain an adequate
ratio of allowance for loan losses to total loans at the end of each period.
Other Operating Income. Total other operating income was $5.4 million for
the year ended December 31, 1995, a $3.0 million increase from $2.4 million for
the year ended December 31, 1994. This increase was primarily due to a $2.3
million increase in net gains on sales of securities available for sale. For the
year ended December 31, 1994, $849,000 of net securities losses were recognized
as the Bank repositioned its securities portfolio to provide more consistent
cash flows and to increase the yield. During 1995, the Bank took advantage of
market conditions and recognized $1.5 million in net securities gains. Banking
service charges and fees on deposit accounts increased $270,000, from $1.6
million for 1994 to $1.8 million for 1995. This increase was primarily
attributed to an additional $230,000 in service fees and charges collected on
the Bank's checking accounts as the Bank promoted its various checking account
products and introduced the Bank's debit card product. Loan origination and
servicing fees increased $139,000, from $716,000 for 1994 to $855,000 for 1995.
This increase reflects an additional $52,000 in service fee income collected for
servicing loans sold on the secondary market and increased service charges
collected due to the restructuring of the Bank's variable rate line-of-credit
product. All other operating income increased $285,000, from $952,000 for 1994
to $1.2 million for 1995. This increase resulted primarily from $134,000 in
additional fees received for providing various management services to the Bank's
Savings Bank Life Insurance Department and an increase of $87,000 for
commissions received on sales of annuities.
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Operating and Other Expenses. Operating and other expenses increased by
$1.7 million, or 9.5%, to $20.1 million for the year ended December 31, 1995
from $18.4 million for the year ended December 31, 1994. The increase was due to
a $1.7 million increase in other expenses, a $447,000 increase in salaries and
employee benefits, a $337,000 increase in occupancy and equipment, a $154,000
increase in network interchange fees, and a $27,000 increase in marketing and
advertising. These increases were partially offset by an $890,000 decrease in
deposit insurance.
Other expenses increased from $3.3 million for the year ended December 31,
1994 to $5.0 million for 1995. As previously discussed, the increase in
operating and other expenses for fiscal 1995 reflect the $600,000 provision for
possible loss on the Bank's demand deposits held by Nationar. In addition to
the provision for possible loss, the Bank incurred increased charges for the
various services formerly performed by Nationar as the Bank was required to
contract with various other third party servicers. As a result, the Bank
accelerated its plans to bring in-house many of the previously outsourced check
clearing and statement rendering functions. In August 1995, the Bank opened its
item processing center incurring costs associated with the implementation of
this new operation, including expenses relating to a reissuance of checks to all
of our checking account customers. Additionally, in June of 1995, the Bank
introduced its new debit card product, requiring the Bank to incur costs
associated with the reissue of all of its account access cards. Salaries and
employee benefits increased from $9.3 million for 1994 to $9.7 million for 1995.
Occupancy and equipment increased from $2.3 million for 1994 to $2.6 million for
1995. The increases in both of these expense categories reflect the costs
related to the establishment of the item processing center, telephone service
center and one additional new branch. The increase in network interchange fees,
from $723,000 for 1994 to $877,000 for 1995, reflect the transactional costs
incurred related to the customer usage of the new debit card product. The
marketing and advertising increase, from $951,000 for 1994 to $978,000 for 1995,
resulted from the promotional activity relating to the debit card product and
new branch opening. The significant decrease in deposit insurance, from $1.9
million for 1994 to $983,000 for 1995, reflects a 50% reduction in the insurance
premium charged by the FDIC, which impacted most BIF-insured banks.
Income Taxes. Income tax expense was $5.1 million for the year ended
December 31, 1995 compared to $4.7 million for the year ended December 31, 1994.
The effective tax rate increased from 32.6% for 1994 to 34.1% for 1995.
Cumulative Effect of Change in Accounting Principle. As of January 1,
1994, the Bank adopted SFAS 106, "Employers' Accounting for Post Retirement
Benefits Other Than Pensions". The transition obligation related to the adoption
of this standard of $1,224,000 was recognized in the 1994 Consolidated Statement
of Income, net of $300,000 previously accrued for this liability.
Liquidity and Capital Resources
Our primary sources of funds are deposits, proceeds from the principal and
interest payments on loans, mortgage related and debt and equity securities, and
to a lesser extent, borrowings and proceeds from the sale of fixed rate mortgage
loans to the secondary market. While maturities and scheduled amortization of
loans and securities are predictable sources of funds, deposit outflows,
mortgage prepayments, mortgage loan sales, and borrowings are greatly influenced
by general interest rates, economic conditions and competition.
Our primary investing activities are the origination of both residential
one- to four-family and commercial real estate loans and the purchase of
mortgage related and debt and equity securities. During the nine months ended
September 30, 1997 and the years ended December 31, 1996, 1995, and 1994, our
loan originations totaled $122.0 million, $177.1 million, $161.2 million and
$141.2 million, respectively. Purchases of mortgage related securities totaled
$67.3 million, $85.5 million, $46.4 million and $112.3 million for the nine
months ended September 30, 1997 and the years ended December 31, 1996, 1995, and
1994, respectively. These activities were funded primarily by deposit growth,
principal repayments on loans, mortgage related securities and debt and equity
securities. Loan sales provided an additional source of liquidity, totaling
$27.3 million, $30.9 million, $35.1 million and $23.2 million for nine months
ended September 30, 1997 and the years ended December 31, 1996, 1995 and 1994,
respectively.
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We experienced a net increase in total deposits of $72.1 million, $59.0
million, $41.4 million, and $6.8 million for the nine months ended September 30,
1997 and the years ended December 31, 1996, 1995, and 1994, respectively.
Deposit flows are affected by the level of interest rates, the interest rates
and products offered by local competitors, and other factors.
We closely monitors our liquidity position on a daily basis. Excess short-
term liquidity is usually invested in overnight federal funds sold. In the
event we require funds beyond its ability to generate them internally,
additional sources of funds are available through the use of reverse repurchase
agreements and short-term Federal Home Loan Bank advances. At September 30,
1997, we had only had $18.7 million outstanding in short-term reverse repurchase
agreements with third parties.
Loan commitments totaled $46.5 million at September 30, 1997, comprised of
$18.9 million at variable rates and $27.6 million at fixed rates. We anticipate
that we will have sufficient funds available to meet current loan commitments.
Certificates of deposit which are scheduled to mature in one year or less from
September 30, 1997, totaled $364.5 million. From January 1, 1997 to September
30, 1997, we experienced a 77.3% retention rate of funds maturing from
certificates of deposit. Based upon this experience and our current pricing
strategy, we believe that a significant portion of such deposits will remain
with the Bank.
In 1988, we plan to continue expanding our retail banking franchise by
opening three new branch offices in Erie County. The renovating and equipping
of these offices, which will be in leased facilities, is expected to cost
approximately $2.4 million. Additional 1998 capital funding needs are estimated
to total $1.2 million, mainly involving the upgrading of computer systems and
hardware. Management anticipates it will have sufficient funds available to
meet its planned capital expenditures throughout 1998.
At September 30, 1997, the Bank exceeded all of its regulatory capital
requirements with a leverage capital level of $125.4 million, or 10.75% of
adjusted assets, which is above the required level of $35.0 million, or 3.00%
and risk-based capital of $131.7 million, or 21.74% of adjusted assets, which is
above the required level of $48.5 million, or 8.00%. See "Regulatory Capital
Compliance" and "Regulation - Regulatory Capital Requirements."
Our most liquid assets are cash and interest-bearing demand accounts. The
levels of these assets are dependent on our operating, financing, lending and
investing activities during any given period. At September 30, 1997, cash and
interest-bearing demand accounts totaled $17.0 million, or 1.4% of total assets.
Impact of New Accounting Standards
In February 1997, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 128 "Earnings Per Share". SFAS No. 128 supersedes APB Opinion No. 15
"Earnings Per Share" and specifies the computation, presentation and disclosure
requirements for earnings per share ("EPS") for entities with publicly held
stock or potential common stock. Essentially, this standard replaces the
primary EPS and fully diluted EPS presentations under APB Opinion No. 15 with a
basic EPS and diluted EPS presentation. SFAS No. 128 is effective for financial
statements for both interim and annual periods ending after December 15, 1997,
earlier application is not permitted.
In February 1997, the FASB issued SFAS No. 129, "Disclosure of Information
about Capital Structure". SFAS No. 129 summarizes previously issued disclosure
guidance contained within APB Opinions Nos. 10 and 15 as well as SFAS No. 47.
There will be no changes to the Bank's disclosures pursuant to the adoption of
SFAS No. 129. This statement is effective for financial statements for periods
ending after December 15, 1997.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income," which establishes standards for reporting and display of comprehensive
income and its components in a full set of general-purpose financial statements.
The comprehensive income and related cumulative equity impact of comprehensive
income items will be required to be disclosed prominently as part of the notes
to the financial statements. Only the impact of
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unrealized gains or losses on securities available for sale is expected to be
disclosed as an additional component of the Bank's income under the requirements
of SFAS No. 130. This statement is effective for fiscal years beginning after
December 15, 1997.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information," which changes the way public companies
report information about segments of their business on their annual financial
statements and requires them to report selected segment information in their
quarterly reports issued to shareholders. It also requires entity wide
disclosures about the products and services an entity provides, the foreign
countries in which it holds assets and reports revenues, and its major
customers. This statement is effective for fiscal years beginning after
December 15, 1997.
BUSINESS OF THE COMPANY
General
In October 1997, the Board of Trustees of the Bank adopted the Plan of
Reorganization. Under the Plan, the Bank organized the Company. The Bank will
be a wholly-owned subsidiary of the Company, the majority of whose shares will
be held by the Mutual Holding Company. See "Niagara Bancorp, Inc." and
"Regulation - Holding Company Regulation."
The Company is currently not an operating company. Following the
Reorganization, in addition to directing, planning and coordinating the business
activities of the Bank, the Company will initially invest net proceeds it
retains primarily in short and medium-term debt securities and marketable equity
securities. The Company also intends to fund the loan to the ESOP to enable the
ESOP to purchase 8% of the Common Stock sold in the Offering. In the future,
the Company may acquire or organize other operating subsidiaries, including
other financial institutions and financial services companies. See "Use of
Proceeds." Presently, there are no agreements or understandings for an expansion
of the Company's operations. Initially, the Company will neither own nor lease
any property from any third party, but will instead use the premises, equipment
and furniture of the Bank. At the present time, the Company does not intend to
employ any persons other than certain officers of the Bank, who will not be
separately provided cash compensation by the Company. The Company may utilize
support staff of the Bank from time to time, if needed. Additional employees
will be hired as appropriate to the extent the Company expands its business in
the future.
BUSINESS OF THE BANK
General
The Bank's principal business consists of attracting retail deposits from
the general public in the areas surrounding its branches and investing those
deposits, together with funds generated from operations and borrowings,
primarily in one- to four-family residential mortgage loans, multi-family and
commercial real estate loans, mortgage related securities and various other
investment securities. The Bank also invests in consumer and other loans,
including home equity and second mortgage loans, mobile home loans, student
loans and commercial business loans. The Bank's revenues are derived
principally from the interest on its mortgage, consumer and commercial loans,
securities, loan origination and servicing fees and service charges and fees
collected on its deposit accounts. The Bank's primary sources of funds are
deposits, other borrowings and principal and interest payments on loans and
securities.
Management Strategy
The Bank was organized in 1870 as a New York-chartered mutual savings bank.
At September 30, 1997, we had total assets of $1.2 billion, total deposits of
$992.2 million, and net worth of $126.7 million. We are a community-and
customer-oriented savings bank that operates fifteen full-service branch offices
in the Western New York counties of Niagara, Orleans, Erie and Genesee, which we
consider to be our primary market area. We also consider the
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remaining four counties of Western New York, Wyoming, Allegany, Cattaraugus and
Chautauqua counties, as our market area. Through our "Person to Person
Commitment" approach to retail banking, we emphasize personal service and
customer convenience in serving the financial needs of the individuals, families
and businesses residing in Western New York. We offer the convenience and
product mix of a larger, super regional bank while providing the responsiveness
and community orientation of a smaller, local institution.
Lockport is located on the historic Erie Canal and is 20 miles northeast
of Buffalo and 15 miles east of Niagara Falls. Within the Buffalo Standard
Metropolitan Statistical Area, which includes Erie and Niagara Counties, there
is a population of approximately 1.2 million people. More than 9 million people
reside within the 125-mile radius of the city of Buffalo and the region is the
45th largest metropolitan area in the nation and the 3rd largest in New York
State.
Based on FDIC-published data, as of June 30, 1996 we had the second largest
deposit market share in each of Niagara and Orleans counties, the fifth largest
deposit market share in Genesee county, and the eighth largest deposit market
share in Erie County. In the eight county Western New York region, we had the
fifth largest deposit market share. For 1996, we were the fourth leading
originator of residential mortgage loans in Erie County. Those banks having
larger market shares in Western New York are significantly larger, multi-
regional financial institutions. Management considers the Bank to be the
dominant independent community bank focused exclusively on serving the banking
needs of the Western New York region.
Our business strategy is designed to enhance our profitability and
strengthen our position as the dominant, independent community bank in Western
New York. We offer the convenience and product mix of a larger, super regional
bank while providing the responsiveness and community orientation of a small,
local institution. The highlights of our strategy include the following:
. Expansion of the retail banking franchise. We are continuing to focus on
expanding our retail banking franchise and increasing the number of
households served within our market area. Since 1994 we have opened five
full-service branch offices and our Board has authorized the establishment
of three additional branch offices in 1998. We operate two full-service
supermarket branch offices, provide customer access to ATMs, including the
Bank's fourteen ATMs, without a service charge, provide telephone customer
service, and provide 24-hour telephone account access. We have customer
relationships with over 76,000 households in our primary market area,
representing approximately 16.9 % of all households therein. Our goal is
to increase the number of Bank products used per customer.
. Loan portfolio growth. Our loan portfolio consists of one- to four-family
residential mortgage loans, commercial and multi-family real estate loans,
consumer and other loans, and commercial business loans. At September 30,
1997, our loan portfolio totaled $622.5 million, an increase of $263.0
million, or 73.2%, since December 31, 1992. The loan portfolio represented
52.9% of total assets and 62.7% of total deposits at September 30, 1997,
compared to 43.1% of total assets and 48.2% of deposits at December 31,
1992. We intend to continue to increase our loan portfolio as a percentage
of assets , and to continue our origination of higher margin multi-family,
commercial real estate and consumer loans.
. Maintaining asset quality. Because we believe that asset quality is a
critical component of long-term financial success, we have remained
committed to a conservative credit culture. During the past five years,
and including the nine month period ended September 30, 1997, non-
performing assets have averaged 0.59% of total assets. At September 30,
1997, our non-performing loans totaled $1.9 million, representing 0.31% of
the loan portfolio, and our non-performing assets totaled $2.2 million,
representing 0.19% of assets. Our allowance for loan losses amounted to
$6.4 million at September 30, 1997, and represented 1.02% of our loan
portfolio and 330.0% of non-performing loans.
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. Managing interest rate risk. Although our liabilities are more sensitive
to changes in interest rates than our assets, we seek to manage our
exposure to interest rate risk by originating and retaining adjustable-rate
loans in both the residential and commercial real estate loan portfolios,
and by originating short-term and medium-term fixed-rate consumer loans.
We also use our investment and mortgage related securities portfolios to
manage our interest rate risk exposure. As of September 30, 1997, our
securities available for sale totaled $465.0 million, or 39.5% of total
assets, and had an average life of 4.27 years and our securities held to
maturity totaled $37.5 million, or 3.2% of total assets, and had an average
life of .07 years.
Market Area
The Bank has been, and intends to continue to be, a community-oriented
institution offering a variety of financial services to meet the needs of the
communities it serves. The Bank currently operates fifteen full service banking
offices in Erie, Niagara, Orleans and Genesee Counties, of Western New York, and
has authorized the establishment of three additional branch offices to be
located in Erie County in 1998. The Bank's primary deposit gathering area is
currently concentrated around the areas where its full service banking offices
are located. The Bank's primary lending area has also historically been
concentrated in the same Western New York counties.
Within the Buffalo Standard Metropolitan Statistical Area, which includes
Erie and Niagara Counties, there is a population of approximately 1.2 million
people. Within a five-hundred mile radius of the region lies 62% of the
Canadian and 55% of the United States population. More than 9 million people
reside within the 125-mile radius of the City of Buffalo and the region is the
45th largest metropolitan area in the nation and the 3rd largest in New York
State.
Historically an industrial-based economy, the Buffalo/Niagara region has
experienced significant job losses in the manufacturing sector since the 1970s.
The decline in manufacturing jobs has slowed in recent years, and there has been
significant growth in retail trade, financial services, health services and in
the auto parts manufacturing industry. The United States - Canadian trading
relationship is the largest of its kind in the world, and thirty percent of that
trade is handled by the region's six international bridges.
Future Acquisition and Expansion Activity
Both nationally and in New York, the banking industry is undergoing a
period of consolidation marked by numerous mergers and acquisitions. Although
we do not have a formal program to acquire other banking or thrift institutions,
we may from time to time be presented with opportunities to acquire institutions
or bank branches that could expand and strengthen our market position. If such
an opportunity arises, we may from time to time engage in discussions or
negotiations and we may conduct a business investigation of a target
institution. Acquisitions typically involve the payment of a premium over book
and market values, and therefore, some dilution of the Company's book value and
net income per share may occur in connection with a future acquisition.
Lending Activities
General. Historically, the principal lending activity of the Bank has been
the origination, for retention in its portfolio, of fixed-rate and adjustable-
rate mortgage loans collateralized by one- to four-family residential real
estate located within its primary market area. The Bank also originates multi-
family residential real estate loans, commercial real estate loans and consumer
loans. To a lesser extent the Bank also originates construction, home equity
and commercial business loans.
In an effort to manage interest rate risk, the Bank has sought to make its
interest-earning assets more interest rate sensitive by originating adjustable-
rate loans in both the residential and commercial real estate loan portfolios,
and by originating variable rate, short-term and medium-term fixed-rate consumer
loans. In originating residential fixed-rate loans, the Bank has successfully
marketed to its customers, the attractive shorter-term maturity features of its
various
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bi-weekly mortgage programs where the accelerated principal amortization
schedules of these loans have played a significant role in ameliorating the
traditional interest rate risk that is inherent in a community based Bank's
residential lending portfolio. The Bank currently sells in the secondary market
a limited amount of 20-30 year monthly and 25-30 year bi-weekly residential
mortgage loans, and retains for portfolio all adjustable-rate mortgage loans and
fixed-rate monthly residential mortgage loans with maturities of 15 years or
less, together with all fixed-rate bi-weekly mortgage loans with maturities of
20 years or less. However, the Bank is primarily a portfolio lender and at any
one time the Bank holds only a nominal amount of loans identified as held-for-
sale. The Bank has historically retained the servicing rights on all mortgage
loans it sells and realizes monthly service fee income. The Bank retains in its
portfolio all multi-family residential loans, commercial real estate loans,
commercial business loans, and consumer loans that it originates with the
exception of student loans which, as they enter their repayment phase, are sold
to the Student Loan Marketing Association ("Sallie Mae").
Bi-weekly Lending. We have been extremely successful in marketing our bi-
weekly mortgage/loan product, which we introduced in early 1992 and which has a
significantly shorter repayment schedule than a conventional monthly loan. The
accelerated repayment schedule that accompanies a bi-weekly loan results in
significant savings to the borrower, and allows for a more rapid increase in
home equity. The bi-weekly mortgage reduces interest payments and shortens the
repayment time in two ways. First, a borrower makes the equivalent of an extra
monthly payment per year by paying half the monthly mortgage payment every two
weeks. The borrower makes the equivalent of 13 monthly payments per year
instead of 12. Also, in paying half the payment two weeks in advance, the
borrower reduces the mortgage interest that is paid over the life of the loan.
For example, an 8%, $100,000, 20-year bi-weekly mortgage loan is fully repaid in
16.2 years. An additional benefit is that repayment of the loan is made through
an automatic deduction from the borrower's savings or checking account, which
enables us to avoid the cost of processing payments. As of September 30, 1997,
$165.7 million or 42.9% of the Bank's residential loan portfolio was comprised
of bi-weekly loans.
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Loan Portfolio Composition. Set forth below is selected information
concerning the composition of the Bank's loan portfolio in dollar amounts and in
percentages (before deductions for deferred fees and costs, unearned discounts
and allowances for losses) as of the dates indicated.
<TABLE>
<CAPTION>
At September 30, At December 31,
------------------- --------------------------------------------------------------------------------
1997 1996 1995 1994 1993
------------------- ------------------- ------------------- ------------------ ------------------
Amount Percent Amount Percent Amount Percent Amount Percent Amount Percent
--------- -------- --------- -------- --------- -------- -------- -------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Real Estate Loans:
One- to four-family....... $386,494 61.79% $360,573 59.85% $319,340 59.31% $277,010 58.12% $248,324 58.66%
Home equity............... 13,047 2.09 11,337 1.88 10,234 1.90 10,729 2.25 10,832 2.56
Multi-family.............. 72,843 11.64 71,397 11.85 71,489 13.28 66,972 14.05 59,943 14.16
Commercial real estate.... 69,571 11.12 68,601 11.38 62,005 11.52 55,946 11.74 42,326 10.00
Construction (1).......... 13,964 2.23 12,493 2.07 7,891 1.47 3,454 0.72 6,910 1.63
-------- ------ -------- ------ -------- ------ -------- ------ -------- ------
Total real estate loans.. 555,919 88.87 524,401 87.03 470,959 87.48 414,111 86.88 368,335 87.01
-------- ------ -------- ------ -------- ------ -------- ------ -------- ------
Consumer and Other Loans:..
Mobile home............... 22,675 3.63 21,406 3.55 20,630 3.83 20,662 4.33 19,785 4.68
Vehicle................... 7,326 1.17 18,747 3.11 12,591 2.34 9,391 1.97 7,275 1.72
Personal.................. 14,776 2.37 13,596 2.26 11,485 2.13 10,213 2.14 8,402 1.98
Home improvement.......... 7,725 1.23 6,879 1.14 7,046 1.31 6,517 1.37 6,028 1.42
Other consumer............ 1,964 0.31 1,937 0.32 1,698 0.32 1,841 0.39 2,059 0.49
Guaranteed student........ 10,907 1.74 10,702 1.78 9,874 1.83 9,951 2.09 8,123 1.92
-------- ------ -------- ------ -------- ------ -------- ------ -------- ------
Total consumer and
other loans............. 65,373 10.45 73,267 12.16 63,324 11.76 58,575 12.29 51,672 12.21
Commercial business loans.. 4,275 0.68 4,895 0.81 4,085 0.76 3,948 0.83 3,321 0.78
-------- ------ -------- ------ -------- ------ -------- ------ -------- ------
Total loans.............. 625,567 100.00% 602,563 100.00% 538,368 100.00% 476,634 100.00% 423,328 100.00%
-------- ====== -------- ====== -------- ====== -------- ====== -------- ======
Net deferred costs........ 3,376 2,809 2,349 1,749 1,763
Unearned discounts........ (103) (347) (39) -- --
Allowance for losses...... (6,353) (6,539) (4,707) (4,192) (4,030)
-------- -------- -------- -------- --------
Loans, net................ $622,487 $598,486 $535,971 $474,191 $421,061
======== ======== ======== ======== ========
<CAPTION>
At December 31,
-------------------
1992
-------------------
Amount Percent
-------- ---------
(Dollars in thousands)
<S> <C> <C>
Real Estate Loans:
One- to four-family....... $202,230 56.02%
Home equity............... 11,902 3.30
Multi-family.............. 62,909 17.43
Commercial real estate.... 30,825 8.54
Construction (1).......... 3,740 1.04
-------- ------
Total real estate loans.. 311,606 86.33
-------- ------
Consumer and Other Loans:..
Mobile home............... 15,992 4.43
Vehicle................... 7,992 2.21
Personal.................. 7,450 2.06
Home improvement.......... 5,822 1.61
Other consumer............ 2,163 0.60
Guaranteed student........ 6,517 1.81
-------- ------
Total consumer and
other loans............. 45,936 12.72
Commercial business loans.. 3,432 0.95
-------- ------
Total loans.............. 360,974 100.00%
-------- ======
Net deferred costs........ 1,157
Unearned discounts........ --
Allowance for losses...... (2,689)
--------
Loans, net................ $359,442
========
</TABLE>
- ---------------------
(1) Includes loans for the construction of one-to-four family residential,
multi-family and commercial real estate properties. At September 30, 1997,
construction loans included $4,046,000 of one-to-four family loans and
$9,918,000 of commercial real estate and multi-family loans.
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Loan Maturity and Repricing Schedule. The following table sets forth
certain information as of September 30, 1997, regarding the amount of loans
maturing or repricing in the Bank's portfolio. Demand loans having no stated
schedule of repayment and no stated maturity, and overdrafts are reported as due
in one year or less. Adjustable- and floating-rate loans are included in the
period in which interest rates are next scheduled to adjust rather than the
period in which they contractually mature, and fixed-rate loans are included in
the period in which the final contractual repayment is due.
<TABLE>
<CAPTION>
One Three Five Ten
Within Through Through Through Through Beyond
One Three Five Ten Twenty Twenty
Year Years Years Years Years Years Total
-------- ------- ------- ------- -------- ------- --------
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Real Estate Loans:
One-to four-family...... $ 88,513 $13,436 $ 6,309 $23,558 $185,517 $69,161 $386,494
Home equity............... 8,815 146 648 1,987 1,451 -- 13,047
Multi-family.............. 26,785 23,184 21,583 732 559 -- 72,843
Commercial................ 21,045 25,817 15,668 4,453 2,588 -- 69,571
Construction.............. 10,402 167 - 1,743 430 1,222 13,964
-------- ------- ------- ------- -------- ------- --------
Total real estate loans.. 155,560 62,750 44,208 32,473 190,545 70,383 555,919
-------- ------- ------- ------- -------- ------- --------
Consumer and other loans... 17,407 8,732 9,931 11,323 17,584 396 65,373
Commercial business loans.. 2,949 323 340 545 -- 118 4,275
-------- ------- ------- ------- -------- ------- --------
Total loans.............. $175,916 $71,805 $54,479 $44,341 $208,129 $70,897 $625,567
======== ======= ======= ======= ======== ======= ========
</TABLE>
Fixed- and Adjustable-Rate Loan Schedule. The following table sets forth
at September 30, 1997, the dollar amount of all fixed-rate and adjustable-rate
loans due after September 30, 1998. Adjustable- and floating-rate loans are
included based on contractual maturities.
<TABLE>
<CAPTION>
Due After September 30, 1998
-------------------------------------------
Fixed Adjustable Total
----------- ---------------- -----------
(In thousands)
<S> <C> <C> <C>
Real Estate Loans:
One- to four-family.............. $284,306 $13,675 $297,981
Home equity...................... 4,232 -- 4,232
Multi-family..................... 13,823 32,235 46,058
Commercial....................... 11,080 37,446 48,526
Construction..................... 3,395 167 3,562
-------- ------- --------
Total real estate loans 316,836 83,523 400,359
-------- ------- --------
Consumer and other loans........... 47,966 -- 47,966
Commercial business loans.......... 1,326 -- 1,326
-------- ------- --------
Total loans................... $366,128 $83,523 $449,651
======== ======= ========
</TABLE>
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One- to Four-Family Real Estate Lending. The Bank's primary lending
activity has been the origination, for retention in the Bank's portfolio, of
mortgage loans to enable borrowers to purchase one- to four-family, owner-
occupied properties located in our primary market area. We offer conforming and
non-conforming, fixed-rate and adjustable-rate, residential mortgage loans with
maturities up to 30 years and maximum loan amounts generally up to $500,000.
The Bank's residential mortgage loan originations are generally obtained from
our loan representatives operating in our branch offices through their contacts
with local realtors, existing or past loan customers, depositors of the Bank,
and referrals from attorneys, accountants and independent mortgage brokers who
refer loan applications from the general public.
We currently offer both fixed and adjustable rate conventional and
government guaranteed (Federal Housing Administration ("FHA"), Veterans
Administration ("VA"), Farmers Home Assistance ("FMHA")) mortgage loans with
terms of 10-30 years that are fully amortizing with monthly or bi-weekly loan
payments. One- to four-family residential loans are generally underwritten
according to the Federal National Mortgage Association ("FNMA"), and Freddie Mac
uniform guidelines. The Bank generally originates both fixed-rate and
adjustable-rate loans in amounts up to the maximum conforming loan limits as
established by FNMA and Freddie Mac secondary market standards, currently
$214,600 for one-family homes up to a maximum of $412,450 for four-family homes.
Private mortgage insurance ("PMI") is required for loans with loan-to-value
ratios in excess of 80%. Loans in excess of conforming loan limits, in amounts
up to $500,000, are also underwritten to both FNMA and Freddie Mac secondary
market standards, and are eligible for sale to various conduit firms that
specialize in the purchase of such non-conforming loans.
Fixed-rate mortgage loans originated by the Bank include due-on-sale
clauses which provide the Bank with the contractual right to deem our loan
immediately due and payable in the event the borrower transfers ownership of the
property without the Bank's consent. Due-on-sale clauses are an important means
of adjusting the yields on our Bank's fixed-rate portfolio, and we generally
exercise our rights under these clauses.
The Bank generally sells its newly originated conventional, conforming 20-
30 year monthly fixed, and 25-30 year bi-weekly, loans in the secondary market
to government sponsored enterprises such as FNMA and Freddie Mac, and its non-
conforming, fixed-rate mortgage loans to private sector secondary market
purchasers. To reinforce its commitment to customer service and also to
generate fee income, as a matter of policy we retain the servicing rights on all
such loans sold. For the nine months ended September 30, 1997 and for the year
ended December 31, 1996, the Bank sold mortgage loans totaling $23.2 million and
$26.1 million, respectively. As of September 30, 1997, our portfolio of fixed-
rate loans serviced for others totaled $139.8 million. We intend to continue to
sell into the secondary market our newly originated, 25-30 year fixed-rate
mortgage loans to assist in our asset/liability management.
In an effort to provide financing for low and moderate income buyers, we
actively participates in residential mortgage programs and products sponsored by
FNMA, Freddie Mac, and the State of New York Mortgage Agency ("SONYMA"). The
SONYMA mortgage programs provide low and moderate income households with fixed-
rate loans which are generally set below prevailing fixed-rate mortgage loans
and which allow below-market down payments. These loans are sold by the Bank to
SONYMA, with the Bank retaining the contractual servicing rights.
We currently offer several one- to four-family, adjustable-rate mortgage
loan ("ARM") products secured by residential properties with rates that adjust
every one, three, or seven years. The one- to four-family ARMs are offered with
terms of up to 30 years. After origination, the interest rate on one- to four-
family ARMs currently offered is reset based upon a contractual spread or margin
above the average yield on United States Treasury Securities, adjusted to a
Constant Maturity (the "U.S. Treasury Constant Maturity Index"), as published
weekly by the Federal Reserve Board. The appropriate index utilized at each
interest rate change date corresponds to the initial one, three, or seven year
adjustment period of the loan.
ARMs are generally subject to limitations on interest rate increases of 2%
per adjustment period, and an aggregate adjustment of 6% over the life of the
loan. The ARMs require that any payment adjustment resulting from a change in
the interest rate be sufficient to result in full amortization of the loan by
the end of the loan term, and thus,
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<PAGE>
do not permit any of the increased payment to be added to the principal amount
of the loan, commonly referred to as negative amortization.
The retention of ARMs, as opposed to longer term, fixed-rate residential
mortgage loans, in the Bank's portfolio helps reduce our exposure to interest
rate risk. However, ARMs generally pose credit risks different from the credit
risks inherent in fixed-rate loans primarily because as interest rates rise, the
underlying debt service payments of the borrowers rise, thereby increasing the
potential for default. In order to minimize this risk, borrowers of one- to
four-family one year adjustable-rate loans are qualified at the rate which would
be in effect after the first interest rate adjustment, if that rate is higher
than the initial rate. We believe that these risks, which have not had a
material adverse effect on the Bank to date, generally are less onerous than the
interest rate risks associated with holding 25-30 year fixed-rate loans.
Certain of the Bank's conforming ARMs can be converted at a later date to a
fixed-rate mortgage loan with interest rates based upon the then-current market
rates plus a predetermined margin or spread that was established at the loan
closing. The Bank sells ARM loans which are converted to 25-30 year fixed-rate
term loans, to either FNMA or Freddie Mac.
While one- to four-family residential loans typically are originated with
20-30 year terms, the Bank permits its ARM loans to be assumed throughout the
life of the loan by qualified buyers. Such loans generally remain outstanding
in our loan portfolio for substantially shorter periods of time because
borrowers often prepay their loans in full upon sale of the property pledged as
security or upon refinancing the loan. Thus, average loan maturity is a
function of, among other factors, the level of purchase and sale activity in the
Western New York real estate market, prevailing interest rates, and the interest
rates payable on outstanding loans. As of September 30, 1997, over 97%, of our
total residential real estate loan portfolio was secured by properties that are
located within the eight county area that comprises Western New York State.
We require title insurance on all of our one- to four- family mortgage
loans, and also require that fire and extended coverage casualty insurance (and,
if appropriate, flood insurance) be maintained in an amount at least equal to
the lesser of the loan balance or the replacement cost of the improvements.
Loans with loan-to-value ratios in excess of 80% must have a mortgage escrow
account from which disbursements are made for real estate taxes, hazard and
flood insurance, and PMI.
We also originate two types of residential constructions loans: (i)
construction/spec loans, and (ii) construction/permanent loans. Annual
originations of residential construction loans have averaged $4.7 million over
the past five years. At September 30, 1997, our residential construction loan
portfolio consisted of 16 construction/spec loans with an aggregate outstanding
balance of $2.0 million and 31 construction/permanent loans with an aggregate
outstanding balance of $3.8 million.
Construction/spec loans are made to area home builders who do not have, at
the time of loan origination, a signed contract with a home buyer who has a
commitment for permanent financing with either the Bank or another lender for a
finished home. The home buyer may be identified either during or after the
construction period, with the risk that the builder will have to carry the debt
service payments and finance real estate taxes and other holding costs of the
completed home for a significant time after the completion of construction and
until the home buyer is identified. We lend on an ongoing basis to approximately
ten local area residential home builders who, at any given time, may have one or
two construction/spec loans outstanding from the Bank. All construction/spec
loans carry the full personal guaranty of the builder, who must have a previous
satisfactory history of completing construction/permanent loans with the Bank.
These loans are generally originated for a term of twelve months, with interest
rates ranging from 1.0% to 1.5% above the prime lending rate, and with a loan-
to-value ratio of no more than 75% of the lower of cost or the appraised
estimated value of the completed property. Loan advances are disbursed on a
three-draw basis as construction is completed. At September 30, 1997, the
largest outstanding concentration of credit to one builder consisted of 2
construction/spec loans with an aggregate balance of $421,200, which were
performing in accordance with their terms.
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<PAGE>
Construction/permanent loans are also made to either a home builder or a
home owner who, at the time of construction, has a signed contract together with
a commitment for permanent financing from the Bank for the finished home. The
construction phase of a loan generally lasts 4-6 months, and the interest rate
charged generally corresponds to the rate of the committed permanent loan, with
loan-to-value ratios of up to 80% (or up to 90% with PMI) of the appraised
estimated value of the completed property or cost, whichever is less. When we
issue the corresponding commitment to provide permanent financing upon
completion of construction, the interest rate charged on the construction loan
generally includes an additional 1/8% to 1/4% rate premium as protection against
the construction loan risk and the additional rate exposure to the Bank of an
increase in interest rates before the permanent loan is funded and eligible for
sale to either FNMA or Freddie Mac. At September 30, 1997, the largest single
outstanding construction loan of this type had an outstanding balance of
$560,000 and was performing in accordance with its terms.
Construction lending generally involves a greater degree of risk than other
one- to four-family mortgage lending. The repayment of the construction loan
is, to a great degree, dependent upon the successful and timely completion of
the construction of the subject property. Construction delays or the financial
impairment of the builder may further impair the borrower's ability to repay the
loan.
In order to facilitate a competitive relationship with several of the
Bank's major residential builders, we will, on an exception basis, originate
land development loans to area home builders that are secured by individual
unimproved or improved residential building lots. Land loans are generally
offered with variable prime based rates with terms of up to two years. The
maximum loan-to-value ratio is 65% of the lower of cost or appraised value.
Home Equity Lending. We offer both fixed-rate, fixed-term, home equity and
second mortgage loans, and prime rate, variable rate home equity lines of credit
(HELOCs) in its market area. Both fixed rate and floating rate home equity
loans are offered in amounts up to 80% of the appraised value of the property
(including the first mortgage) with a maximum loan amount of $100,000. Fixed-
rate home equity loans are offered with repayment terms of up to fifteen years
and HELOCs are offered for terms up to thirty years, with interest-only payments
during the first ten years and repayment of principal and interest during the
final twenty years. As of September 30, 1997, fixed-rate second mortgage and
home equity loans totaled $4.2 million or 0.7% of the Bank's total loan
portfolio. The disbursed portion of home equity lines of credit totaled $8.8
million or 1.4% of the Bank's loan portfolio, with $6.3 million remaining
undisbursed.
As is the case with residential one- to four-family first mortgage lending,
the underwriting standards employed by the Bank for both fixed-rate second
mortgage loans and HELOCs are formatted to the standard secondary marketing
guidelines as established by FNMA and Freddie Mac.
Commercial Real Estate and Multi-family Lending. We originate real estate
loans secured predominantly by first liens on apartment houses, office
complexes, and commercial and industrial real estate. Loans collateralized by
commercial real estate totaled $69.6 million, or 11.1% of our total loan
portfolio as of September 30, 1997. Loans collateralized by multi-family
residential real estate totaled $72.8 million, or 11.6%, of the total loan
portfolio as of September 30, 1997, and consisted of 207 loans outstanding with
an average loan balance of $351,898. Our largest multi-family real estate loan
relationship at September 30, 1997 had a principal balance of $2.2 million, and
was performing in accordance with its terms. The commercial real estate loans
are predominately secured by nonresidential properties such as office buildings,
shopping centers, retail strip centers, industrial and warehouse properties and
to a lesser extent by more specialized properties such as churches, mobile home
parks, restaurants, motel/hotels and auto dealerships. At September 30, 1997,
we had 196 non-multi-family commercial real estate loans outstanding with an
average loan balance of approximately $354,954. Our largest commercial real
estate loan at September 30, 1997 had a principal balance of $4.1 million and
was collateralized by an office building located in our primary lending area.
This loan is performing in accordance with its terms.
At September 30, 1997, approximately 74% of our commercial real estate and
multi-family loans were secured by properties located in our primary market
area. Our current policy with regard to such loans is to emphasize geographic
distribution within our primary market area, diversification of property type
and minimization of credit risk.
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<PAGE>
As part of our ongoing strategic initiatives to minimize interest rate
risk, commercial and multi-family real estate loans originated for the Bank's
portfolio are generally limited to one, three or five year ARM products which
are priced at prevailing market interest rates. The initial interest rates are
subsequently reset after completion of the initial one, three or five year
adjustment period at new market rates that generally range between 200 and 300
basis points over the then current one, three or five year United States
Treasury Constant Maturity Index. The maximum term for commercial real estate
loans is generally not more than 10 years, with a prepayment schedule based on
not more than a 25 year amortization schedule for multi-family loans, and 20
years for commercial real estate loans.
In our underwriting of commercial real estate loans, we may lend up to 80%
of the property's appraised value on apartments, and up to 75% on other
commercial properties. Appraised values initially are estimated by staff
underwriters and confirmed by independent, professionally designated qualified
appraisers, to determine that the property to be mortgaged satisfies the Bank's
loan-to-value requirements. Decisions to lend are based on the economic
viability of the property and the creditworthiness of the borrower.
Creditworthiness is determined by considering the character, experience,
management and financial strength of the borrower, and the ability of the
property to generate adequate funds to cover both operating expenses and debt
service. In evaluating a commercial real estate loan, we place primary emphasis
on the ratio of net cash flow to debt service for the property, generally
requiring a ratio of at least 1.20%, computed after deduction for a vacancy
factor and property expenses deemed appropriate by the Bank. In addition, we
generally require a personal guarantee of the loan principal from the borrower.
On all real estate loans, we require title insurance insuring the priority
of its lien, fire and extended coverage casualty insurance, and flood insurance,
if appropriate, in order to protect its security. In connection with
substantially all commercial real estate lending, in addition to staff review,
we employ independent engineering firms to review plans, specifications and draw
disbursements, employs consulting firms to review the economic feasibility of
the project, and employs environmental assessment firms to evaluate the
environmental risks that may be associated with either the building or the site.
We also offer commercial real estate and multi-family construction mortgage
loans. Most construction loans are made as "construction/permanent" loans,
which provide for disbursement of loan funds during construction and automatic
conversion to permanent loans upon completion of construction and the attainment
of either tenant lease-up provisions or prescribed debt service coverage ratios.
The construction phase of the loan is made on a short-term basis, usually not
exceeding two years, with floating interest rate levels generally established at
a spread in excess of the prime rate. The construction loan application process
includes the same criteria which are required for permanent commercial mortgage
loans, as well as a submission to the Bank of completed plans, specifications
and cost estimates related to the proposed construction. These items are used
as an additional basis to determine the appraised value of the subject property.
Appraisal reports are completed by independent, professionally designated
appraisers. All appraisal reports are reviewed by our commercial loan
underwriting staff. Loans are based on the lesser of the current appraised
value of loan and improvements or the cost of construction. Generally, the
loan-to-value ratio for construction loans does not exceed 75%. At September
30, 1997, $13.8 million was committed for commercial real estate and multi-
family construction loans, of which $3.4 million was outstanding.
Among the reasons for our continued emphasis on commercial real estate and
multi-family lending is a desire to invest in assets bearing interest rates
which are generally higher than those obtainable on residential mortgage loans
and which are more rate sensitive to changes in market interest rates.
Commercial real estate and multi-family loans, however, entail significant
additional risk as compared with one- to four-family residential mortgage
lending, as they typically involve large loan balances concentrated with single
borrowers or groups of related borrowers. In addition, the payment experience
on loans secured by income producing properties is typically dependent on the
successful operation of the related real estate project and thus may be subject
to a greater extent to adverse conditions in the real estate market or in the
economy generally. Construction loans involve additional risks attributable to
the fact that loan funds are advanced upon the security of the project under
construction, which is of uncertain value prior to the completion of
construction. Moreover, because of the uncertainties inherent in estimating
construction costs, delays
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<PAGE>
arising from labor problems, material shortages, and other unpredictable
contingencies, it is relatively difficult to evaluate accurately the total loan
funds required to complete a project and the related loan-to-value ratios.
Consumer and Other Loans. We originate a variety of consumer and other
loans, including home improvement loans, new and used automobile loans, mobile
home loans, student loans, boat and RV loans, personal unsecured loans,
including both fixed-rate installment loans and prime floating variable rate
lines-of-credit, and savings account "passbook" loans. As of September 30,
1997, consumer loans totaled $65.4 million, or 10.5% of the total loan
portfolio.
At September 30, 1997, the largest group of consumer loans consisted of
$22.7 million of loans secured by mobile homes owned by individuals,
representing 34.7% of the consumer loan portfolio. We have been engaged in
mobile home lending for over eight years. While we generally lend throughout
the State of New York with respect to mobile homes, the majority of the
portfolio, $12.0 million, or 54%, is located within the Bank's primary market
area. The mobile home units (both new and used) are primarily located in well-
managed mobile home parks reviewed and inspected by our management team as part
of its ongoing underwriting process. Mobile home loans have shorter terms to
maturity than traditional 30-year residential loans and higher yields than
single-family residential mortgage loans. Although we generally offer mobile
home loans with fixed-rate, fully amortizing loan terms for 10-20 years, mobile
home units manufactured prior to 1991 are restricted to a maximum term of no
more than fifteen years. We anticipate that it will continue to be an active
originator of mobile home loans.
We will generally finance up to 90% of the purchase price of a new mobile
home unit, not to exceed 140% of the dealer invoice. We also require a UCC-1
filing perfecting the Bank's lien for all mobile home loans, and requires
homeowner's insurance at least equal to the amount financed. We have contracted
with an independent third-party to generate all mobile home loan applications
but, prior to funding, all mobile home loan originations must be underwritten
and approved by designated Bank underwriters. As part of a negotiated servicing
contract, the third party originator will at the request of the Bank, contact
borrowers who become delinquent in their payments to the Bank and, when
necessary, will oversee the repossession and sale of mobile homes on our behalf.
For such services, and as part of the origination and servicing contract, we pay
the originator a fee at loan funding, of which generally one-half is deposited
into a non-interest bearing escrow loss account, and is under the sole control
of the Bank to absorb future losses which may be incurred on the loans.
Mobile home lending generally entails greater risk than traditional single-
family residential mortgage lending, due to the type and nature of the
collateral, which may depreciate over time as compared to the typical
appreciation of houses securing single-family residential loans, and because
mobile home borrowers often have lower income levels than single-family
residential mortgage loan borrowers. In many cases, repossessed collateral for
a defaulted mobile home loan will not provide an adequate source of repayment of
the outstanding loan balance because of depreciation or improper repair and
maintenance of the underlying security. The Bank attempts to minimize such risk
through the loss escrow arrangement with the third-party originator.
The next largest group of loans in the consumer loan portfolio are $14.8
million of personal loans, $9.3 million of which are secured and unsecured
installment loans, and $5.5 million of which are prime based variable rate
lines-of-credit. Unsecured installment loans generally have shorter terms than
secured consumer loans and generally have higher interest rates than rates
charged on secured installment loans with comparable terms.
The next largest group of consumer loans are home improvement loans, the
total of which amounted to $7.7 million at September 30, 1997. We offer fully
amortizing, fixed-rate property improvement loans for terms of up to 15 years
and with loan-to-value ratios of up to 80% (or 100% as to FHA loans) when taking
into account any outstanding first mortgage loan balance. For property
improvement loans in excess of $7,500, the Bank generally obtains a second lien
position as additional collateral security.
The next largest group of consumer loans are loans secured by new or used
automobiles which, as of September 30, 1997, totaled $7.3 million. We originate
automobile loans directly to our customers and we have no outstanding
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<PAGE>
agreement with automobile dealerships to generate indirect loans. The maximum
term for an automobile loan is generally 60 months for a new car, and 36-48
months for a used car. We will generally lend up to 90% of the purchase price of
a new car, and, with respect to used cars, up to 90% of the lesser of the
purchase price or the National Automobile Dealers' Association book rate. We
require all borrowers to maintain collision insurance on automobiles securing
loans in excess of $5,000, with the Bank listed as loss payee. In those
instances where the borrower fails to maintain adequate insurance coverage, the
Bank is further protected against loss by vendors single interest insurance
coverage.
We have been, and continue to be, an active originator of student loans.
As of September 30, 1997, the Bank had $10.9 million of variable-rate student
loans in its portfolio. Substantially all of the loans are originated under the
auspices of the New York State Higher Education Services Corporation
("NYSHESC"). Under the terms of these loans, no repayment is due until the
student graduates, with 98% of the principal guaranteed by NYSHESC. Our general
practice is to sell these student loans to the Student Loan Marketing
Association ("Sallie Mae") as the loans reach repayment status. The Bank
generally receives a premium of .25% to 1% on the sale of these loans.
Our procedures for underwriting consumer loans include an assessment of the
applicant's payment history on other debts and the ability to meet existing
obligations and payments on the proposed loans. Although the applicant's
creditworthiness is a primary consideration, the underwriting process also
includes a comparison of the value of the collateral security, if any, to the
proposed loan amount.
Consumer loans generally entail greater risk than residential mortgage
loans, particularly in the case of consumer loans that are unsecured or secured
by assets that tend to depreciate, such as automobiles, boats, recreational
vehicles and mobile homes. In such cases, repossessed collateral for a
defaulted consumer loan may not provide an adequate source of repayment for the
outstanding loan and the remaining deficiency often does not warrant further
substantial collection efforts against the borrower. In addition, consumer loan
collections are dependent on the borrower's continued financial stability, and
this is more likely to be adversely affected by job loss, divorce, illness or
personal bankruptcy. Furthermore, the application of various Federal and State
laws including Federal and State bankruptcies and insolvency laws may limit the
amount which can be recovered on such loans. We add a general provision on a
regular basis to its consumer loan loss allowance, based on general economic
conditions and prior loss experience.
Commercial Business Loans. We currently offer commercial business loans to
existing customers in our market area, some of which are secured in part by
additional real estate collateral. In an effort to expand our customer account
relationships and develop a broader base of more interest rate sensitive assets,
we make various types of secured and unsecured commercial loans for the purpose
of financing equipment acquisition, expansion, working capital and other general
business purposes. The terms of these loans generally range from less than
one year to seven years. The loans are either negotiated on a fixed-rate basis
or carry variable interest rates indexed to the prime rate. At September 30,
1997, we had 83 commercial business loans outstanding with an aggregate balance
of $4.3 million, or .68%, of the total loan portfolio. As of September 30,
1997, the average commercial business loan balance was approximately $51,506.
The largest commercial business loan had a principal balance of $300,000 and is
performing in accordance with its terms.
Commercial credit decisions are based upon a complete credit appraisal of
the loan applicant. A determination is made as to the applicant's ability to
repay in accordance with the proposed terms as well as an overall assessment of
the risks involved. An investigation is made of the applicant to determine
character and capacity to manage. Personal guarantees of the principals are
generally required. In addition to an evaluation of the loan applicant's
financial statements, a determination is made of the probable adequacy of the
primary and secondary sources of repayment to be relied upon in the transaction.
Credit agency reports of the applicant's credit history as well as bank checks
and trade investigations supplement the analysis of the applicant's
creditworthiness. Collateral supporting a secured transaction is also analyzed
to determine its marketability and liquidity. Commercial business loans
generally bear higher interest
75
<PAGE>
rates than residential loans, but they also may involve a higher risk of default
since their repayment is generally dependent on the successful operation of the
borrower's business.
Loan Originations, Purchases, Sales and Servicing. While we originate both
fixed-rate and adjustable-rate loans, our ability to generate each type of loan
depends upon relative borrower demand and the pricing levels as set in the local
marketplace by competing banks, thrifts, credit unions, and mortgage banking
companies, as well as life insurance companies, and Wall Street conduits who
also actively compete for local product in the commercial real estate loan area.
Loan originations are derived from a number of sources, such as real estate
broker referrals, existing customers, borrowers, builders, attorneys, and walk-
in customers. In addition, the residential lending area currently employs seven
loan originators to augment our traditional sources of loan applications. All
of our loan originators are on a base salary plus commission. We also rely on a
small number of select area mortgage brokers, who are authorized to accept and
process residential mortgage loan applications on our behalf. All completed
loan applications are forwarded to our centralized residential loan origination
area for underwriting, approval, commitment, and closing.
In the past, to augment our direct origination of loans in our primary
lending area, we have purchased one- to four-family residential whole loans and
commercial real estate whole loans and participations which are originated and
serviced by other financial institutions. As of September 30, 1997, the Bank's
combined commercial real estate, multi-family and residential portfolio of loans
serviced by other financial institutions consisted of 230 loans with an
aggregate outstanding balance of $7.6 million. Although we have not actively
purchased residential loans since 1986, we may from time to time purchase loans
from the secondary market to supplement our origination of local mortgage loans,
particularly in the residential loan area.
We generally sell the conforming, residential conventional monthly fixed-
rate loans that it originates with maturities of 20 years or more, and
conventional bi-weekly fixed-rate loans with maturities of 25 years or more to
both FNMA and Freddie Mac as part of its ongoing asset/liability management
strategy. Non-conforming fixed-rate loans with principal balances in excess of
the maximum limits as established annually by FNMA and Freddie Mac, currently
$214,600 for single-family homes, are sold to private sector secondary market
purchasers. In addition to removing a level of interest rate risk from the
balance sheet, the operation of a secondary marketing function within the
lending area allows us the flexibility to continue to make loans available to
customers when savings flows decline or funds are not otherwise available for
lending purposes. However, we assume an increased level of risk if such loans
cannot be sold in a timely basis in a rapidly rising interest rate environment.
Changes in the level of interest rates and the condition of the local and
national economies also affect the amount of loans originated by the Bank and
impact the level of buying demand by investors to whom the loans are sold.
Generally, our loan origination and sale activity, and therefore, our
results of operations, may be adversely affected by an increasing rate
environment to the extent that such environment results in a decreased level of
loan demand by borrowers. Accordingly, the volume of loan originations and the
profitability of this activity can vary from period to period. One- to four-
family residential mortgage loans are generally underwritten to current FNMA and
Freddie Mac seller/servicer guidelines. One- to four-family loans are also
closed on standard FNMA/Freddie Mac documents and sales are conducted utilizing
standard FNMA/Freddie Mac purchase contracts and master commitments as
applicable. Mortgage loans are sold both to FNMA and Freddie Mac on a non-
recourse basis whereby foreclosure losses are generally the responsibility of
either FNMA or Freddie Mac and not the Bank.
We are qualified loan servicer for both FNMA and Freddie Mac. For all
loans sold, we will retain the servicing rights and will continue to collect
payments on the loans, maintain tax escrows and applicable fire and flood
insurance coverage, and to supervise foreclosure proceedings if necessary. We
retain a portion of the interest paid by the borrower on the loans, generally
1/4% - 3/8% as consideration for its servicing activities.
The following table sets forth the loan origination, purchase and repayment
activities of the Bank for the periods indicated.
76
<PAGE>
<TABLE>
<CAPTION>
Nine Months
Ended September 30, Year Ended December 31,
---------------------- --------------------------------
1997 1996 1996 1995 1994
--------- --------- --------- -------- ---------
(In thousands)
<S> <C> <C> <C> <C> <C>
Originations by Type:
- ---------------------
Real estate:
One- to four-family........................ $ 77,381 $ 82,951 $110,894 $107,618 $ 84,096
Home equity................................ 2,334 1,070 1,357 852 404
Commercial and multi-family................ 18,012 17,570 27,168 24,880 27,462
Consumer and other.......................... 20,323 23,784 31,688 25,053 26,507
Commercial business......................... 3,991 4,693 5,972 2,767 2,684
-------- -------- -------- -------- --------
Total loans originated.................... 122,041 130,068 177,079 161,170 141,153
-------- -------- -------- -------- --------
Sales:
- ------
Real estate:
One- to four- family....................... 23,191 19,290 26,148 30,141 19,527
Consumer and other.......................... 4,126 3,871 4,749 4,948 3,679
-------- -------- -------- -------- --------
Total loans sold.......................... 27,317 23,161 30,897 35,089 23,206
-------- -------- -------- -------- --------
Repayments:
- -----------
Real estate:
One- to four-family........................ 29,755 32,920 42,323 32,959 36,911
Home equity................................ 624 400 254 1,347 507
Commercial and multi-family................ 12,225 14,619 17,066 11,716 8,558
Consumer and other.......................... 25,247(1) 12,295 16,247 15,141 15,783
Commercial business......................... 4,058 3,526 5,169 2,630 2,057
-------- -------- -------- -------- --------
Total repayments.......................... 71,909 63,760 81,059 63,793 63,816
-------- -------- -------- -------- --------
Total reductions.......................... 99,226 86,921 111,956 98,882 87,022
Increase (decrease) in other items, net (2).. 1,000 (420) (776) 7 (839)
-------- -------- -------- -------- --------
Net increase.............................. $ 23,815 $ 42,727 $ 64,347 $ 62,295 $ 53,292
======== ======== ======== ======== ========
</TABLE>
- ------------------------------
(1) Includes the early repayment of loans secured by pledges and assignments of
automobile leases.
(2) Other items include charge-offs, deferred fees and expenses, and discounts
and premiums.
77
<PAGE>
Loan Approval Authority and Underwriting. The Board establishes lending
authorities for individual officers and certain delegated underwriters as to the
various types of residential and consumer loan products. In the commercial real
estate and business lending area, the Board has authorized specific lending
officers to individually approve loans and/or concentrations of credit not to
exceed $250,000. Loans in excess of $250,000, up to $750,000, may be approved
by the President or Chief Lending Officer plus one additional authorized lending
officer. Loan approvals in excess of $750,000, and up to $2.0 million, require
the approval of both the President and the Chief Lending Officer, plus one
additional authorized lending officer. All individual loans and or aggregate
concentrations of credit to one borrower which exceed $2.0 million must be
approved by the Loan Committee of the Board. In addition, our loan policy
limits the amount of credit that can be extended to any one borrower to 10% of
total capital. See "Loans-to-One Borrower".
The lending activities of the residential, consumer, commercial and multi-
family real estate, and commercial business lending areas of the Bank are
subject to written underwriting standards and loan origination procedures that
are updated and separately reviewed annually by both management and the Bank's
Board of Trustees. In particular, to assure the maximum salability of our
residential loan products for possible resale into the secondary mortgage
markets, we have formally adopted both the underwriting, appraisal, and
servicing guidelines of FNMA and Freddie Mac as part of our standard loan policy
and procedures manual.
We require that a property appraisal be obtained in connection with all
mortgage loans. Property appraisals in both the residential and commercial and
multi-family real estate areas are performed by an independent appraiser from a
list approved by the Bank's Board of Trustees. The appraisals are then reviewed
for accuracy and completeness by the appropriate loan underwriting areas of the
Bank. In conformity with secondary market guidelines, the Bank requires that
title insurance (except for home equity lines of credit) and hazard insurance be
maintained on all security properties and that flood insurance be maintained if
the property is within a designated flood plain.
We currently maintain escrows for the payment of real estate taxes on
approximately 70% of all mortgage loans currently held in portfolio. If an
escrow waiver is granted, the borrower must pay a one-time fee at loan closing
for the property to be enrolled in a tax service which reports the tax payment
status of these loans on an annual basis to the Bank for the life of the loan.
Loan Origination Fees and Other Income. In addition to interest earned on
loans, we also receive loan origination fees. To the extent that loans are
originated or acquired for the Bank's portfolio, Statement of Financial
Accounting Standards (SFAS) No. 91 requires that we defer loan origination fees
and costs and amortize such amounts as an adjustment of yield over the life of
the loan by use of the level yield method. At September 30, 1997, we had $3.4
million of net deferred loan origination costs. Such fees and costs vary with
the volume and type of loans and commitments made and purchased, principal
repayments, and competitive conditions in the mortgage markets, which in turn
respond to the demand and availability of money.
In addition to loan origination fees, we also receive other fees, service
charges, and other income that consist primarily of deposit transaction account
service charges, late charges and credit card fees.
Loans-to-One Borrower. Savings banks are subject to the same loans-to-one
borrower limits as those applicable to national banks, which under current
regulations restrict loans to one borrower to an amount equal to 15% of
unimpaired net worth on an unsecured basis, and an additional amount equal to
10% of unimpaired net worth if the loan is secured by readily marketable
collateral (generally, financial instruments and bullion, but not real estate).
Our policy provides that loans to one borrower (or related borrowers) should not
exceed 10% of the Bank's capital.
At September 30, 1997, the largest aggregate amount loaned by the Bank to
one borrower consisted of seven commercial mortgage loans in an amount of $9.6
million and was secured by eight suburban office park properties.
78
<PAGE>
The second largest aggregate amount loaned by the Bank to one borrower
consisted of one commercial mortgage and one business loan, in the aggregate
amount of $5.1 million, secured by two suburban office park properties.
The third largest aggregate amount loaned by the Bank to one borrower
consisted of four commercial mortgage loans in the amount of $4.9 million,
secured by two retail centers, one office building and one restaurant.
The fourth largest aggregate amount loaned by the Bank to one borrower
consisted of one commercial mortgage loan in an amount of $4.1 million and was
secured by a medical office building.
The fifth largest aggregate amount loaned by the Bank to one borrower
consisted of four commercial mortgage loans in the amount of $2.9 million and
was secured by four apartment projects.
All of the loans discussed above are performing in accordance with their
terms.
Delinquencies and Classified Assets
Collection Procedures. A computer generated late notice is sent by the
17th day of the month requesting the payment due plus the late charge that was
assessed. After the late notices have been mailed, accounts are assigned to
collectors by the automated collection system for follow-up to determine reasons
for delinquency and explore payment options. Additional system-generated
collection letters are sent to customers on the 30th and 45th days for consumer
loans, and by the 45th day for mortgage loans. Notwithstanding ongoing
collection efforts, all consumer loans are fully charged-off after 210 days.
These mortgage loan collection procedures pertain to loans held in the
Bank's portfolio. All of the residential mortgage loan servicing performed for
both government issued FHA and VA loans, together with residential loans sold in
the secondary market, are in full compliance with their own respective loan
servicing requirements.
Loans Past Due and Non-performing Assets. Loans are reviewed on a regular
basis and are placed on nonaccrual status when, in the opinion of management,
the collection of additional interest is doubtful. Loans are placed on
nonaccrual status when either principal or interest is 90 days or more past due.
Interest accrued and unpaid at the time a loan is placed on a nonaccrual status
is reversed from interest income. At September 30, 1997, we had non-performing
loans of $1.9 million, and a ratio of non-performing loans to total loans of
0.31%.
Real estate acquired as a result of foreclosure or by deed in lieu of
foreclosure is classified as REO until such time as it is sold. When real
estate is acquired through foreclosure or by deed in lieu of foreclosure, it is
recorded at its fair value, less estimated costs of disposal. If the value of
the property is less than the loan, less any related specific loan loss
provisions, the difference is charged against the allowance for loan losses.
Any subsequent write-down of REO is charged against earnings. At September 30,
1997, we had REO, net of allowances, of approximately $268,000. At September
30, 1997, we had total non-performing assets of $2.2 million and a ratio of non-
performing assets to total assets of 0.19%.
79
<PAGE>
The following table sets forth delinquencies in the Bank's loan portfolio
as of the dates indicated. When a loan is delinquent 90 days or more, the Bank
fully reverses all accrued interest thereon and ceases to accrue interest
thereafter. For all the dates indicated, the Bank did not have any material
restructured loans within the meaning of SFAS 114.
<TABLE>
<CAPTION>
At September 30, 1997 At December 31, 1996
---------------------------------------------- -----------------------------------------------------
60-89 Days 90 Days or More 60-89 Days 90 Days or More
---------------------- ---------------------- ------------------------- --------------------------
Principal Principal Principal Principal
Number Balance Number Balance Number Balance Number Balance
of Loans of Loans of Loans of Loans of Loans of Loans of Loans of Loans
---------- ---------- ---------- ---------- -------- ----------- ---------- ------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
One- to four-family........ 12 $ 493 16 $ 659 9 $ 373 17 $ 473
Home equity................ 1 15 1 57 1 13 1 58
Commercial real estate and
multi-family.............. 3 567 4 692 -- -- 8 1,822
Consumer and other......... 56 221 55 123 73 296 89 257
Commercial business........ 5 84 10 394 -- -- 13 2,108
--------- --------- --------- --------- -------- --------- --------- ---------
Total..................... 77 $1,380 86 $1,925 83 $ 682 128 $4,718
========= ========= ========= ========= ======== ========= ========= =========
Delinquent loans to total
loans (1) (2)............. 0.22% 0.31% 0.11% 0.78%
========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
At December 31, 1995 At December 31, 1994
------------------------------------------- ---------------------------------------------------
60-89 Days 90 Days of More 60-89 Days 90 Days or More
------------------- ------------------- ----------------------- -----------------------
Principal Principal Principal Principal
Number Balance Number Balance Number Balance Number Balance
of Loans of Loans of Loans of Loans of Loans of Loans of Loans of Loans
-------- --------- -------- --------- -------- --------- --------- ----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
One- to four-family........ 6 $ 147 25 $1,100 16 $ 344 17 $ 715
Home equity................ 2 21 1 34 4 86 1 12
Commercial real estate and
multi-family.............. -- -- 10 2,436 2 613 9 3,133
Consumer and other......... 70 212 60 166 29 108 39 117
Commercial business........ -- -- 1 219 -- -- 1 245
--------- --------- --------- --------- -------- --------- ------- ---------
Total..................... 78 $ 380 97 $3,955 51 $1,151 67 $4,222
========= ========= ========= ========= ======== ========= ======= =========
Delinquent loans to total
loans (1) (2)............. 0.07% 0.74% 0.24% 0.89%
========= ========= ========= =========
</TABLE>
- ----------------------------------
(1) Total loans include principal balance net of the deferred loan fees and
expenses and unamortized premiums and discounts.
(2) Excludes loans that had matured and as to which the Bank had not formally
extended the maturity date. Regular principal and interest payments
continued in accordance with the original terms of the loan. The Bank
continued to accrue interest on these loans as long as regular payments
received were less than 90 days delinquent. These loans totaled $312,000,
$3.9 million, $3.1 million and $2.7 million at September 30, 1997 and
December 31, 1996, 1995 and 1994, respectively.
80
<PAGE>
Non-Accrual Loans and Non-Performing Assets. The following table sets
forth information regarding nonaccrual loans and other non-performing assets.
<TABLE>
<CAPTION>
At December 31,
At Sept. 30, --------------------------------------------
1997 1996 1995 1994 1993 1992
------ ------ ------ ------ ------ ------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Non-accruing loans (1):
One- to four-family................................. $ 659 $ 473 $1,100 $ 715 $ 689 $ 342
Home equity......................................... 57 58 34 12 9 --
Commercial real estate and multi-family............. 692 1,822 2,436 3,133 3,611 2,094
Consumer and other.................................. 123 257 166 117 140 129
Commercial business................................. 394 2,108 219 245 99 66
------ ------ ------ ------ ------ ------
Total.............................................. 1,925 4,718 3,955 4,222 4,548 2,631
------ ------ ------ ------ ------ ------
Non-performing assets:
Other real estate owned (2):
One- to four-family................................. 22 155 -- -- 15 51
Commercial real estate and multi-family............. 246 162 257 259 922 2,281
Other non-performing assets:
Investments in affiliates........................... -- 157 264 629 789 920
Nationar receivable (3)............................. -- -- 5,053 -- -- --
------ ------ ------ ------ ------ ------
Total.............................................. 268 474 5,574 888 1,726 3,252
------ ------ ------ ------ ------ ------
Total non-performing assets........................... $2,193 $5,192 $9,529 $5,110 $6,274 $5,883
====== ====== ====== ====== ====== ======
Total non-performing assets as a percentage of total
assets............................................... 0.19% 0.48% 0.97% 0.56% 0.69% 0.70%
====== ====== ====== ====== ====== ======
Total non-performing loans to total loans (4)......... 0.31% 0.78% 0.74% 0.89% 1.10% 0.75%
====== ====== ====== ====== ====== ======
</TABLE>
- -----------------------
(1) Loans are placed on non-accrual status when they become 90 days or more past
due or if they have been identified by the Bank as presenting uncertainty
with respect to the collectibility of interest or principal.
(2) Other real estate owned balances are shown net of related allowances.
(3) On February 6, 1995, the Superintendent seized Nationar, a check-clearing
and trust company, freezing all of Nationar's assets. As of December 31,
1995, the Bank had $5.7 million in demand deposits held in receivership by
the New York State Banking Department. As of December 31, 1996, the Bank had
received all funds due from Nationar.
(4) Excludes loans that had matured and the Bank had not formally extended the
maturity date. Regular principal and interest payments continued in
accordance with the original terms of the loan. The Bank continued to accrue
interest on these loans as long as regular payments received were less than
90 days delinquent. These loans totaled $312,000, $3.9 million, $3.1
million, $2.7 million, $1.5 million and $245,000 at September 30, 1997 and
December 31, 1996, 1995, 1994, 1993 and 1992, respectively.
For the nine months ended September 30, 1997 and for the year ended
December 31, 1996, gross interest income which would have been recorded had the
non-accruing loans been current in accordance with their original terms amounted
to $133,000 and $325,000, respectively. No interest income on nonaccrual loans
was included in income during such periods except for $22,000 and $39,000 of
cash interest payments received for the Bank's largest non-performing loan for
the nine months ended September 30, 1997 and the year ended December 31, 1996,
respectively.
Classification of Assets. Our policies, consistent with regulatory
guidelines, provide for the classification of loans and other assets such as
investment securities, considered to be of lesser quality as "substandard,"
"doubtful," or "loss" assets. An asset is considered "substandard" if it is
inadequately protected by the current net worth and paying capacity of the
obligor or of the collateral pledged, if any. "Substandard" assets include
those characterized by the "distinct possibility" that the savings institution
will sustain "some loss" if the deficiencies are not corrected. Assets
classified as "doubtful" have all of the weaknesses inherent in those classified
"substandard" with the added characteristic that the weaknesses present make
"collection or liquidation in full," on the basis of currently existing facts,
conditions, and values, "highly questionable and improbable." Assets classified
as "loss" are those considered "uncollectible" and of such little value that
their continuance as assets without the establishment of a specific loss reserve
81
<PAGE>
is not warranted. Assets that do not expose the savings institution to risk
sufficient to warrant classification in one of the aforementioned categories,
but which possess some weaknesses, are required to be designated "special
mention" by management.
When we classify problem assets as either substandard or doubtful, we
establish general valuation allowances or "loss reserves" in an amount deemed
prudent by management. General allowances represent loss allowances that have
been established to recognize the inherent risk associated with lending
activities, but which, unlike specific allowances, have not been allocated to
particular problem assets. When the Bank classifies problem assets as "loss,"
it is required either to establish a specific allowance for losses equal to 100%
of the amount of the assets so classified, or to charge-off such amount. The
Bank's determination as to the classification of its assets and the amount of
its valuation allowance is subject to review by its regulatory agencies, which
can order the establishment of additional general or specific loss allowances.
We regularly review our asset portfolio to determine whether any assets require
classification in accordance with applicable regulations.
On the basis of management's review of its assets, at September 30, 1997,
we had classified a total of $6.7 million of loans as follows (in thousands):
<TABLE>
<CAPTION>
<S> <C>
Special Mention............ $3,891
Substandard................ 2,765
Doubtful................... -
Loss....................... -
------
Total classified......... $6,656
======
Allowance for loan losses.. $6,353
======
</TABLE>
Allowance for Loan Losses. The allowance for loan losses is established
through a provision for loan losses based on management's evaluation of the risk
inherent in the loan portfolio and current economic conditions. Such
evaluation, which includes a review of all loans on which full collectibility
may not be reasonably assured, considers among other matters, the estimated net
realizable value or the fair value of the underlying collateral, economic
conditions, historical loan loss experience and other factors that warrant
recognition in providing for an adequate loan loss allowance. In addition,
various regulatory agencies, as an integral part of their examination process,
periodically review the Bank's allowance for loan losses and valuation of REO.
Such agencies may require us to recognize additions to the allowance based on
their judgment about information available to them at the time of their
examination. The Bank's provisions for loan losses are described in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." At September 30, 1997, the total allowance was $6.4 million, which
amounted to 1.02% of total loans and 330.0% of non-performing loans which have
decreased to $1.9 million at this date. The allowance is established based upon
our evaluation of the risks inherent in the loan portfolio, the general economy
and the general trend within the savings industry to increase allowances for
losses as a percentage of total loans. We will continue to monitor and modify
the level of the allowance for loan losses in order to maintain it at a level
which management considers adequate to provide for potential loan losses. For
the nine months ended September 30, 1997 and the years ended December 31, 1996
and 1995, the Bank had charge-offs of $1.3 million, $436,000 and $556,000,
respectively, against this allowance.
82
<PAGE>
Analysis of the Allowance For Loan Losses. The following table sets forth
the analysis of the allowance for loan losses for the periods indicated.
<TABLE>
<CAPTION>
Nine Months Ended
September 30, Year Ended December 31,
----------------- -----------------------------------------------
1997 1996 1996 1995 1994 1993 1992
------- ------- ------- ------- ------- ------- -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at the beginning
of period.............................$ 6,539 $ 4,707 $ 4,707 $ 4,192 $4,030 $2,689 $ 1,888
Charge-offs:
One- to four-family................... 43 28 28 17 -- -- --
Multi-family.......................... 265 39 122 215 223 -- --
Commercial real estate................ 107 35 35 108 460 -- --
Construction or development........... -- -- -- -- -- -- 526
Consumer and other.................... 303 185 251 216 142 160 123
Commercial business (1)............... 553 -- -- -- -- 66 --
------- ------- ------- ------- ------ ------ -------
1,271 287 436 556 825 226 649
------- ------- ------- ------- ------ ------ -------
Recoveries:
One- to four-family................... -- -- -- -- -- -- --
Multi-family.......................... 33 -- -- -- -- -- --
Commercial real estate................ -- -- 25 -- -- -- --
Construction or development........... -- -- -- -- -- -- --
Consumer and other.................... 68 37 56 55 30 42 52
Commercial business................... 9 -- -- -- 9 3 --
------- ------- ------- ------- ------ ------ -------
110 37 81 55 39 45 52
------- ------- ------- ------- ------ ------ -------
Net charge-offs........................ 1,161 250 355 501 786 181 597
Provision for loan losses.............. 975 1,861 2,187 1,016 948 1,522 1,398
------- ------- ------- ------- ------ ------ -------
Balance at end of period...............$ 6,353 $ 6,318 $ 6,539 $ 4,707 $4,192 $4,030 $ 2,689
======= ======= ======= ======= ====== ====== =======
Ratio of net charge-offs during the
period to average loans outstanding
during the period.................... 0.19% 0.04% 0.06% 0.10% 0.17% 0.05% 0.18%
======= ======= ======= ======= ====== ====== =======
Allowance for loan losses
to total loans........................ 1.02% 1.08% 1.09% 0.88% 0.88% 0.96% 0.75%
======= ======= ======= ======= ====== ====== =======
Allowance for loan losses to
non-performing loans.................. 330.03% 118.58% 138.60% 119.01% 99.29% 88.61% 102.20%
======= ======= ======= ======= ====== ====== =======
</TABLE>
- --------------------
(1) Included in commercial business loan charge-offs for 1997 is $486,000
related to a settlement that the Bank had reached with the bankruptcy
trustee relating to loans to a borrower that had filed for bankruptcy
protection.
83
<PAGE>
Allocation of Allowance for Loan Losses. The following table sets forth
the allocation of the allowance for loan losses by loan category for the periods
indicated.
<TABLE>
<CAPTION>
At December 31,
------------------------------------------------------
At September 30, 1997 1996 1995
------------------------- ------------------------------------------------------
Percent Percent Percent
of Loans of Loans of Loans
Amount in each Amount in Each Amount in Each
of Allowance Category of Allowance Category of Allowance Category
For To Total For To Total For To Total
Loan Losses Loans Loan Losses Loans Loan Losses Loans
------------ ---------- ------------- ----------- ------------ -----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
One- to four-family...................... $ 436 62.43% $ 412 60.77% $ 367 60.14%
Home equity.............................. 31 2.09 27 1.88 24 1.90
Commercial real estate and multi-family.. 356 24.35 374 24.38 630 25.44
Consumer and other....................... 342 10.45 385 12.16 302 11.76
Commercial business...................... 421 0.68 1,432 0.81 164 0.76
Unallocated (1).......................... 4,767 -- 3,909 -- 3,220 --
------ ------ ------ ------ ------ ------
Total................................... $6,353 100.00% $6,539 100.00% $4,707 100.00%
====== ====== ====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
At December 31,
------------------------------------------------------------------------------------
1994 1993 1992
-------------------------- -------------------------- --------------------------
Percent Percent Percent
of Loans of Loans of Loans
Amount in Each Amount in Each Amount in Each
of Allowance Category of Allowance Category of Allowance Category
For To Total For To Total For To Total
Loan Losses Loans Loan Losses Loans Loan Losses Loans
------------ ---------- ----------- ----------- ------------- -----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
One- to four-family...................... $ 350 58.59% $ 290 59.43% $ 235 56.67%
Home equity.............................. 26 2.25 26 2.56 29 3.30
Commercial real estate and multi-family.. 736 26.04 1,367 25.02 993 26.35
Consumer and other....................... 298 12.29 286 12.21 233 12.73
Commercial business...................... 164 0.83 119 0.78 68 0.95
Unallocated (1).......................... 2,618 - 1,942 - 1,131 -
------ ------ ------ ------ ------ ------
Total................................... $4,192 100.00% $4,030 100.00% $2,689 100.00%
====== ====== ====== ====== ====== ======
</TABLE>
- ---------------------
(1) The unallocated amount represents the amount of the allowance for loan
losses that is in excess of the minimum amount required as calculated by the
Bank. As our non-performing and classified loans decrease as a percentage
of total loans, this unallocated amount becomes a larger percentage of the
loan loss allowance.
84
<PAGE>
Securities Investment Activities
Our securities investment policy is established by the Board of Trustees.
This policy dictates that investment decisions will be made based on the safety
of the investment, liquidity requirements, potential returns, cash flow targets,
and desired risk parameters. In pursuing these objectives, we consider the
ability of an investment to provide earnings consistent with factors of quality,
maturity, marketability and risk diversification. The Finance Committee of the
Board supervises the Bank's securities investment program. This supervision
entails the evaluation of all investment activities for safety and soundness and
the ongoing evaluation of investment policy and objectives. The Treasurer is
responsible for making securities investment portfolio decisions in accordance
with established policies. While the Treasurer has the authority to conduct
trades within specific guidelines established by the investment policy, all
transactions are reviewed and approved by the Finance Committee of the Board on
a monthly basis.
Our current policies generally limit securities investments to U.S.
Government and agency securities, municipal bonds, corporate debt obligations
and corporate equity securities. In addition, our policy permits investments in
mortgage related securities, including securities issued and guaranteed by FNMA,
Freddie Mac, GNMA and privately-issued collateralized mortgage obligations
(CMOs). Also permitted are investments in asset-backed securities ("ABS"),
backed by auto loans, credit card receivables, home equity and home improvement
loans. Our current securities investment strategy utilizes a risk management
approach of diversified investing between three categories: short-,
intermediate- and long-term. The emphasis of this approach is to increase
overall investment securities yields while managing interest rate risk. To
accomplish these objectives, we focus on investments in mortgage related
securities, CMOs and ABSs. In addition, U.S. Government and other non-amortizing
securities are utilized for call protection and liquidity.
At September 30, 1997, we had $502.5 million in investment securities,
consisting primarily of U.S. Government obligations, mortgage related
securities, municipal, public utility and corporate obligations, preferred and
common stocks, and asset-backed securities. SFAS No. 115 requires the Bank to
designate its securities as held to maturity, available for sale or trading,
depending on the Bank's ability and intent regarding its investments. We do not
have a trading portfolio. As of September 30, 1997, $465.0 million of the
securities portfolio, or 39.5% of total assets, was classified as available for
sale, with a weighted average life of 4.27 years. At such date, $37.5 million of
the securities portfolio, or 3.2% of total assets, was classified as held to
maturity, with a fair value of $37.5 million and a weighted average life of .07
years. Since December 1995, the Bank has only designated money market preferred
stock as held to maturity due to its 49 and 90 day maturities. All other
securities have been classified as available for sale.
Amortized Cost and Fair Value of Investment and Mortgage Related
Securities. The following table sets forth certain information regarding the
amortized cost and fair values of the Bank's debt, equity, asset-backed and
mortgage related securities as of the dates indicated.
85
<PAGE>
<TABLE>
<CAPTION>
At December 31,
At September 30, ------------------------------------------------------------------------
1997 1996 1995 1994
---------------------- ---------------------- ---------------------- ----------------------
Amortized Fair Amortized Fair Amortized Fair Amortized Fair
Cost Value Cost Value Cost Value Cost Value
----------- --------- ----------- --------- ----------- --------- ----------- ---------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investment Securities:
Securities held to maturity:
Money market preferred
stock..................... $ 37,500 $ 37,500 $ 38,000 $ 38,000 $ 46,700 $ 46,700 $ 28,836 $ 28,836
States and political
subdivisions.............. -- -- -- -- -- -- 15,002 15,484
----------- --------- ----------- --------- ----------- --------- ----------- ---------
Total securities held to
maturity................ 37,500 37,500 38,000 38,000 46,700 46,700 43,838 44,320
----------- --------- ----------- --------- ----------- --------- ----------- ---------
Debt securities available
for sale:
U.S. Treasury.............. 84,856 85,531 84,716 85,220 54,839 55,745 49,878 47,877
U.S. government agencies... 5,008 5,002 5,012 5,004 -- -- -- --
States and political
subdivisions.............. 1,761 1,870 1,942 2,041 9,118 9,317 -- --
Corporate bonds............ 6,927 7,034 999 1,000 6,035 6,035 5,173 5,002
----------- --------- ----------- --------- ----------- --------- ----------- ---------
Total debt securities
available for sale...... 98,552 99,437 92,669 93,265 69,992 71,097 55,051 52,879
----------- --------- ----------- --------- ----------- --------- ----------- ---------
Equity securities available
for sale:
Common stock............... 5,391 6,139 3,115 3,612 3,382 3,566 8,486 8,315
FHLB stock................. 6,392 6,392 5,394 5,394 4,926 4,926 -- --
----------- --------- ----------- --------- ----------- --------- ----------- ---------
Total equity securities
available for sale...... 11,783 12,531 8,509 9,006 8,308 8,492 8,486 8,315
----------- --------- ----------- --------- ----------- --------- ----------- ---------
Asset-backed securities
available for sale.......... 67,270 67,243 28,090 27,998 5,350 5,278 4,888 4,539
----------- --------- ----------- --------- ----------- --------- ----------- ---------
Total investment
securities.............. $ 215,105 $ 216,711 $ 167,268 $ 168,269 $ 130,350 $ 131,567 $ 112,263 $ 110,053
=========== ========= =========== ========= =========== ========= =========== =========
Average remaining life of
investment
securities (2)............ 1.51 years 1.97 years 1.38 years 3.96 years
=========== =========== =========== ===========
Mortgage related securities:
Available for sale:
Freddie Mac.............. $ 118,469 $ 118,639 $ 109,903 $ 108,832 $ 43,000 $ 43,392 $ 35,157 $ 33,000
GNMA..................... 33,461 34,542 44,966 45,780 51,104 52,984 61,199 58,462
FNMA..................... 25,330 25,393 28,487 28,256 33,170 33,575 46,730 43,898
CMOs..................... 107,744 107,188 104,244 101,992 132,550 131,592 151,000 137,920
----------- --------- ----------- --------- ----------- --------- ----------- ---------
Total mortgage related
securities available
for sale:............ $ 285,004 $ 285,762 $ 287,600 $ 284,860 $ 259,824 $ 261,543 $ 294,086 $ 273,280
=========== ========= =========== ========= =========== ========= =========== =========
Average remaining life of
mortgage related
securities.................. 5.69 years 7.56 years 6.21 years 4.73 years
=========== =========== =========== ===========
Net unrealized gains
(losses) on securities
available for sale....... $ 2,364 $ -- $ (1,739) $ -- $ 2,936 $ -- $ (23,498) $ --
Total securities............. $ 502,473 $ 502,473 $ 453,129 $ 453,129 $ 393,110 $ 393,110 $ 382,851 $ 383,333
=========== ========= =========== ========= =========== ========= =========== =========
Average remaining life of
securities (2).............. 3.94 years 5.60 years 4.64 years 4.52 years
=========== =========== =========== ===========
</TABLE>
- -----------------------
(1) The Bank adopted the provisions set forth in SFAS No. 115 on January 1,
1994, which requires entities to carry securities available for sale at
their fair value.
(2) Average remaining life does not include common stock and FHLB stock.
86
<PAGE>
The following table sets forth certain information regarding the carrying
value, weighted average yields and contractual maturities of the Bank's
securities portfolio as of September 30, 1997. Adjustable-rate mortgage related
securities are included in the period in which interest rates are next scheduled
to adjust. No tax equivalent adjustments were made to the weighted average
yields. Amounts are shown at amortized cost for held to maturity securities and
at fair value for available for sale securities.
<TABLE>
<CAPTION>
At September 30, 1997
-------------------------------------------------------------------------------------------------------
More Than One More Than Five
One Year or Less Year to Five Years Years to Ten Years After Ten Years Total
-------------------------------------------------------------------------------------------------------
Weighted Weighted Weighted Weighted Weighted
Carrying Average Carrying Average Carrying Average Carrying Average Carrying Average
Value Yield Value Yield Value Yield Value Yield Value Yield
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Available for sale:
Mortgage related
securities:
Freddie Mac.............. $ -- --% $ 18,394 6.20% $45,447 6.83% $ 54,798 7.07% $118,639 6.84%
GNMA..................... -- -- 54 6.78 386 7.92 34,102 8.09 34,542 8.09
FNMA..................... -- -- 3,475 6.88 16,761 6.80 5,157 6.31 25,393 6.71
CMOs..................... -- -- 3,282 5.66 1,540 4.98 102,366 6.40 107,188 6.36
--------- -------- ------- -------- --------
Total mortgage related
securities............. -- -- 25,205 6.23 64,134 6.78 196,423 6.88 285,762 6.80
--------- -------- ------- -------- --------
Debt securities:
U.S. treasury............ 9,983 5.52 75,548 6.31 -- -- -- -- 85,531 6.22
U.S. government
agencies............... -- -- 5,002 6.63 -- -- -- -- 5,002 6.63
States and political
subdivisions............ 941 4.07 331 4.94 -- -- 598 8.30 1,870 5.58
Corporate bonds.......... -- -- 7,034 6.84 -- -- -- -- 7,034 6.84
--------- -------- ------- -------- --------
Total debt securities... 10,924 5.40 87,915 6.37 -- -- 598 8.30 99,437 6.27
--------- -------- ------- -------- --------
Equity securities:
Common stock............. -- -- -- -- -- -- -- -- 6,139 2.14
FHLB stock............... -- -- -- -- -- -- -- -- 6,392 6.75
--------- -------- ------- -------- --------
Total equity
securities............ -- -- -- -- -- -- -- -- 12,531 4.49
--------- -------- ------- -------- --------
Asset-backed securities... -- -- 8,833 6.41 18,162 5.87 40,248 6.36 67,243 6.23
Total securities
available for sale..... 10,924 5.40 121,953 6.34 82,296 6.58 237,269 6.79 464,973 6.54
--------- -------- ------- -------- --------
Held to maturity:
Money market preferred
stock................... 37,500 4.10 -- -- -- -- -- -- 37,500 4.10
--------- -------- ------- -------- --------
Total securities.......... $48,424 $121,953 $82,296 $237,269 $502,473
========= ======== ======= ======== ========
</TABLE>
87
<PAGE>
Mortgage Related Securities. We purchase mortgage related securities in
order to: (i) generate positive interest rate spreads with minimal
administrative expense; (ii) lower our credit risk as a result of the guarantees
provided by Freddie Mac, FNMA, and GNMA; (iii) utilize these securities as
collateral for borrowing; and (iv) increase liquidity. We also invest primarily
in mortgage related securities issued or sponsored by FNMA, Freddie Mac, and
GNMA. We also invest in CMOs issued or sponsored by FNMA and Freddie Mac as well
as private issuers. At September 30, 1997, mortgage related securities totaled
$285.8 million or 24.3% of total assets, all of which were classified as
available for sale. At September 30, 1997, all of the mortgage related
securities were fixed rate. The mortgage related securities portfolio had coupon
rates ranging from 5.0% to 10.0%, a weighted average yield of 6.80% and a
weighted average life of 5.69 years at September 30, 1997. The estimated fair
value of the Bank's mortgage related securities at September 30, 1997 was $285.8
million which was $758,000 greater than the amortized cost of $285.0 million.
Mortgage related securities are created by the pooling of mortgages and the
issuance of a security with an interest rate that is less than the interest rate
on the underlying mortgages. Mortgage related securities typically represent a
participation interest in a pool of single-family or multi-family mortgages,
although the Bank focuses its investments on mortgage related securities backed
by single-family mortgages. The issuers of such securities (generally U.S.
Government agencies and government sponsored enterprises, including FNMA,
Freddie Mac and GNMA) pool and resell the participation interests in the form of
securities to investors, such as the Bank, and guarantee the payment of
principal and interest to these investors. Mortgage related securities generally
yield less than the loans that underlie such securities because of the cost of
payment guarantees and credit enhancements. In addition, mortgage related
securities are usually more liquid than individual mortgage loans and may be
used to collateralize certain liabilities and obligations of the Bank.
Investments in mortgage related securities involve a risk that actual
prepayments will be greater than estimated over the life of the security, which
may require adjustments to the amortization of any premium or accretion of any
discount relating to such instruments thereby reducing the net yield on such
securities. There is also reinvestment risk associated with the cash flows from
such securities or in the event such securities are redeemed by the issuer. In
addition, the market value of such securities may be adversely affected by
changes in interest rates. We review prepayment estimates for our mortgage
related securities at purchase to ensure that prepayment assumptions are
reasonable considering the underlying collateral for the securities at issue and
current interest rates and to determine the yield and estimated maturity of our
mortgage related security portfolio. Of the Bank's $285.7 million mortgage
related securities portfolio at September 30, 1997, $25.2 million with a
weighted average yield of 6.23% had contractual maturities within five years,
$64.1 million with a weighted average yield of 6.78% had contractual maturities
of five to ten years, and $196.4 million with a weighted average yield of 6.88%
had contractual maturities of over ten years. However, the actual maturity of a
mortgage related security may be less than its stated maturity due to
prepayments of the underlying mortgages. Prepayments that are faster than
anticipated may shorten the life of the security and may result in a loss of any
premiums paid and thereby reduce the net yield on such securities. Although
prepayments of underlying mortgages depend on many factors, the difference
between the interest rates on the underlying mortgages and the prevailing
mortgage interest rates generally is the most significant determinant of the
rate of prepayments. During periods of declining mortgage interest rates,
refinancing generally increases and accelerates the prepayment of the underlying
mortgages and the related security. Under such circumstances, we may be subject
to reinvestment risk because, to the extent that the Bank's mortgage related
securities prepay faster than anticipated, we may not be able to reinvest the
proceeds of such repayments and prepayments at a comparable rate of return.
Conversely, in a rising interest rate environment prepayments may decline,
thereby extending the estimated life of the security and depriving the Bank of
the ability to reinvest cash flows at the increased rates of interest.
CMOs are a type of debt security issued by a special-purpose entity that
aggregates pools of mortgages and mortgage related securities and creates
different classes of CMO securities with varying maturities and amortization
schedules as well as a residual interest with each class possessing different
risk characteristics. The cash flows from the underlying collateral are
generally divided into "tranches" or classes whereby tranches have descending
priorities with respect to the distribution of principal and interest repayment
of the underlying mortgages and mortgage related securities, as opposed to pass
through mortgage-backed securities where cash flows are distributed pro rata to
all security holders. In contrast to mortgage-backed securities from which cash
flow is received (and hence, prepayment risk is shared) pro rata by all
securities holders, the cash flow from the mortgages or mortgage related
securities underlying
88
<PAGE>
CMOs is paid in accordance with predetermined priority to investors holding
various tranches of such securities or obligations. A particular tranche of CMOs
may therefore carry prepayment risk that differs from that of both the
underlying collateral and other tranches. Accordingly, CMOs attempt to moderate
risks associated with conventional mortgage related securities resulting from
unexpected prepayment activity. Investments in CMOs involve a risk that actual
prepayments will differ from those estimated in pricing the security, which may
result in adjustments to the net yield on such securities. Additionally, the
market value of such securities may be adversely affected by changes in the
market interest rates. Management believes these securities may represent
attractive alternatives relative to other investments due to the wide variety of
maturity, repayment and interest rate options available.
At September 30, 1997, our CMO portfolio totaled $107.2 million, or 9.1%,
of total assets and 9.5% of total interest-earning assets, and consisted of
$10.4 million of CMOs issued by private issuers and $96.8 million issued by
government sponsored agencies such as FNMA and Freddie Mac. The entire CMO
portfolio is classified as available for sale and had an estimated weighted
average life of 3.31 years and a weighted average yield of 6.36% at September
30, 1997. It is our practice to limit purchases of privately issued CMOs to
non-high risk securities rated "AAA" by a nationally recognized credit rating
agency, investing primarily in the early to intermediate tranches which have the
greatest credit support. Our current policy with respect to CMOs limits
investments to non-high risk securities unless approval is given by the Board of
Trustees and an analysis is provided on how a high risk CMO will improve the
overall interest rate risk of the Bank. High risk CMOs are defined as those
securities exhibiting significantly greater volatility of estimated average life
and price relative to interest rates than do 30-year, fixed rate securities. We
also limit the amount of investment in CMOs per issue to 15% of our net worth,
and in conjunction with ABSs, to 20% of assets in the aggregate.
Purchases, Sales, and Repayments of Mortgage Related Securities. Set forth
below is information relating to the Bank's purchases, sales and repayments of
principal of mortgage related securities for the periods indicated.
<TABLE>
<CAPTION>
Nine Months
Ended September 30, Years Ended December 31,
---------------------- ----------------------------------
1997 1996 1996 1995 1994
-------- -------- -------- -------- --------
(In thousands)
Purchases:
- ---------
<S> <C> <C> <C> <C> <C>
Adjustable-rate (1).................. $ 7,918 $ -- $ -- $ -- $ 10,104
Fixed-rate (1)....................... 23,563 65,729 85,506 32,885 44,164
CMOs................................. 35,859 -- -- 13,490 58,027
-------- -------- -------- -------- --------
Total purchases..................... 67,340 65,729 85,506 46,375 112,295
Sales:
- -----
Adjustable-rate (1).................. (15,726) -- -- (16,110) --
Fixed-rate (1)....................... (8,409) (4,590) (11,421) (17,964) (16,507)
CMOs................................. (20,354) (1,941) (13,125) (18,377) (24,951)
-------- -------- -------- -------- --------
Total sales......................... (44,489) (6,531) (24,546) (52,451) (41,458)
Principal Repayments:
- --------------------
Principal repayments................. (25,359) (25,466) (33,026) (28,056) (76,816)
Increase in other items, net (2)..... (88) (118) (158) (130) (517)
Change in unrealized gains (losses)
on mortgage related securities...... 3,498 (8,184) (4,459) 22,525 (20,806)
-------- -------- -------- -------- --------
Net increase (decrease)............ $ 902 $ 25,430 $ 23,317 $(11,737) $(27,302)
======== ======== ======== ======== ========
</TABLE>
- ----------------------
(1) Consists of pass-through securities.
(2) Other items represent amortization and accretion of premiums and discounts.
89
<PAGE>
U.S. Government and Agency Obligations. At September 30, 1997, our U.S.
Treasury securities portfolio totaled $85.5 million, all of which was classified
as available for sale. This portfolio consists primarily of short- to medium-
term (maturities of one to five years) securities. The current investment
strategy, however, is to maintain investments in such instruments to such extent
as can be used for liquidity purposes, as collateral for borrowings, and for
prepayment protection. At September 30, 1997, the agency securities portfolio
totaled $5.0 million, all of which was classified as available for sale and
consisted of agency callable debentures. The agency debentures are callable on a
semi-annual basis following a holding period of twelve months. We do not
generally purchase structured notes.
Corporate Bonds. The corporate bond portfolio, which at September 30, 1997
totaled $7.0 million, all of which was classified as available for sale, was
composed primarily of short- and medium-term, fixed-rate investment grade
corporate and utility issues. At September 30, 1997, the portfolio had an
average life of approximately 2.9 years and a weighted average yield of 6.84%.
Our policy limits investments in corporate bonds with maturities of twelve years
or less to bonds rated "BBB/Baa" or better by at least one nationally recognized
rating agency and to a total investment of 15% of the Bank's assets, with a 6%
of Bank net worth limitation per issue. Our policy limits investments in
corporate bonds with maturities over twelve years to bonds rated "BBB/Baa" or
better by at least one nationally recognized rating agency and a total
investment of no more than 15% of the Bank's assets with a limitation of 4% of
Bank net worth per issue. Consistent with the Bank's current securities
investment strategy, the Bank has not emphasized investments in corporate debt
obligations.
States and Political Subdivisions. At September 30, 1997 we had a
portfolio of bonds issued by states and political subdivisions consisting of 10
bonds totaling $1.8 million, which had an estimated fair value of $1.9 million.
All of such securities were classified as available for sale and were comprised
of general obligation bonds (i.e., obligations backed by the general credit of
the issuer). All of the bonds are currently rated "AAA" with the exception of
two non-rated local bonds with an estimated fair value of $194,130. At
September 30, 1997 the average life of the portfolio was approximately 5.65
years and the portfolio had a weighted average yield of 5.58%, before tax
equivalent yield adjustments. Interest earned on municipal bonds is exempt from
federal income taxes. Some of the bonds additionally benefit from state income
tax exemptions.
Equity Securities. At September 30, 1997, our equity securities portfolio
totaled $12.5 million, all of which was classified as available for sale. The
portfolio consisted of $6.1 million of common stock issued by nationally
recognized companies and $6.4 million of stock issued by the FHLB as a condition
of membership. The Bank benefits from its investment in common and preferred
stock due to a tax deduction the Bank receives with regard to dividends paid by
domestic corporate issuers on equity securities held by other corporate
entities, such as the Bank. The Bank's policy limit for common stock
investments is 7.5% of total assets and the amount invested in any single
issuer may not exceed 4% of net worth. The Bank's current policies permit the
purchase of common stock rated "B+" or better.
Asset-Backed Securities. Our ABS portfolio at September 30, 1997 totaled
$67.2 million, all of which were classified as available or sale, representing
5.72% of total assets and 5.96% of total interest-earning assets. The Bank
purchases shorter average life tranches with pass-through or sequential
structures, tight payment windows and senior positions. Issues will generally
have third party guarantees by monoline credit insurers and/or some form of
internal credit protection (i.e., reserve funds, excess spread accounts or
subordination). The Bank's current policy limits investment in ABSs in
conjunction with non-high risk mortgage derivative products to 20% of the Bank's
total assets.
ABSs are a type of debt security collateralized by various loans and assets
including; automobile loans, equipment leases, credit card receivables, home
equity and improvement loans, manufactured housing, student loans and other
consumer loans. Issuance of an ABS begins with creation of a special purpose
bankruptcy-remote trust to hold collateral on behalf of investors and to
administer the distribution of cash flows. The business of a bankruptcy-remote
ABS trust is restricted to the purchase of loans and issuance of debt
collateralized by those loans. Because consumer loans are amortizing, alternate
principal cash flow structures can be created and tranched in a very similar
manner as CMOs. There are several typical structures available to investors in
the ABS market. They are excess spread, senior/subordinated, reserve funds and
surety bond guaranteed. Excess spread is the first line of protection for most
ABS
90
<PAGE>
and is the difference between interest cash flow from the underlying loans and
the combined investor coupon, servicing fee, charge-offs and trust costs.
Senior/subordinated structures are internal credit support designating one
portion of the transaction as junior to the remaining portion. Obligations to
the senior class are honored prior to junior class obligations in the event of a
cash flow shortfall from the collateral. A reserve fund is, in effect, part of
the subordinated piece retained, in a declining balance, by the trust so that a
portion of the junior class may be rated investment grade. Surety bond or
guarantee structures are guarantees by third party AAA-rated monoline insurance
companies. Insurers generally guarantee (or wrap) the principal and interest
payments of 100% of a transaction, not just the subordinated class. Asset-backed
securitizations provide the Bank with a broad selection of fixed-income
alternatives, most with higher credit ratings and less downgrade risk than
corporate bonds and more stable cash flows than mortgage related securities.
Prepayments and structure risk of ABSs are less of a concern than CMO securities
due to the shorter maturities of the underlying collateral promoting greater
stability of payments.
Money Market Preferred Stock. At September 30, 1997, the Bank held $37.5
million of money market preferred stock ("MMPS") exclusively in its held to
maturity portfolio. The portfolio represents 3.19% of total assets and 3.32% of
total interest-earning assets, and has a weighted average rate of 4.10%. The
portfolio consisted primarily of shares of major utility companies. Investments
in these securities are used by the Bank as a higher yielding cash alternative
to federal funds sold and as a source of second-tier liquidity due to their 49
and 90 day maturities (dividend resets). Rates are set on these securities by
means of Dutch Auction, are priced on a predetermined formula at a percentage of
commercial paper and are used by corporations as a lower rate funding
alternative. We benefit from an investment in common and preferred stock due to
the 70% dividends- received tax deduction we recognize with regard to dividends
paid by U.S. corporate issuers on equity securities held by other corporate
entities, such as the Bank. The yield is therefore higher on these securities on
an after-tax basis than the quoted yield. The Bank's policy limit for its MMPS
investments is $5 million per issue and $50 million in aggregate.
Sources of Funds
General. Deposits, repayments and prepayments of loans and securities,
proceeds from sales of loans and securities, and proceeds from maturing
securities and cash flows from operations are the primary sources of our funds
for use in lending, investing and for other general purposes. To a lesser
extent we use borrowed funds, primarily FHLB advances, to fund our operations.
Deposits. We offer a variety of deposit accounts with a range of interest
rates and terms. Our deposit accounts consist of savings, NOW accounts,
checking accounts, money market accounts, school savings and club accounts and
certificates of deposit. We offer certificates of deposit with balances in
excess of $100,000 at preferential rates (jumbo certificates) and also offer
Individual Retirement Accounts ("IRAs") and other qualified plan accounts. To
enhance the deposit products it offers, we offer commercial checking accounts
for small to moderately-sized commercial businesses, as well as a low-cost
checking account services for low-income customers.
At September 30, 1997, our deposits totaled $992.2 million or 99.0% of
interest-bearing liabilities. For the nine months ended September 30, 1997, the
average balance of savings and transaction account deposits totaled $452.1
million, or 47.0% of total average deposits. At September 30, 1997, we had a
total of $516.9 million in certificates of deposit, of which $364.5 million had
maturities of one year or less, reflecting the shift in deposit accounts from
savings accounts to shorter-term certificates of deposit that has occurred in
the last three years. In 1996, the average balance of savings and transaction
account deposits represented approximately 49.1% of total deposits and
certificates of deposit represented 50.9%. Although the Bank has a significant
portion of its deposits in shorter term certificates of deposit, management
monitors activity on these accounts and, based on historical experience and the
Bank's current pricing strategy, believes it will retain a large portion of such
accounts upon maturity.
The flow of deposits is influenced significantly by general economic
conditions, changes in money market rates, prevailing interest rates and
competition. Our deposits are obtained predominantly from the areas in which
its branch offices are located. We rely primarily on competitive pricing of our
deposit products and customer service and
91
<PAGE>
long-standing relationships with customers to attract and retain these deposits;
however, market interest rates and rates offered by competing financial
institutions significantly affect the Bank's ability to attract and retain
deposits. In addition, the Bank has periodically paid a special interest payment
on all deposit accounts, ranging from 10 to 25 basis points. For the year ended
December 31, 1995, we paid a special interest payment of 15 basis points on all
deposit accounts in commemoration of its 125th anniversary, which totaled $1.25
million. While 1995 was the most recent year in which a special interest payment
was paid, the Bank has made no decision as to whether such special interest
payments will occur in any future year. The Bank uses traditional means of
advertising its deposit products, including radio and print media and generally
does not solicit deposits from outside its market area. While certificates of
deposit in excess of $100,000 are accepted by the Bank, and may be subject to
preferential rates, we do not actively solicit such deposits as they are more
difficult to retain than core deposits. Historically, the Bank has not used
brokers to obtain deposits.
The following table sets forth the deposit activities of the Bank for the
periods indicated.
<TABLE>
<CAPTION>
Nine Months
Ended September 30, Years Ended December 31,
-------------------------- ---------------------------------------
1997 1996 1996 1995 1994
----------- ----------- ----------- ----------- -----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Opening balance............... $ 920,072 $ 861,065 $ 861,065 $ 819,690 $ 812,939
Deposits...................... 1,751,818 1,244,359 1,736,655 1,508,173 1,182,400
Withdrawals................... (1,711,656) (1,215,860) (1,716,709) (1,502,621) (1,207,280)
Interest credited............. 31,985 29,489 39,061 35,823 31,631
----------- ----------- ----------- ----------- -----------
Ending balance................ 992,219 919,053 920,072 861,065 819,690
----------- ----------- ----------- ----------- -----------
Net increase.................. $ 72,147 $ 57,988 $ 59,007 $ 41,375 $ 6,751
=========== =========== =========== =========== ===========
Percent increase.............. 7.84% 6.73% 6.85% 5.05% 0.83%
=========== =========== =========== =========== ===========
</TABLE>
The following table indicates the amount of the Bank's certificates of
deposit by time remaining until maturity as of September 30, 1997.
<TABLE>
<CAPTION>
Maturity
---------------------------------------------------
3 Months Over 3 to 6 Over 6 to 12 Over 12
or Less Months Months Months Total
--------- ----------- ------------ -------- --------
(In thousands)
<S> <C> <C> <C> <C> <C>
Certificates of deposit
less than $100,000........... $ 89,252 $81,223 $142,291 $113,661 $426,427
Certificates of deposit of
$100,000 or more............. 17,951 11,389 22,350 38,751 90,441
-------- ------- -------- -------- --------
Total of certificates of
deposit...................... $107,203 $92,612 $164,641 $152,412 $516,868
======== ======= ======== ======== ========
</TABLE>
92
<PAGE>
The following tables set forth information, by various rate categories,
regarding the average balance of deposits by types of deposit for the periods
indicated.
<TABLE>
<CAPTION>
For the Nine Months Ended For the Year Ended
September 30, December 31,
-------------------------------- ------------------------------------------
1997 1996
-------------------------------- ------------------------------------------
Percent Percent
of Total Weighted of Total Weighted
Average Average Average Average Average Average
Balance Deposits Rate Balance Deposits Rate
-------- --------- ---------- -------- ------------- -----------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Money market accounts............... $ 60,173 6.25% 3.57% $ 53,999 6.04% 3.55%
Savings accounts.................... 304,106 31.60 3.34 307,530 34.36 3.37
NOW accounts........................ 60,240 6.26 1.82 51,718 5.78 1.85
Non-interest-bearing accounts....... 27,629 2.87 -- 26,273 2.94 --
-------- ------ -------- ------
Total.............................. 452,148 46.98 2.96 439,520 49.12 3.01
-------- ------ -------- ------
Certificates of deposit:
Less than six months................ 188,291 19.58 -- 176,787 19.76 --
Over six through 12 months.......... 124,360 12.92 -- 106,793 11.94 --
Over 12 through 24 months........... 81,310 8.45 -- 53,409 5.97 --
Over 24 months...................... 28,417 2.95 -- 38,486 4.30 --
Certificates over $100,000.......... 87,746 9.12 -- 79,755 8.91 --
-------- ------ -------- ------
Total certificates of deposit...... 510,124 53.02 5.74 455,230 50.88 5.81
-------- ------ -------- ------
Total average deposits............ $962,272 100.00% 4.44% $894,750 100.00% 4.43%
======== ====== ======== ======
<CAPTION>
For the Year Ended December 31,
-------------------------------------------------------------------
1995/(1)/ 1994
-------------------------------- --------------------------------
Percent Percent
of Total Weighted of Total Weighted
Average Average Average Average Average Average
Balance Deposits Rate Balance Deposits Rate
--------- -------- --------- -------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Money market accounts............... $ 52,528 6.27% 3.96% $ 49,671 6.05% 3.09%
Savings accounts.................... 326,125 38.91 3.42 415,843 50.68 3.09
NOW accounts........................ 44,023 5.25 1.89 36,386 4.43 2.06
Non-interest-bearing accounts....... 28,720 3.43 -- 30,996 3.78 --
-------- ------ -------- ------
Total.............................. 451,396 53.86 3.12 532,896 64.94 2.84
-------- ------ -------- ------
Certificates of deposit:
Less than six months................ 117,584 14.03 -- 64,323 7.85 --
Over six through 12 months.......... 94,366 11.26 -- 56,520 6.89 --
Over 12 through 24 months........... 55,039 6.57 -- 46,226 5.63 --
Over 24 months...................... 50,891 6.07 -- 62,147 7.57 --
Certificates over $100,000.......... 68,768 8.21 -- 58,445 7.12 --
-------- ------ -------- ------
Total certificates of deposit...... 386,648 46.14 6.09 287,661 35.06 5.72
-------- ------ -------- ------
Total average deposits............ $838,044 100.00% 4.49% $820,557 100.00% 3.85%
======== ====== ======== ======
- ---------------------------
</TABLE>
(1) Calculations for this table exclude a $1.25 million special interest payment
in 1995 which was approved by the Bank's Board of Trustees and paid on a pro
rata basis on all interest-bearing savings, NOW, money market and
certificate of deposit accounts in recognition of the Bank's 125th
anniversary.
93
<PAGE>
Certificates of Deposit Maturities. The following table sets forth the amount
and maturities of certificates of deposit at September 30, 1997
<TABLE>
<CAPTION>
Period to Maturity from September 30, 1997 At December 31,
----------------------------------------------------- --------------------------------
Less Three Four
Than One to Two to to to Five At
One Two Three Four Five Years or Sept. 30,
Year Years Years Years Years More 1997 1996 1995 1994
-------- -------- ------- ------- ----- -------- --------- -------- -------- --------
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Rate:
0 to 4.00%...... $ 1,142 $ -- $ 2 $ -- $ -- $ 4 $ 1,148 $ 1,567 $ 5,222 $ 63,605
4.01 to 5.00%... 22,935 496 65 -- -- 103 23,599 57,140 46,340 64,416
5.01 to 6.00%... 322,677 79,103 13,173 4,397 877 1,758 421,985 351,270 202,715 107,776
6.01 to 7.00%... 11,670 4,136 1,141 211 30 413 17,601 23,173 94,957 5,922
7.01 to 8.00%... 1,948 327 111 4,415 -- -- 6,801 7,456 10,662 11,195
8.01 to 9.00%... 4,069 10,406 3,084 1,600 -- -- 19,159 18,775 19,765 19,209
Over 9.01%...... 15 26,455 -- -- -- 105 26,575 25,340 42,875 48,296
-------- -------- ------- ------- ----- ------ -------- -------- -------- --------
Total.......... $364,456 $120,923 $17,576 $10,623 $907 $2,383 $516,868 $484,721 $422,536 $320,419
======== ======== ======= ======= ===== ====== ======== ======== ======== ========
</TABLE>
94
<PAGE>
Borrowed Funds. At September 30, 1997, the Bank had $28.7 million of
borrowed funds, which primarily consisted of FHLB advances and reverse
repurchase agreements entered into with nationally recognized securities
brokerage firms. Reverse repurchase agreements are contracts for the sale of
securities owned or borrowed by the Bank, with an agreement to repurchase those
securities at an agreed upon price and date. We use reverse repurchase
agreements in periods when we can generate securities investments with yields in
excess of the cost of such borrowings. Our policies limit the use of reverse
repurchase agreements to collateral consisting of U.S. Treasury obligations,
U.S. agency obligations or mortgage related securities. Securities brokers
utilized by the Bank in these agreements must meet the Securities Exchange Act
Uniform Net Capital Rule 15c3-1 requirements with a public securities
association master repurchase agreement on file. There was $20.0 million of
reverse repurchase agreements outstanding as of December 31, 1996, and the Bank
averaged approximately $11.1 million outstanding pursuant to such agreements
during the year ended December 31, 1996. At September 30, 1997, $18.7 million of
reverse repurchase agreements were outstanding. In 1994, the Bank became
eligible to obtain advances from the FHLB of New York upon the security of the
common stock it owns in that bank and certain of its residential mortgage loans,
provided certain standards related to credit worthiness have been met. Such
advances are available pursuant to several credit programs, each of which has
its own interest rate and range of maturities. There were $12.0 million of FHLB
advances outstanding as of December 31, 1996, and the Bank averaged
approximately $5.6 million of FHLB advances during the year ended December 31,
1996. As of September 30, 1997, $10.0 million of FHLB advances were outstanding.
At September 30, 1997, the Bank had $117.8 million available under a line of
credit with the FHLB of New York.
The following table sets forth the maximum month-end balance and average
monthly balance of FHLB advances and securities sold under agreements to
repurchase for the periods indicated. The Bank had no outstanding borrowings at
December 31, 1995 and 1994.
<TABLE>
<CAPTION>
Nine Months
Ended September 30, Year Ended
---------------------- December 31,
1997 1996 1996
------ ------ ------
(Dollars in thousands)
<S> <C> <C> <C>
Maximum Balance:
- ----------------
FHLB advances..................... $10,000 $ 5,000 $12,000
Securities sold under agreements
to repurchase.................... 28,961 24,675 24,675
Average Balance:
- ----------------
FHLB advances..................... 6,889 5,000 5,583
Securities sold under agreements
to repurchase.................... 22,030 8,147 11,091
Weighted Average Interest Rate:
- -------------------------------
FHLB advances..................... 5.93% 5.72% 5.78%
Securities sold under agreements
to repurchase.................... 5.59 5.35 5.38
</TABLE>
95
<PAGE>
The following table sets forth certain information as to the Bank's
borrowings at the dates indicated.
<TABLE>
<CAPTION>
At At
September 30, December 31,
1997 1996
------------- ------------
(In thousands)
<S> <C> <C>
FHLB advances............................................ $10,000 $12,000
Securities sold under agreements to repurchase........... 18,740 20,008
------- -------
Total borrowings........................................ $28,740 $32,008
======= =======
Weighted average interest rate of FHLB advances.......... 6.16% 6.03%
Weighted average interest rate of securities sold
under agreements to repurchase.......................... 5.68% 5.42%
</TABLE>
Savings Bank Life Insurance
The Bank, through its Savings Bank Life Insurance ("SBLI") department,
engages in group life insurance coverage for individuals under the SBLI
Financial Institution Group Life insurance policy. The SBLI department's
activities are segregated from the Bank and, while they do not materially affect
the Bank's earnings, management believes that offering SBLI is beneficial to the
Bank's relationship with its depositors and the general public. The SBLI
department pays its own expenses and reimburses the Bank for expenses incurred
on its behalf. At September 30, 1997, the SBLI Department had policies totaling
$1.7 billion in force.
Other Fee Based Activities
We offer annuity and mutual fund products through designated employees who
are registered representatives. The annuity and mutual funds, which are products
of unrelated insurance and mutual fund companies, are offered to customers and
to members of the general public who are interested in non-deposit investments.
We began offering mutual fund products in 1997. We earn fees from the annuity
and mutual fund providers for attracting and retaining these customers. During
the nine months ended September 30, 1997, and the years ended December 31, 1996,
1995 and 1994, we had revenues of $339,000, $448,000, $230,000 and $143,000,
respectively from annuity and mutual fund sales.
Subsidiary Activities
LSB Realty, Inc. LSB Realty, Inc. is a wholly-owned real estate development
subsidiary of the Bank which was established in 1984 for the purpose of
investing in and lending to real estate development projects. At this time, the
subsidiary is in the process of divesting its last five projects and selling the
remaining properties it has developed. The portfolio was developed in the 1980's
with other New York State savings banks and invested primarily in residential
real estate development partnerships in the Hudson Valley region of New York
State. As of September 30, 1997, there is no remaining asset value reflected in
the financial statements for these projects.
LSB Associates, Inc. LSB Associates, Inc., a wholly-owned subsidiary of the
Bank incorporated in 1984, is engaged in the sale of annuities, life insurance,
and mutual funds. LSB Associates, Inc. acts as an agent for third party
insurance companies to sell their products.
96
<PAGE>
Other Subsidiaries. The Bank has two other wholly-owned subsidiaries. LSB
Funding, Inc. is a real estate investment trust ("REIT") and LSB Securities,
Inc. is a New York State Article 9A company which is primarily involved in the
investment in U.S. Treasury obligations.
Competition
The Bank faces significant competition in both making loans and attracting
deposits. The Western New York area has a high density of financial
institutions, most of which are branches of significantly larger institutions
which have greater financial resources than the Bank, and all of which are
competitors of the Bank to varying degrees. The Bank's competition for loans
comes principally from commercial banks, savings banks, savings and loan
associations, mortgage banking companies, credit unions and insurance companies
and other financial service companies. Its most direct competition for deposits
has historically come from savings and loan associations, savings banks,
commercial banks and credit unions. The Bank faces additional competition for
deposits from non-depository competitors such as the mutual fund industry,
securities and brokerage firms and insurance companies. Further competition may
arise as restrictions on the interstate operations of financial institutions are
removed.
Properties
The Bank currently conducts its business through fifteen full service
banking offices. The following table sets forth the Bank's offices as of
September 30, 1997 and does not include the three branch office facilities which
the Bank plans to initiate subsequent to such date, which are expected to open
in the first or second quarter of 1998.
<TABLE>
<CAPTION>
Location Leased Original Date of Net Book Value
or Year Lease of Property or
Owned Leased or Expiration Leasehold
Acquired Improvements at
September 30, 1997
- ------------------------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C>
Administrative/Home Office:
Administrative Center
6950 South Transit Road
Lockport, NY 14094 Owned 1996 N/A $7,986
Branch Offices:
Loan Center Office
80 Washburn Street
Lockport, NY 14094 Owned 1968 N/A $ 538
Main Office (1)
55 East Avenue
Lockport, NY 14094 Owned 1968 N/A $1,385
Town of Lockport Office (2)
5737 South Transit Road
Lockport, NY 14094 Leased 1973 4/30/12 $ 639
Town of Lockport Office (2)
Drive Thru Facility
6210 Shimer Drive
Lockport, NY 14094 Leased 1993 9/30/12 $ 218
Batavia Office
401 West Main Street
Batavia, NY 14020 Owned 1977 N/A $ 413
</TABLE>
97
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
Cheektowaga Office
1455 French Road
Depew, NY 14043 Owned 1991 N/A $ 813
Clarence Office
6409 Transit Road
East Amherst, NY 14051 Leased 1989 12/31/09 $ 25
Depew Office
570 Dick Road
Depew, NY 14043 Leased 1996 12/31/99 $ 208
Hamburg Office
5751 South Park Avenue
Hamburg, NY 14075 Owned 1995 N/A $ 897
Medina Office
327 Main Street
Medina, NY 14103 Owned 1975 N/A $ 319
Niagara Falls Office
Tops Int'l Super Center
7200 Niagara Falls Blvd.
Niagara Falls, NY 14304 Leased 1993 3/31/08 $ 124
North Tonawanda Office
100 River Road
North Tonawanda, NY 14120 Owned 1994 N/A $ 728
Ransomville Office
2547 Youngstown/Lockport Rd.
Ransomville, NY 14131 Owned 1985 N/A $ 71
Tonawanda Office
Sheridan/Delaware Plaza
Tonawanda, NY 14223 Leased 1997 3/31/17 $ 336
West Amherst Office
Tops Super Center
3035 Niagara Falls Blvd.
Amherst, NY 14228 Leased 1993 9/30/08 $ 137
West Seneca Office
1251 Union Road
West Seneca, NY 14224 Leased 1996 8/31/06 $ 254
North Buffalo Office
2141 Elmwood Avenue
Buffalo, NY 14207 Leased 1997 3/31/17 $ 292
</TABLE>
- ---------------------------
(1) The Main Office Branch building also houses certain administrative offices.
(2) The Bank owns the building but leases the land.
Legal Proceedings
The Bank is not involved in any pending legal proceedings other than
routine legal proceedings occurring in the ordinary course of business which, in
the aggregate, involve amounts which are believed by management to be immaterial
to the financial condition or operations of the Bank.
98
<PAGE>
Personnel
As of September 30, 1997, the Bank had 305 full-time employees and 96 part-
time employees. The employees are not represented by a collective bargaining
unit and the Bank considers its relationship with its employees to be good. See
"Management of the Bank - Benefit Plans" for a description of certain
compensation and benefit programs offered to the Bank's employees.
FEDERAL AND STATE TAXATION
Federal Taxation
General. The Mutual Holding Company, the Company and the Bank will be
subject to federal income taxation in the same general manner as other
corporations, with some exceptions discussed below. The following discussion of
federal taxation is intended only to summarize certain pertinent federal income
tax matters and is not a comprehensive description of the tax rules applicable
to the Bank.
Method of Accounting. For federal income tax purposes, the Bank currently
reports its income and expenses on the accrual method of accounting and uses a
tax year ending December 31 for filing its consolidated federal income tax
returns. The Small Business Protection Act of 1996 (the "1996 Act") eliminated
the use of the reserve method of accounting for bad debt reserves by savings
institutions, effective for taxable years beginning after 1995.
Bad Debt Reserves. Prior to the 1996 Act, the Bank was permitted to
establish a reserve for bad debts and to make annual additions to the reserve.
These additions could, within specified formula limits, be deducted in arriving
at the Bank's taxable income. As a result of the 1996 Act, the Bank must use the
specific charge off method in computing its bad debt deduction beginning with
its 1996 Federal tax return. In addition, the federal legislation requires the
recapture (over a six year period) of the excess of tax bad debt reserves at
December 31, 1995 over those established as of December 31, 1987. The amount of
such reserve subject to recapture as of September 30, 1997, was approximately
$4.2 million.
Taxable Distributions and Recapture. Prior to the 1996 Act, bad debt
reserves created prior to January 1, 1988 were subject to recapture into taxable
income should the Bank fail to meet certain thrift asset and definitional tests.
New federal legislation eliminated these thrift related recapture rules.
However, under current law, pre-1988 reserves remain subject to recapture should
the Bank make certain non-dividend distributions or cease to maintain a bank
charter.
At September 30, 1997, the Bank's total federal pre-1988 reserve was
approximately $6.9 million. This reserve reflects the cumulative effects of
federal tax deductions by the Bank for which no Federal income tax provision has
been made.
Minimum Tax. The Code imposes an alternative minimum tax ("AMT") at a rate
of 20% on a base of regular taxable income plus certain tax preferences
("alternative minimum taxable income" or "AMTI"). The AMT is payable to the
extent such AMTI is in excess of an exemption amount. Net operating losses can
offset no more than 90% of AMTI. Certain payments of alternative minimum tax may
be used as credits against regular tax liabilities in future years. The Bank has
not been subject to the alternative minimum tax and has no such amounts
available as credits for carryover.
Net Operating Loss Carryovers. A financial institution may carry back net
operating losses to the preceding two taxable years and forward to the
succeeding 20 taxable years. This provision applies to losses incurred in
taxable years beginning after August 5, 1997. At September 30, 1997, the Bank
had no net operating loss carryforwards for federal income tax purposes.
99
<PAGE>
Corporate Dividends-Received Deduction. The Company may exclude from its
income 100% of dividends received from the Bank as a member of the same
affiliated group of corporations. Following completion of the Reorganization
and Offering, it is expected that the Mutual Holding Company will own less than
80% of the outstanding Common Stock of the Company. As such, the Mutual Holding
Company will not be permitted to file a consolidated federal income tax return
with the Company and the Bank. The corporate dividends-received deduction is
80% in the case of dividends received from corporations with which a corporate
recipient does not file a consolidated return, and corporations which own less
than 20% of the stock of a corporation distributing a dividend may deduct only
70% of dividends received or accrued on their behalf.
State Taxation
New York State Taxation. The Company and the Bank will report income on a
combined calendar year basis to New York State. New York State Franchise Tax on
corporations is imposed in an amount equal to the greater of (a) 9% of "entire
net income" allocable to New York State (b) 3% of "alternative entire net
income" allocable to New York State (c) 0.01% of the average value of assets
allocable to New York State or (d) nominal minimum tax. Entire net income is
based on federal taxable income, subject to certain modifications. Alternative
entire net income is equal to entire net income without certain modifications.
Delaware State Taxation. As a Delaware holding company not earning income
in Delaware, the Company is exempt from Delaware corporate income tax but is
required to file an annual report with and pay an annual franchise tax to the
State of Delaware.
REGULATION
General
The Bank is a New York-chartered mutual savings bank and its deposit
accounts are insured up to applicable limits by the Bank Insurance Fund ("BIF")
of the FDIC. The Bank is subject to extensive regulation by the Department, as
its chartering agency; and by the FDIC, as its deposit insurer. The Bank is
required to file reports with, and is periodically examined by, the FDIC and the
Superintendent concerning its activities and financial condition and must obtain
regulatory approvals prior to entering into certain transactions, including, but
not limited to, mergers with or acquisitions of other savings institutions. The
Bank is a member of the FHLB of New York and is subject to certain regulations
by the Federal Home Loan Bank System. Both the Company and the Mutual Holding
Company, as bank holding companies, will be subject to regulation by the Federal
Reserve Board and will be required to file reports with the Federal Reserve
Board. Any change in such regulations, whether by the Department, the FDIC, or
the Federal Reserve Board could have a material adverse impact on the Bank, the
Company, or the Mutual Holding Company.
Certain of the regulatory requirements applicable to the Bank, the Company
and the Mutual Holding Company are referred to below or elsewhere herein.
New York Bank Regulation
The exercise by an FDIC-insured savings bank of the lending and investment
powers of a savings bank under the New York State Banking Law is limited by FDIC
regulations and other federal law and regulations. In particular, the
applicable provisions of New York State Banking Law and regulations governing
the investment authority and activities of an FDIC insured state-chartered
savings bank have been substantially limited by the Federal Deposit Insurance
Corporation Improvement Act of 1991 ("FDICIA") and the FDIC regulations issued
pursuant thereto.
The Bank derives its lending, investment and other authority primarily from
the applicable provisions of New York State Banking Law and the regulations of
the Banking Department, as limited by FDIC regulations. Under these laws and
regulations, savings banks, including the Bank, may invest in real estate
mortgages, consumer and commercial
100
<PAGE>
loans, certain types of debt securities, including certain corporate debt
securities and obligations of federal, state and local governments and agencies,
certain types of corporate equity securities and certain other assets. Under the
statutory authority for investing in equity securities, a savings bank may
invest up to 7.5% of its assets in corporate stock, with an overall limit of 5%
of its assets invested in common stock. Investment in the stock of a single
corporation is limited to the lesser of 2% of the outstanding stock of such
corporation or 1% of the savings bank's assets, except as set forth below. Such
equity securities must meet certain earnings ratios and other tests of financial
performance. A savings bank's lending powers are not subject to percentage of
assets limitations, although there are limits applicable to single borrowers. A
savings bank may also, pursuant to the "leeway" power, make investments not
otherwise permitted under the New York State Banking Law. This power permits
investments in otherwise impermissible investments of up to 1% of assets in any
single investment, subject to certain restrictions and to an aggregate limit for
all such investments of up to 5% of assets. Additionally, in lieu of investing
in such securities in accordance with and reliance upon the specific investment
authority set forth in the New York State Banking Law, savings banks are
authorized to elect to invest under a "prudent person" standard in a wider range
of investment securities as compared to the types of investments permissible
under such specific investment authority. However, in the event a savings bank
elects to utilize the "prudent person" standard, it will be unable to avail
itself of the other provisions of the New York State Banking Law and regulations
which set forth specific investment authority. The Bank has not elected to
conduct its investment activities under the "prudent person" standard. A savings
bank may also exercise trust powers upon approval of the Department.
New York State chartered savings banks may also invest in subsidiaries
under their service corporation investment authority. A savings bank may use
this power to invest in corporations that engage in various activities
authorized for savings banks, plus any additional activities which may be
authorized by the Banking Department. Investment by a savings bank in the stock,
capital notes and debentures of its service corporations is limited to 3% of the
bank's assets, and such investments, together with the bank's loans to its
service corporations, may not exceed 10% of the savings bank's assets.
Furthermore, New York banking regulations impose requirements on loans which a
bank may make to its executive officers and directors and to certain
corporations or partnerships in which such persons have equity interests. These
requirements include, but are not limited to, requirements that (i) certain
loans must be approved in advance by a majority of the entire Board of Trustees
and the interested party must abstain from participating directly or indirectly
in the voting on such loan, (ii) the loan must be on terms that are not more
favorable than those offered to unaffiliated third parties, and (iii) the loan
must not involve more than a normal risk of repayment or present other
unfavorable features.
Under the New York State Banking Law, the Superintendent may issue an order
to a New York State chartered banking institution to appear and explain an
apparent violation of law, to discontinue unauthorized or unsafe practices and
to keep prescribed books and accounts. Upon a finding by the Department that
any director, trustee or officer of any banking organization has violated any
law, or has continued unauthorized or unsafe practices in conducting the
business of the banking organization after having been notified by the
Superintendent to discontinue such practices, such director, trustee or officer
may be removed from office after notice and an opportunity to be heard. The
Bank does not know of any past or current practice, condition or violation that
might lead to any proceeding by the Superintendent or the Department against the
Bank or any of its trustees or officers.
Insurance of Accounts and Regulation by the FDIC
The Bank is a member of the BIF, which is administered by the FDIC.
Deposits are insured up to applicable limits by the FDIC and such insurance is
backed by the full faith and credit of the U.S. Government. As insurer, the
FDIC imposes deposit insurance premiums and is authorized to conduct
examinations of and to require reporting by FDIC-insured institutions. It also
may prohibit any FDIC-insured institution from engaging in any activity the FDIC
determines by regulation or order to pose a serious risk to the FDIC. The FDIC
also has the authority to initiate enforcement actions against savings banks,
after giving the Superintendent an opportunity to take such action, and may
terminate the deposit insurance if it determines that the institution has
engaged or is engaging in unsafe or unsound practices, or is in an unsafe or
unsound condition.
101
<PAGE>
In late 1995, the FDIC approved a final rule regarding deposit insurance
premiums which, effective with respect to the semi-annual premium assessment
beginning January 1, 1996, reduced deposit insurance premiums for BIF member
institutions to zero basis points (subject to an annual minimum of $2,000) for
institutions in the lowest risk category.
As a result of legislation passed in 1996, relating to the recapitalization
of the SAIF, from 1997 through 1999, FDIC-insured institutions will pay an
insurance premium of approximately 1.3 basis points of their BIF-assessable
deposits. The Bank's insurance premiums, which had amounted to the minimum
$2,000 annual fee for its BIF-insured deposits, were increased to 1.3 basis
points. Based upon assessable deposits at September 30, 1997, the Bank would
expect to pay $31,400 in insurance premiums per quarter during 1998.
Regulatory Capital Requirements
The FDIC has adopted risk-based capital guidelines to which the Bank is
subject. The guidelines establish a systematic analytical framework that makes
regulatory capital requirements more sensitive to differences in risk profiles
among banking organizations. The Bank is required to maintain certain levels of
regulatory capital in relation to regulatory risk-weighted assets. The ratio of
such regulatory capital to regulatory risk-weighted assets is referred to as the
Bank's "risk-based capital ratio." Risk-based capital ratios are determined by
allocating assets and specified off-balance sheet items to four risk-weighted
categories ranging from 0% to 100%, with higher levels of capital being required
for the categories perceived as representing greater risk.
These guidelines divide a savings bank's capital into two tiers. The first
tier ("Tier I") includes common equity, retained earnings, certain non-
cumulative perpetual preferred stock (excluding auction rate issues) and
minority interests in equity accounts of consolidated subsidiaries, less
goodwill and other intangible assets (except mortgage servicing rights and
purchased credit card relationships subject to certain limitations).
Supplementary ("Tier II") capital includes, among other items, cumulative
perpetual and long-term limited-life preferred stock, mandatory convertible
securities, certain hybrid capital instruments, term subordinated debt and the
allowance for loan and lease losses, subject to certain limitations, less
required deductions. Savings banks are required to maintain a total risk-based
capital ratio of 8%, of which at least 4% must be Tier I capital.
In addition, the FDIC has established regulations prescribing a minimum
Tier I leverage ratio (Tier I capital to adjusted total assets as specified in
the regulations). These regulations provide for a minimum Tier I leverage ratio
of 3% for banks that meet certain specified criteria, including that they have
the highest examination rating and are not experiencing or anticipating
significant growth. All other banks are required to maintain a Tier I leverage
ratio of 3% plus an additional cushion of at least 100 to 200 basis points. The
FDIC may, however, set higher leverage and risk-based capital requirements on
individual institutions when particular circumstances warrant. Savings banks
experiencing or anticipating significant growth are expected to maintain capital
ratios, including tangible capital positions, well above the minimum levels.
Standards for Safety and Soundness
The federal banking agencies have adopted a final regulation and
Interagency Guidelines Prescribing Standards for Safety and Soundness
("Guidelines") to implement the safety and soundness standards required under
federal law. The Guidelines set forth the safety and soundness standards that
the federal banking agencies use to identify and address problems at insured
depository institutions before capital becomes impaired. The standards set
forth in the Guidelines address internal controls and information systems;
internal audit system; credit underwriting; loan documentation; interest rate
risk exposure; asset growth; and compensation, fees and benefits. The agencies
also adopted additions to the Guidelines which require institutions to examine
asset quality and earnings standards. If the appropriate federal banking agency
determines that an institution fails to meet any standard prescribed by the
Guidelines, the agency may require the institution to submit to the agency an
acceptable plan to achieve compliance with the standard, as required
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by federal law. The final regulations establish deadlines for the submission and
review of such safety and soundness compliance plans.
Limitations on Dividends and Other Capital Distributions
The FDIC has the authority to use its enforcement powers to prohibit a
savings bank from paying dividends if, in its opinion, the payment of dividends
would constitute an unsafe or unsound practice. Federal law also prohibits the
payment of dividends by a bank that will result in the bank failing to meet its
applicable capital requirements on a pro forma basis. New York law also
restricts the Bank from declaring a dividend which would reduce its capital
below (i) the amount required to be maintained by state and federal law and
regulations, or (ii) the amount of the Bank's liquidation account established in
connection with the Reorganization.
Prompt Corrective Action
The federal banking agencies have promulgated regulations to implement the
system of prompt corrective action required by federal law. Under the
regulations, a bank shall be deemed to be (i) "well capitalized" if it has total
risk-based capital of 10.0% or more, has a Tier 1 risk-based capital ratio of
6.0% or more, has a Tier I leverage capital ratio of 5.0% or more and is not
subject to any written capital order or directive; (ii) "adequately capitalized"
if it has a total risk-based capital ratio of 8.0% or more, a Tier I risk-based
capital ratio of 4.0% or more and a Tier I leverage capital ratio of 4.0% or
more (3.0% under certain circumstances) and does not meet the definition of
"well capitalized"; (iii) "undercapitalized" if it has a total risk-based
capital ratio that is less than 8.0%, a Tier I risk-based capital ratio that is
less than 4.0% or a Tier I leverage capital ratio that is less than 4.0% (3.0%
under certain circumstances); (iv) "significantly undercapitalized" if it has a
total risk-based capital ratio that is less than 6.0%, a Tier I risk-based
capital ratio that is less than 3.0% or a Tier I leverage capital ratio that is
less than 3.0%; and (v) "critically undercapitalized" if it has a ratio of
tangible equity to total assets that is equal to or less than 2.0%. Federal law
and regulations also specify circumstances under which a federal banking agency
may reclassify a well capitalized institution as adequately capitalized and may
require an adequately capitalized institution to comply with supervisory actions
as if it were in the next lower category (except that the FDIC may not
reclassify a significantly undercapitalized institution as critically
undercapitalized).
Based on the foregoing, the Bank is currently classified as a "well
capitalized" savings institution.
Activities and Investments of Insured State-Chartered Banks
Federal law generally limits the activities and equity investments of FDIC-
insured, state-chartered banks to those that are permissible for national banks,
notwithstanding state laws. Under regulations dealing with equity investments,
an insured state bank generally may not, directly or indirectly, acquire or
retain any equity investment of a type, or in an amount, that is not permissible
for a national bank. An insured state bank is not prohibited from, among other
things, (i) acquiring or retaining a majority interest in a subsidiary; (ii)
investing as a limited partner in a partnership the sole purpose of which is
direct or indirect investment in the acquisition, rehabilitation, or new
construction of a qualified housing project, provided that such limited
partnership investments may not exceed 2% of the bank's total assets; (iii)
acquiring up to 10% of the voting stock of a company that solely provides or
reinsures directors', trustees', and officers' liability insurance coverage or
bankers' blanket bond group insurance coverage for insured depository
institutions; and (iv) acquiring or retaining the voting shares of a depository
institution if certain requirements are met.
Federal law and FDIC regulations permit certain exceptions to the foregoing
limitation. For example, certain state-chartered banks, such as the Bank, may
continue to invest in common or preferred stock listed on a National Securities
Exchange or the National Market System of NASDAQ, and in the shares of an
investment company registered under the Investment Company Act of 1940, as
amended. Such banks may also continue to sell savings bank life insurance. As
of September 30, 1997, the Bank had $6.1 million of securities pursuant to this
exception.
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Transactions With Affiliates
Under current federal law, transactions between depository institutions and
their affiliates are governed by Sections 23A and 23B of the Federal Reserve
Act. An affiliate of a savings bank is any company or entity that controls, is
controlled by, or is under common control with the savings bank, other than a
subsidiary. In a holding company context, at a minimum, the parent holding
company of a savings bank and any companies which are controlled by such parent
holding company are affiliates of the savings bank. Generally, Section 23A
limits the extent to which the savings bank or its subsidiaries may engage in
"covered transactions" with any one affiliate to an amount equal to 10% of such
savings bank's capital stock and surplus, and contains an aggregate limit on all
such transactions with all affiliates to an amount equal to 20% of such capital
stock and surplus. The term "covered transaction" includes the making of loans
or other extensions of credit to an affiliate; the purchase of assets from an
affiliate, the purchase of, or an investment in, the securities of an affiliate;
the acceptance of securities of an affiliate as collateral for a loan or
extension of credit to any person; or issuance of a guarantee, acceptance, or
letter of credit on behalf of an affiliate. Section 23A also establishes
specific collateral requirements for loans or extensions of credit to, or
guarantees, acceptances on letters of credit issued on behalf of an affiliate.
Section 23B requires that covered transactions and a broad list of other
specified transactions be on terms substantially the same, or no less favorable,
to the savings bank or its subsidiary as similar transactions with
nonaffiliates.
Further, Section 22(h) of the Federal Reserve Act restricts a savings bank
with respect to loans to directors, executive officers, and principal
stockholders. Under Section 22(h), loans to directors, executive officers and
stockholders who control, directly or indirectly, 10% or more of voting
securities of a savings bank, and certain related interests of any of the
foregoing, may not exceed, together with all other outstanding loans to such
persons and affiliated entities, the savings bank's total capital and surplus.
Section 22(h) also prohibits loans above amounts prescribed by the appropriate
federal banking agency to directors, executive officers, and shareholders who
control 10% or more of voting securities of a stock savings bank, and their
respective related interests, unless such loan is approved in advance by a
majority of the Board of Directors of the savings bank. Any "interested"
director may not participate in the voting. The loan amount (which includes all
other outstanding loans to such person) as to which such prior board of director
approval is required, is the greater of $25,000 or 5% of capital and surplus or
any loans over $500,000. Further, pursuant to Section 22(h), loans to directors,
executive officers and principal shareholders must generally be made on terms
substantially the same as offered in comparable transactions to other persons.
Section 22(g) of the Federal Reserve Act places additional limitations on loans
to executive officers.
Holding Company Regulation
Federal Bank Holding Company Regulation. Upon consummation of the
Reorganization, the Company, as the sole shareholder of the Bank, and the Mutual
Holding Company, as indirect controlling shareholder of the Bank, will become
bank holding companies. Bank holding companies are subject to comprehensive
regulation and regular examinations by the Federal Reserve Board under the BHCA,
and the regulations of the Federal Reserve Board. The Federal Reserve Board
also has extensive enforcement authority over bank holding companies, including,
among other things, the ability to assess civil money penalties, to issue cease
and desist or removal orders and to require that a holding company divest
subsidiaries (including its bank subsidiaries). In general, enforcement actions
may be initiated for violations of law and regulations and unsafe or unsound
practices.
Under Federal Reserve Board policy, a bank holding company must serve as a
source of strength for its subsidiary bank. Under this policy the Federal
Reserve Board may require, and has required in the past, a holding company to
contribute additional capital to an undercapitalized subsidiary bank.
Under the BHCA, a bank holding company must obtain Federal Reserve Board
approval before: (i) acquiring, directly or indirectly, ownership or control of
any voting shares of another bank or bank holding company if, after such
acquisition, it would own or control more than 5% of such shares (unless it
already owns or controls the majority of such
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shares); (ii) acquiring all or substantially all of the assets of another bank
or bank holding company; or (iii) merging or consolidating with another bank
holding company.
The BHCA also prohibits a bank holding company, with certain exceptions,
from acquiring direct or indirect ownership or control of more than 5% of the
voting shares of any company which is not a bank or bank holding company, or
from engaging directly or indirectly in activities other than those of banking,
managing or controlling banks, or providing services for its subsidiaries. The
principal exceptions to these prohibitions involve certain non-bank activities
which, by statute or by Federal Reserve Board regulation or order, have been
identified as activities closely related to the business of banking or managing
or controlling banks. The list of activities permitted by the Federal Reserve
Board includes, among other things, operating a savings association, mortgage
company, finance company, credit card company or factoring company; performing
certain data processing operations; providing certain investment and financial
advice; underwriting and acting as an insurance agent for certain types of
credit-related insurance; leasing property on a full-payout, non-operating
basis; selling money orders, travelers' checks and United States Savings Bonds;
real estate and personal property appraising; providing tax planning and
preparation services; and, subject to certain limitations, providing securities
brokerage services for customers. The Company and the Mutual Holding Company
have no present plans to engage in any of these activities.
Interstate Banking and Branching. Federal law allows the Federal Reserve
Board to approve an application of an adequately capitalized and adequately
managed bank holding company to acquire control of, or acquire all or
substantially all of the assets of, a bank located in a state other than such
holding company's home state, without regard to whether the transaction is
prohibited by the laws of any state. The Federal Reserve Board may not approve
the acquisition of the bank that has not been in existence for the minimum time
period (not exceeding five years) specified by the statutory law of the host
state. The Federal Reserve Board is prohibited from approving an application if
the applicant (and its depository institution affiliates) controls or would
control more than 10% of the insured deposits in the United States or 30% or
more of the deposits in the target bank's home state or in any state in which
the target bank maintains a branch. Individual states continue to have authority
to limit the percentage of total insured deposits in the state which may be held
or controlled by a bank or bank holding company to the extent such limitation
does not discriminate against out-of-state banks or bank holding companies.
Individual states may also waive the 30% state-wide concentration limit referred
to above.
Additionally, beginning on June 1, 1997, the federal banking agencies were
authorized to approve interstate merger transactions without regard to whether
such transaction is prohibited by the law of any state, unless the home state of
one of the banks "opted out" by adopting a law which applies equally to all out-
of-state banks and expressly prohibits merger transactions involving out-of-
state banks. Interstate acquisitions of branches are permitted only if the law
of the state in which the branch is located permits such acquisitions. In
response to Riegle-Neal, the State of New York enacted laws allowing interstate
mergers and branching on a reciprocal basis.
Federal law authorizes the FDIC to approve interstate branching de novo by
national and state banks, respectively, only in states which specifically allow
for such branching. The appropriate federal banking agencies are required to
prescribe regulations which prohibit any out-of-state bank from using the
interstate branching authority primarily for the purpose of deposit production.
The FDIC and Federal Reserve Board have adopted such regulations. These
regulations include guidelines to ensure that interstate branches operated by an
out-of-state bank in a host state are reasonably helping to meet the credit
needs of the communities which they serve. Should the FDIC determination that a
bank interstate branch is not reasonably helping to meet the credit needs of the
communities serviced by an interstate, the FDIC is authorized to close the
interstate branch or not permit the bank to open a new branch in the state in
which the bank previously opened an interstate branch.
Dividends. The Federal Reserve Board has issued a policy statement on the
payment of cash dividends by bank holding companies, which expresses the Federal
Reserve Board's view that a bank holding company should pay cash dividends only
to the extent that the holding company's net income for the past year is
sufficient to cover both the cash dividends and a rate of earning retention that
is consistent with the holding company's capital needs, asset quality and
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overall financial condition. The Federal Reserve Board also indicated that it
would be inappropriate for a company experiencing serious financial problems to
borrow funds to pay dividends. Furthermore, under the prompt corrective action
regulations adopted by the Federal Reserve Board, the Federal Reserve Board may
prohibit a bank holding company from paying any dividends if the holding
company's bank subsidiary is classified as "undercapitalized."
Bank holding companies are required to give the Federal Reserve Board prior
written notice of any purchase or redemption of its outstanding equity
securities if the gross consideration for the purchase or redemption, when
combined with the net consideration paid for all such purchases or redemptions
during the preceding 12 months, is equal to 10% or more of their consolidated
net worth. The Federal Reserve Board may disapprove such a purchase or
redemption if it determines that the proposal would constitute an unsafe or
unsound practice or would violate any law, regulation, Federal Reserve Board
order, or any condition imposed by, or written agreement with, the Federal
Reserve Board. This notification requirement does not apply to any company that
meets the well-capitalized standard for commercial banks, has a safety and
soundness examination rating of at least a "2" and is not subject to any
unresolved supervisory issues.
New York State Bank Holding Company Regulation. In addition to the federal
bank holding company regulations, a bank holding company organized or doing
business in New York State also may be subject to regulation under the New York
State Banking Law. The term "bank holding company," for the purposes of the New
York State Banking Law, is defined generally to include any person, company or
trust that directly or indirectly either controls the election of a majority of
the directors or owns, controls or holds with power to vote more than 10% of the
voting stock of a bank holding company or, if the company is a banking
institution, another banking institution, or 10% or more of the voting stock of
each of two or more banking institutions. In general, a bank holding company
controlling, directly or indirectly, only one banking institution will not be
deemed to be a bank holding company for the purposes of the New York State
Banking Law. Under New York State Banking Law, the prior approval of the
Banking Department is required before: (1) any action is taken that causes any
company to become a bank holding company; (2) any action is taken that causes
any banking institution to become or be merged or consolidated with a subsidiary
of a bank holding company; (3) any bank holding company acquires direct or
indirect ownership or control of more than 5% of the voting stock of a banking
institution; (4) any bank holding company or subsidiary thereof acquires all or
substantially all of the assets of a banking institution; or (5) any action is
taken that causes any bank holding company to merge or consolidate with another
bank holding company. Additionally, certain restrictions apply to New York
State bank holding companies regarding the acquisition of banking institutions
which have been chartered five years or less and are located in smaller
communities. Officers, directors and employees of New York State bank holding
companies are subject to limitations regarding their affiliation with securities
underwriting or brokerage firms and other bank holding companies and limitations
regarding loans obtained from its subsidiaries. Although the Company will not
be a bank holding company for purposes of New York State law upon the Effective
Date of the Reorganization, any future acquisition of ownership, control, or the
power to vote 10% or more of the voting stock of another bank or bank holding
company would cause it to become such.
Mutual Holding Company Regulation. Under New York law, the Mutual Holding
Company may exercise all powers and privileges of a New York chartered mutual
savings bank. As a bank holding company, the Mutual Holding Company is also
authorized to exercise all powers and in engage in all activities permitted to a
bank holding company under the Bank Holding Company Act, except that it may not
directly or indirectly engage in the sale or underwriting of insurance.
Dividend Waivers by the Mutual Holding Company. It has been the policy of
many mutual holding companies to waive the receipt of dividends declared by any
savings institution subsidiary. In connection with its approval of the
Reorganization, however, the Federal Reserve Board imposed certain conditions on
the waiver by the Mutual Holding Company of dividends paid on the Common Stock.
In particular, the Mutual Holding Company must obtain prior Federal Reserve
Board approval before it may waive any dividends. As of the date hereof,
management does not believe that the Federal Reserve Board has given its
approval to any waiver of dividends by any mutual holding company that has
requested its approval.
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The terms of the Federal Reserve Board approval of the Reorganization also
require that the amount of any waived dividends will not be available for
payment to Minority Stockholders and will be excluded from capital for purposes
of calculating dividends payable to Minority Stockholders. Moreover, the
cumulative amount of waived dividends must be maintained in a restricted capital
account which would be added to any liquidation account of the Bank, and would
not be available for distribution to Minority Stockholders. The restricted
capital account and liquidation account amounts would not be reflected in the
Bank's financial statements or the notes thereto, but would be considered as a
notational or memorandum account of the Bank, and would be maintained in
accordance with the rules, regulations and policy of the Office of Thrift
Supervision except that such rules would be administered by the Federal Reserve
Board, and any other rules and regulations adopted by the Federal Reserve Board.
The Plan of Reorganization also provides that if the Mutual Holding Company
converts to stock form in the future, any waived dividends would reduce the
percentage of the converted company's shares of common stock issued to Minority
Stockholders in connection with any such transaction. See "Conversion of the
Mutual Holding Company to Stock Form."
Management does not believe that the Mutual Holding Company will initially
waive dividends declared by the Company. If the Mutual Holding Company decides
that it is in its best interest to waive a particular dividend to be paid by the
Company, and the Federal Reserve Board approves such waiver, then the Company
would pay such dividend only to Minority Stockholders, and the amount of the
dividend waived by the Mutual Holding Company would be treated in the manner
described above. The Mutual Holding Company's decision as to whether or not to
waive a particular dividend, if such waiver is approved by the Federal Reserve
Board, will depend on a number of factors, including the Mutual Holding
Company's capital needs, the investment alternatives available to the Mutual
Holding Company as compared to those available to the Company, and regulatory
approvals. There can be no assurance (i) that after the Reorganization the
Mutual Holding Company will waive dividends paid by the Company, (ii) that the
Federal Reserve Board will approve any dividend waivers by the Mutual Holding
Company or (iii) of the terms that may be imposed by the Federal Reserve Board
on any dividend waiver.
Conversion of the Mutual Holding Company to Stock Form. New York law,
regulations of the Department and the Plan of Reorganization permit the Mutual
Holding Company to convert from the mutual to the capital stock form of
organization (a "Conversion Transaction"). There can be no assurance when, if
ever, a Conversion Transaction will occur, and the Board of Trustees has no
current intention or plan to undertake a Conversion Transaction. In a
Conversion Transaction, the Mutual Holding Company would merge with and into the
Bank or the Company, with the Bank or the Company as the resulting entity, and
certain depositors of the Bank would receive the right to subscribe for
additional shares of the resulting entity. In a Conversion Transaction, each
share of Common Stock outstanding immediately prior to the completion of the
Conversion Transaction held by persons other than the Mutual Holding Company (a
"Minority Share") would be automatically converted into and become the right to
receive a number of shares of common stock of the resulting entity determined
pursuant an exchange ratio that ensures that after the conversion transaction,
subject to the Dividend Waiver Adjustment described below and a slight
adjustment to reflect the receipt of cash in lieu of fractional shares, the
percentage of the to-be outstanding shares of the resulting entity issued to
Minority Stockholders in exchange for their Common Stock would be equal to the
percentage of the outstanding shares of Common Stock held by Minority
Stockholders immediately prior to the Conversion Transaction. The total number
of shares held by Minority Stockholders after the Conversion Transaction would
also be affected by any purchases by such persons in the offering that would be
conducted as part of the Conversion Transaction.
The Dividend Waiver Adjustment would adjust the percentage of the to-be
outstanding shares of the resulting entity issued in exchange for minority
shares to reflect (i) the aggregate amount of dividends waived by the Mutual
Holding Company and (ii) assets other than Common Stock held by the Mutual
Holding Company. Pursuant to the Dividend Waiver Adjustment, the percentage of
the to-be outstanding shares of the resulting entity issued to Minority
Stockholders in exchange for their minority shares (the "Adjusted Minority
Ownership Percentage") is equal to the percentage of the outstanding shares of
Common Stock held by Minority Stockholders multiplied by the Dividend Waiver
Fraction. The Dividend Waiver Fraction is equal to the product of (a) a
fraction, of which the numerator is equal to the Company's stockholders' equity
at the time of the Conversion Transaction less the aggregate amount of dividends
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waived by the Mutual Holding Company and the denominator is equal to the
Company's stockholders' equity at the time of the Conversion Transaction, and
(b) a fraction, of which the numerator is equal to the appraised pro forma
market value of the resulting entity minus the value of the Mutual Holding
Company's assets other than Common Stock and the denominator is equal to the pro
forma market value of the resulting entity.
Federal Securities Law
The Common Stock of the Company to be issued in the Offering will be
registered with the Securities and Exchange Commission ("SEC") under the
Exchange Act. The Company will be subject to the information, proxy
solicitation, insider trading restrictions and other requirements of the SEC
under the Exchange Act.
Company Common Stock held by persons who are affiliates (generally
officers, directors and principal stockholders) of the Company may not be resold
without registration or unless sold in accordance with certain resale
restrictions. If the Company meets specified current public information
requirements, each affiliate of the Company is able to sell in the public
market, without registration, a limited number of shares in any three-month
period.
Federal Reserve System
The Federal Reserve Board requires all depository institutions to maintain
noninterest-bearing reserves at specified levels against their transaction
accounts (primarily checking, NOW and Super NOW checking accounts). At
September 30, 1997, the Bank was in compliance with these reserve requirements.
Community Reinvestment Act
Under the Community Reinvestment Act, as amended (the "CRA"), as
implemented by FDIC regulations, a savings bank has a continuing and affirmative
obligation, consistent with its safe and sound operation, to help meet the
credit needs of its entire community, including low and moderate income
neighborhoods. The CRA does not establish specific lending requirements or
programs for financial institutions nor does it limit an institution's
discretion to develop the types of products and services that it believes are
best suited to its particular community, consistent with the CRA. The CRA
requires the FDIC, in connection with its examination of a savings institution,
to assess the institution's record of meeting the credit needs of its community
and to take such record into account in its evaluation of certain applications
by such institution. The CRA requires the FDIC to provide a written evaluation
of an institution's CRA performance utilizing a four-tiered descriptive rating
system. The Bank's latest CRA rating was "satisfactory."
New York State Regulation. The Bank is also subject to provisions of the
New York State Banking Law which impose continuing and affirmative obligations
upon banking institutions organized in New York State to serve the credit needs
of its local community ("NYCRA") which are substantially similar to those
imposed by the CRA. Pursuant to the NYCRA, a bank must file an annual NYCRA
report and copies of all federal CRA reports with the Banking Department. The
NYCRA requires the Banking Department to make an annual written assessment of a
bank's compliance with the NYCRA, utilizing a four-tiered rating system, and
make such assessment available to the public. The NYCRA also requires the
Superintendent to consider a bank's NYCRA rating when reviewing a bank's
application to engage in certain transactions, including mergers, asset
purchases and the establishment of branch offices or automated teller machines,
and provides that such assessment may serve as a basis for the denial of any
such application.
The Bank's NYCRA rating as of its latest examination was "satisfactory."
Federal Home Loan Bank System
The Bank is a member of the FHLB of New York, which is one of 12 regional
FHLBs, that administers the home financing credit function of savings
institutions. Each FHLB serves as a reserve or central bank for its members
within its assigned region. It is funded primarily from proceeds derived from
the sale of consolidated obligations of the
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FHLB System. It makes loans to members (i.e., advances) in accordance with
policies and procedures established by the board of directors of the FHLB. These
policies and procedures are subject to the regulation and oversight of the
Federal Housing Finance Board. All advances from the FHLB are required to be
fully secured by sufficient collateral as determined by the FHLB. In addition,
all long-term advances are required to provide funds for residential home
financing.
As a member, the Bank is required to purchase and maintain stock in the
FHLB of New York. At September 30, 1997, the Bank had $6.4 million of FHLB
stock. In past years, the Bank has received dividends on its FHLB stock. The
dividend yield from FHLB stock was 6.75% at September 30, 1997. No assurance
can be given that such dividends will continue in the future at such levels.
Under federal law, the FHLBs are required to provide funds for the
resolution of troubled savings institutions and to contribute to low and
moderately priced housing programs through direct loans or interest subsidies on
advances targeted for community investment and low- and moderate-income housing
projects. These contributions have affected adversely the level of FHLB
dividends paid and could continue to do so in the future. These contributions
could also have an adverse effect on the value of FHLB stock in the future. A
reduction in value of the Bank's FHLB stock may result in a corresponding
reduction in the Bank's capital.
MANAGEMENT OF THE COMPANY
Directors of the Company
The Board of Directors of the Company consists of eleven members, each of
whom is currently serving as a Trustee of the Bank. Directors of the Company
will serve three-year staggered terms so that approximately one-third of the
Directors will be elected at each annual meeting of stockholders. The class of
directors whose term of office expires at the first annual meeting of
shareholders following completion of the Reorganization consists of Directors
Currie, Heinrich, Mancuso and Weber. The class of directors whose term expires
at the second annual meeting of shareholders following completion of the
Reorganization consists of Directors Caldwell, Fitch, Judge and Miklinski. The
class of directors whose term of office expires at the third annual meeting of
shareholders following the completion of the Reorganization consists of
Directors Assad, Smith and Swan. The biographical information regarding these
individuals is set forth under "Management of the Bank-Biographical
Information."
Executive Officers of the Company
The following individuals are executive officers of the Company and hold
the offices set forth below opposite their names. The biographical information
for each executive officer is set forth under "Management of the
Bank--Biographical Information."
<TABLE>
<CAPTION>
Name Age* Position
- ------------------- -------- -------------------------------------
<S> <C> <C>
William E. Swan 50 President and Chief Executive Officer
Paul J. Kolkmeyer 44 Executive Vice President and Chief
Financial Officer
G. Gary Berner 49 Senior Vice President
Kathleen P. Monti 49 Senior Vice President
Diane Allegro 42 Senior Vice President
</TABLE>
- -------------------------
*As of September 30, 1997
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The executive officers of the Company are elected annually and hold office
until their respective successors have been elected and qualified or until
death, resignation, retirement or removal by the Board.
Since the formation of the Company, none of the executive officers has
received remuneration from the Company. It is not anticipated that the
executive officers of the Company will initially receive any remuneration in his
or her capacity as an executive officer. For information concerning
compensation of executive officers of the Bank, see "Management of the Bank."
Indemnification and Limitation of Liability
The certificate of incorporation of the Company provides that a director or
officer of the Company shall be indemnified by the Company to the fullest extent
authorized by the Delaware General Corporation Law ("DGCL") against all
expenses, liability and loss reasonably incurred or suffered by such person in
connection with his activities as a director or officer or as a director or
officer of another company, if the director or officer held such position at the
request of the Company. Delaware law requires that such director, officer,
employee or agent, in order to be indemnified, must have acted in good faith and
in a manner reasonably believed to be not opposed to the best interests of the
Company and, with respect to any criminal action or proceeding, either had
reasonable cause to believe such conduct was lawful or did not have reasonable
cause to believe his conduct was unlawful.
In addition, the certificate of incorporation and Delaware law also provide
that the Company may maintain insurance, at its expense, to protect itself and
any director, officer, employee or agent of the Company or another corporation,
partnership, joint venture, trust or other enterprise against any expense,
liability or loss, whether or not the Company has the power to indemnify such
person against such expense, liability or loss under the DGCL. The Company
intends to obtain such insurance.
The certificate of incorporation also provides that directors of the
Company shall not be personally liable to the Company or its stockholders for
monetary damages for breach of fiduciary duty as a director, except for
liability (i) for any breach of the director's duty of loyalty to the Company or
its stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174 of
the Delaware General Corporation Law (which relates to unlawful dividends or
stock purchases or redemptions), or (iv) for any transaction from which the
director derived an improper personal benefit.
MANAGEMENT OF THE BANK
Directors of the Bank
Upon completion of the Reorganization, the initial directors of the Bank
will consist of those persons who currently serve on the Board of Trustees of
the Bank. The directors of the Bank will have three year terms which will be
staggered to provide for the election of approximately one-third of the board
members each year. Directors of the Bank will be elected by the Company as sole
stockholder of the Bank. The proposed directors of the Bank are as follows:
<TABLE>
<CAPTION>
Director Age* Occupation Term Expires
- -------- ---- ----------- ------------
<S> <C> <C> <C>
Gordon P. Assad 49 President and Chief Executive 2001
Officer, Erie & Niagara
Insurance Association
Christa R. Caldwell 63 Director (Retired), 2000
Lockport Public Library
James W. Currie 56 President, 1999
Ag Pak, Inc.
Gary B. Fitch 62 Owner-Manager, 2000
Ontario Orchards, Inc.
</TABLE>
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<PAGE>
<TABLE>
<S> <C> <C> <C>
David W. Heinrich 61 President, 1999
Heinrich Chevrolet Corp.
Daniel W. Judge 55 President and Chief Executive 2000
Officer, I.D. ONE, Inc.
B. Thomas Mancuso 41 President, 1999
Joseph L. Mancuso & Sons, Inc.
James Miklinski 54 General Manager, 2000
Niagara Milk Cooperative
Barton G. Smith 67 Paul Garrick, Inc. (Retired) 2001
William E. Swan 50 President and Chief Executive 2001
Officer, Lockport Savings Bank
Robert G. Weber 60 Managing Partner (Retired), 1999
KPMG Peat Marwick LLP
</TABLE>
- --------------
*As of September 30, 1997
Executive Officers of the Bank
The following table sets forth certain information (as of September 30,
1997) regarding the executive officers of the Bank, all of whom currently serve
in their indicated position as executive officers of the Bank.
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
William E. Swan 50 President and Chief Executive Officer
Paul J. Kolkmeyer 44 Executive Vice President and Chief
Financial Officer
G. Gary Berner 49 Senior Vice President and Chief Lending Officer
Kathleen P. Monti 49 Senior Vice President/HR & Administration
Diane Allegro 42 Senior Vice President/Retail Banking
</TABLE>
The executive officers of the Bank will be elected annually and will hold
office until the next annual meeting of the Board of Directors of the Bank held
immediately after the annual meeting of stockholders of the Bank, and until
their successors are elected and qualified, or until death, resignation,
retirement or removal by the Board of Directors.
Biographical Information
Directors of the Bank
Gordon P. Assad has served as a Trustee of the Bank since 1995. Mr. Assad
is the President and Chief Executive Officer of Erie & Niagara Insurance
Association and has served in that position since 1972.
Christa R. Caldwell has served as a Trustee of the Bank since 1986. Ms.
Caldwell is retired and was the Director of the Lockport Public Library from
1967 to 1996.
James W. Currie has served as a Trustee of the Bank since 1987. Mr. Currie
is the President of Ag Pak, Inc., a manufacturer of produce packaging machines,
and has served in that position since 1974.
Gary B. Fitch has served as a Trustee of the Bank since 1981. Mr. Fitch is
the Owner-Manager of Ontario Orchards, Inc., and has served in that position
since 1976. Mr. Fitch also serves as the Executive Secretary of Agricultural
Affiliates, Inc. and has served in that position since 1991.
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<PAGE>
David W. Heinrich served as a Trustee of the Bank from 1969 to 1991. He
was re-elected to the Board in June of 1993. Mr. Heinrich is the President of
Heinrich Chevrolet Corp.
Daniel W. Judge has served as a Trustee of the Bank since 1992. Mr. Judge
is the President and Chief Executive Officer of I.D. ONE, Inc., a purchasing and
marketing cooperative of independent industrial distributors, and has served in
that position since 1996. Mr. Judge served as the Executive Director of I.D.
ONE, Inc. from 1993 to 1996. Mr. Judge has also served as President and Manager
of Dansam, Inc., a business management services company, since 1990.
B. Thomas Mancuso has served as a Trustee of the Bank since 1990. Mr.
Mancuso is the President of Joseph L. Mancuso & Sons, Inc., a real estate
development company.
James Miklinski has served as a Trustee of the Bank since 1996. Mr.
Miklinski is the General Manager of Niagara Milk Cooperative, and has served in
that position since 1990.
Barton G. Smith has served as a Trustee of the Bank since 1986. Mr. Smith
is retired from Paul Garrick, Inc.
William E. Swan has served as a Trustee of the Bank since 1996. Mr. Swan
is the President and Chief Executive Officer of Lockport Savings Bank, and has
served in that position since 1989. Prior to joining the Bank in 1988, he served
as an Administrative Vice President of Manufacturers and Traders Trust Company.
Robert G. Weber has served as a Trustee of the Bank since 1996. Mr. Weber
is a retired Buffalo Office Managing Partner of KPMG Peat Marwick LLP where he
served from 1959 to 1995.
Executive Officers of the Bank Who Are Not Directors
Paul J. Kolkmeyer has served as Executive Vice President and Chief
Financial Officer of the Bank since 1995. Prior to that time, Mr. Kolkmeyer
served as Senior Vice President and Chief Financial Officer of the Bank. He has
worked for the Bank since 1990. Prior to 1990, he served as a Vice President at
Morgan Guaranty Trust Company.
Kathleen P. Monti has served as Senior Vice President of Human Resources
and Administration of the Bank since 1995. From 1993 to 1995 Ms. Monti served
as Vice President of Human Resources of the Bank. Prior to 1993, she served as
an Administrative Vice President-Regional Human Resource Manager at Marine
Midland Bank.
G. Gary Berner has served as Senior Vice President and Chief Lending
Officer of the Bank since 1992. Prior to joining the Bank in 1992, he was Vice
President, Asset Management Group at Key Bank of New York, N.A.
Diane Allegro has been Senior Vice President of Retail Banking since
October 1997. From 1994 to October 1997, she was Vice President-Retail Sales &
Delivery Systems at Rochester Community Savings Bank. Prior to 1994, she was
employed by First Federal Savings and Loan Association of Rochester.
Meetings and Committees of the Bank's Board
The Board of Trustees of the Bank meets monthly and may have additional
special meetings as may be called by the Chairman or as otherwise provided by
law. During the year ended December 31, 1996, the Board held ___ meetings. No
trustee attended fewer than 75% in the aggregate of the total number of meetings
of the Board or Board Committees on which such Trustee served during 1996. The
Board of Trustees of the Bank has the following standing committees: Loan
Committee, Audit Committee, CRA Committee, Finance Committee and Board Affairs
Committee.
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<PAGE>
Board of Directors and Committees of the Company After Reorganization
Following the Reorganization, the Board of Directors of the Company is
expected to meet quarterly, or more often as may be necessary. The Board of
Directors initially is expected to have a standing Executive Committee and an
Audit Committee. The Board of Directors may, by resolution, designate one or
more additional committees.
The Executive Committee initially will consist of the following five
Directors of the Company: Messrs. Heinrich, Swan, Assad, Judge and Weber. The
Executive Committee is expected to meet as necessary when the Board is not in
session to exercise general control and supervision in all matters pertaining to
the interests of the Company, subject at all times to the direction of the Board
of Directors. The Executive Committee may also serve as the nominating
committee for the purpose of identifying, evaluating and recommending potential
candidates for election to the Board.
The Audit Committee initially will consist of the following Directors of
the Company: Weber, Currie, Mancuso, Miklinski and Heinrich. The Audit
Committee is expected to meet at least quarterly to examine and approve the
audit report prepared by the independent auditors of the Bank, to review and
recommend the independent auditors to be engaged by the Company, to review the
internal audit function and internal accounting controls of the Company, and to
review and approve audit policies.
Compensation of Trustees and Directors
Directors of the Bank receive a retainer fee of $12,000 ($17,000 for the
Chairman), plus a fee of $700 per Board meeting attended and $400 per meeting
for attendance at committee meetings. Directors who are also employees of the
Bank are not eligible to receive Board fees. Directors of the Company will
receive an annual retainer fee of $5,000 and a fee of $400 per meeting for
attendance at Board and committee meetings.
Trustees Deferred Fees Plan. The Trustees Deferred Fee Plan ("Trustees
Plan") is a non-qualified deferred compensation plan into which a Trustee can
defer up to 100% of his or her Board fees earned during the calendar year. All
amounts deferred by a Trustee are fully vested at all times. Amounts credited
to a deferred fee account are invested in equity securities, fixed income
securities, money market accounts, and cash, at the sole discretion of the Bank.
Upon cessation of a Trustee's service with the Bank, the Bank will pay the
Trustee the amounts credited to their account. The amounts will be paid in five
to ten substantially equal annual installments, as selected by the Trustee,
provided, however, that the annual payments will not be less than $25,000, and
if necessary, the number of payments and the amount of the final payment will be
adjusted accordingly.
If the Trustee dies before all payments have been made, the remaining
payments will be made to the Trustee's designated beneficiary. In the event of
the Trustee's death prior to commencement of benefits, the Bank shall pay the
Trustee's beneficiary the amounts credited to the benefit of the Trustee under
the Trustee's Plan, in five substantially equal annual payments of not less than
$25,000, and if necessary, the payments will be adjusted in the same manner as
set forth above. In the event of an unforeseeable emergency which will result
in a severe financial hardship, the Trustee may request a distribution of all or
part of their benefits or may request an acceleration of benefits that are being
paid, as applicable.
Executive Compensation
Summary Compensation Table. The following table sets forth for the year
ended December 31, 1996, certain information as to the total remuneration paid
by the Bank to the Chief Executive Officer of the Bank, as well as to the four
most highly compensated executive officers of the Bank at December 31, 1996
other than the Chief Executive Officer who received total annual compensation in
excess of $100,000 (together, the "Named Executive Officers").
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<PAGE>
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
------------------------------------ ---------------------------------
Awards Payouts
----------------------- -------
Other
Year Annual Restricted Options/ All Other
Ended Compensation Stock SARS LTIP Compensation
Name and Principal Position 12/31(1) Salary Bonus(2) (3) Awards(4) (#)(5) Payouts (6)
- --------------------------- -------- -------- -------- ------------ ---------- -------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
William E. Swan 1996 $239,194 $93,764 -- -- -- -- $74,259
President and Chief Executive
Officer
Paul J. Kolkmeyer 1996 135,034 46,286 -- -- -- -- 38,867
Executive Vice President
and Chief Financial Officer
G. Gary Berner 1996 108,534 37,653 -- -- -- -- 38,261
Senior Vice President and
Chief Lending Officer
Kathleen Monti 1996 80,464 28,519 12,317 -- -- -- 30,536
Senior Vice President--
Human Resources and Administration
</TABLE>
- -------------------------
(1) In accordance with the rules on executive officer and director compensation
disclosure adopted by the SEC, Summary Compensation information is excluded
for the fiscal years ended December 31, 1995 and 1994, as the Bank was not a
public company during such periods.
(2) Includes payments under the Bank's Management Incentive Program.
(3) The Bank also provides certain members of senior management with the use of
an automobile, club membership dues, and certain other personal benefits.
Except in the case of Ms. Monti, the aggregate value of such personal
benefits did not exceed the lesser of $50,000 or 10% of the total annual
salary and bonus reported for each officer.
(4) Does not include awards pursuant to the restricted stock plan, as such
awards were not earned, vested or granted in 1996. For a discussion of the
terms of the Recognition Plan which are intended to be adopted by the
Company, see "--Benefit Plans--Recognition and Retention Plan."
(5) No stock options or SARs were earned or granted in 1996. For a discussion
of the Stock Option Plan which is intended to be adopted by the Company, see
"--Benefit Plans--Stock Option Plan."
(6) Includes the following: the Bank's contributions pursuant to the 401(k) Plan
of $4,750, $4,051, $3,256, and $2,414 with respect to Messrs. Swan,
Kolkmeyer and Berner and Ms. Monti, respectively; $27,486, $11,354, $11,505,
and $7,643 credited to the account of Messrs. Swan, Kolkmeyer and Berner and
Ms. Monti, respectively, pursuant to the non-qualified deferred
compensation plan; split dollar life insurance premiums paid by the Bank of
$39,750, $19,875, $19,875, and $19,875 with respect to Messrs. Swan,
Kolkmeyer and Berner and Ms. Monti; income imputed on group term life
insurance in excess of $50,000 per employee of $1,187, $473, $511, and $604
with respect to Messrs. Swan, Kolkmeyer and Berner and Ms. Monti; and
$1,086, $3,114 and $3,114 for Messrs. Swan, Kolkmeyer and Berner relating to
medical insurance premiums.
Report of Independent Compensation Consultant
Pursuant to regulations of the Department applicable to the Reorganization,
the Bank must obtain the opinion of an independent compensation consultant as to
whether or not the total compensation for the executive officers and
Trustees/Directors of the Bank, viewed as a whole and on an individual basis, is
reasonable and proper in comparison to the compensation provided to executive
officers and directors of similar publicly-traded financial institutions. The
Bank has obtained an opinion from William M. Mercer, Incorporated, which
indicates that, based upon published professional survey data of similarly
situated publicly-traded financial institutions operating in the relevant
markets as of August 1, 1997, with respect to the total cash compensation (base
salary and annual incentive) for executive officers and total compensation for
Trustees of the Bank, such compensation, viewed as a whole on an individual
basis, is reasonable and proper in comparison to the compensation provided to
similarly situated publicly-traded financial institutions, and that, with
respect to the amount of shares of Common Stock expected to be reserved under
the ESOP, the restricted stock plan and Stock Option Plan as a whole, such
amounts reserved for granting are reasonable in comparison to similar publicly-
traded financial institutions.
Employment Agreements
The Bank intends to enter into employment agreements with the Named
Executive Officers and Diane Allegro. The employment agreements will have terms
ranging from twelve to thirty-six months. On each anniversary date, an
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<PAGE>
employment agreement may be extended for an additional twelve months, so that
the remaining term shall be from twelve to thirty-six months. If the agreement
is not renewed, the agreement will expire at the end of its term. Under the
employment agreements, the current Base Salary for Messrs. Swan, Kolkmeyer,
Berner and for Ms. Monti and Ms. Allegro will be $____________, $ ____________,
$ __________, $ __________, and __________, respectively. The Base Salary may
be increased but not decreased. The employment agreements also provide that the
executive will be entitled to participate in an equitable manner with other
executive officers in discretionary bonuses declared by the Board. In addition
to the Base Salary and bonus, the employment agreements provide for, among other
things, participation in retirement plans and other employee and fringe benefits
applicable to executive personnel. The agreements provide for termination by the
Bank for cause at any time. In the event the Bank involuntarily terminates the
executive's employment for reasons other than for cause, the executive, or in
the event of death, his or her beneficiary would be entitled to severance pay in
an amount equal to three times Base Salary (in the case of Messrs. Swan and
Kolkmeyer), two times Base Salary (in the case of Mr. Berner and Ms. Monti), and
one times Base Salary (in the case of Ms. Allegro). For these purposes,
involuntary termination includes a constructive termination where the Bank (i)
fails to appoint or reappoint the executive to his or her present position, (ii)
materially changes the executive's functions, duties or responsibilities, which
change would cause the executive's position to become one of lesser
responsibility, importance or scope, (iii) relocates the executive's place of
employment by more than 100 miles, (iv) liquidates or dissolves other than in
connection with a reorganization that does not affect the executive's status, or
(v) a breach of the employment agreement. The Bank would also continue the
executive's health coverage through the remaining term of the employment
agreement. In the event the payments to the executive would include an "excess
parachute payment" as defined by Code Section 280G (relating to payments made in
connection with a change in control), the payments would be reduced in order to
avoid having an excess parachute payment.
In the event of an executive's death while employed under an employment
agreement, the Bank will pay the executive's estate the executive's salary
through the end of the calendar month in which the executive dies. If the
executive becomes disabled (as defined in the Bank's disability plan), the
employment agreement will remain in effect through the term of the agreement,
except that the executive's salary payments will be reduced by any disability
insurance payments made to the executive.
Benefit Plans
The Bank's current tax-qualified employee pension benefit plans consist of
a defined benefit pension plan and a profit sharing plan with a salary deferral
feature under section 401(k) of the Code. As a result of the Reorganization,
the Company and the Bank will be able to compensate employees with stock-based
compensation pursuant to the ESOP, and employees, officers and directors with
stock-based compensation pursuant to a restricted stock plan and the Stock
Option Plan described below.
Deferred Compensation Plan. The Bank has adopted the Lockport Savings Bank
Deferred Compensation Plan ("Non-qualified Plan") for the benefit of certain
senior executives of the Bank that it has designated to participate in the plan.
Under the Non-qualified Plan, the Bank annually credits an executive's deferred
compensation account with an amount determined in the sole discretion of the
Board. The amounts credited to the executive's deferred compensation account
are annually credited with earnings, at a rate determined in the sole discretion
of the Board. An executive will vest in amounts credited to his account at the
rate of 20% per year, beginning in the second year of participation in the Non-
qualified Plan until the executive is fully vested after 6 years of
participation. For these purposes, an executive's years of participation will be
equal to the executive's number of whole years of employment with the Bank
measured from the date that an Executive becomes a participant under the Plan.
Notwithstanding the above, an Executive shall be fully vested in his deferred
compensation account upon attaining age 60 with five years of participation or
in the event of a change in control of the Bank. Benefits are payable to the
executive in fifteen substantially equal annual payments commencing (i) 30 days
after the executive has attained age 60, or (ii) 30 days after the executive
terminates employment, if after age 60, or due to disability. In the event of
the executive's death after benefits commence, the Bank will pay the remaining
benefits to the executive's beneficiary over the remainder of the payment term.
In the event of the executive's death after termination of employment but prior
to commencement of benefit payments, the Bank will pay the executive's
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benefit to the executive's beneficiary in fifteen substantially equal annual
payments commencing within 30 days of the executive's death. In the event of the
executive's death prior to termination of employment, the executive will forfeit
all benefits under the Non-qualified Plan. In the event of an unforeseeable
emergency which will result in a severe financial hardship, the executive may
request a distribution of all or part of his benefits or may request an
acceleration of benefits that are being paid to him, as applicable.
Messrs. Swan, Kolkmeyer, and Berner and Ms. Monti are participants in the
Non-qualified Plan. As of December 31, 1996, Messrs. Swan, Kolkmeyer, and
Berner and Ms. Monti, had $102,380, $41,754, and $21,396 and $7,643,
respectively, credited to their deferred compensation accounts.
Defined Benefit Pension Plan. The Bank maintains the Retirement Plan of
Lockport Savings Bank in RSI Retirement Trust ("Retirement Plan") which is a
qualified, tax-exempt defined benefit plan. Employees age 21 or older who have
worked at the Bank for a period of one year and have been credited with 1,000 or
more hours of service with the Bank during the year are eligible to accrue
benefits under the Retirement Plan, provided, however that leased employees,
employees paid on an hourly or contract basis, and employees employed off-site
in connection with the operation or maintenance of properties acquired through
foreclosure or deed are not eligible to participate. The Bank contributes each
year, if necessary, an amount to the Retirement Plan to satisfy the actuarially
determined minimum funding requirements in accordance with the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"). For the plan year
ending September 30, 1997, a contribution of $105,827 was required to be made to
the Retirement Plan. At September 30, 1997, the market value of the Retirement
Plan trust fund equaled approximately $9.2 million.
In the event of retirement at normal retirement age (i.e., the later of age
65 or the 5th anniversary of participation in the Retirement Plan), the plan is
designed to provide a single life annuity. For a married participant, the
normal form of benefit is an actuarially reduced joint and survivor annuity
where, upon the participant's death, the participant's spouse is entitled to
receive a benefit equal to 50% of that paid during the participant's lifetime.
Alternatively, a participant may elect (with proper spousal consent, if
necessary) a joint and 100% survivor annuity, or an annuity payable for a period
certain and life. All forms in which a participant's benefit may be paid will
be actuarially equivalent to the single life annuity. The retirement benefit
provided is an amount equal to 2% (1.25% as of April 1, 1998) of a participant's
average annual earnings multiplied by the participant's years of credited
service (up to a maximum of 30 years). Retirement benefits are also payable
upon retirement due to early and late retirement or death. A reduced benefit is
payable upon early retirement at age 60, at or after age 55 and the completion
of 20 years of vested service with the Bank, or after completion of 30 years of
vested service. Upon termination of employment other than as specified above, a
participant who has five years of vested service after age 18 is eligible to
receive his or her accrued benefit commencing, generally, on such participant's
normal retirement date.
The following table indicates the annual retirement benefit that would be
payable under the Retirement Plan upon retirement at age 65 in calendar year
1997, expressed in the form of a single life annuity for the final average
salary and benefit service classifications specified below.
<TABLE>
<CAPTION>
Years of Service and Benefit Payable at Retirement
--------------------------------------------------
Compensation 15 20 25 30
------------ ------- ------- ------- -------
<S> <C> <C> <C> <C>
$50,000 $15,000 $20,000 $25,000 $30,000
$75,000 $22,500 $30,000 $37,500 $45,000
$100,000 $30,000 $40,000 $50,000 $60,000
$125,000 $37,500 $50,000 $62,500 $75,000
$160,000 and above $48,000 $64,000 $80,000 $96,000
</TABLE>
As of September 30, 1997, Messrs. Swan, Kolkmeyer and Berner and Ms. Monti
had 10, 7, 6 and 4 years of credited service (i.e., benefit service) under the
Retirement Plan, respectively.
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401(k) Plan. The Bank maintains the Lockport Savings Bank 401(k) Plan (the
"401(k) Plan") which is a qualified, tax-exempt profit sharing plan with a
salary deferral feature under Section 401(k) of the Code. All employees who
have attained age 21 and have completed one year of employment during which they
worked at least 1,000 hours are eligible to participate. Eligible employees are
entitled to enter the 401(k) Plan on a monthly basis.
Under the 401(k) Plan, participants are permitted to make salary reduction
contributions (in whole percentages) equal to the lesser of (i) from 1% to 15%
of compensation or (ii) $9,500 (as indexed annually). For these purposes,
"compensation" includes wages reported on federal income tax form W-2, excluding
bonuses, but does not include compensation in excess of the Code Section
401(a)(17) limits (i.e., $160,000 in 1997). The Bank will match 50% of the
first 6% of salary that a participant contributes to the 401(k) Plan. All
contributions and earnings are fully and immediately vested. A participant may
withdraw salary reduction contributions (and earnings) in the event the
participant suffers a financial hardship.
The 401(k) Plan permits employees to direct the investment of his or her
own accounts into various investment options. In connection with the Offering,
the 401(k) Plan intends to offer participants the opportunity to invest in an
"Employer Stock Fund" which intends to purchase Common Stock in the Offering.
Each participant who directs the Trustee to invest all or part of his or her
account in the Employer Stock Fund will have assets in his or her account
applied to the purchase of shares of Common Stock. Participants will be
entitled to direct the Trustee as to how to vote his or her allocable shares of
Common Stock.
Plan benefits will be paid to each participant in the form of a single life
annuity (or joint and survivor annuity if married) upon retirement unless an
alternate form of distribution (single sum annuity for a period certain or life,
or equal payments over a fixed period) is selected. Normal retirement age under
the plan is age 65. Early retirement age is the earliest of age 59 1/2 or the
date on which a participant ceases working for the Bank.
At December 31, 1996, the market value of the 401(k) Plan equaled
approximately $3.7 million. The Bank's matching contribution to the 401(k) Plan
for the Plan year ended December 31, 1996, was approximately $169,000.
Employee Stock Ownership Plan and Trust. The Bank intends to implement an
Employee Stock Ownership Plan (the "ESOP") in connection with the
Reorganization. Employees with at least one year of employment with the Bank
and who have attained age 21 are eligible to participate. As part of the
Reorganization, the ESOP intends to borrow funds from the Company and use those
funds to purchase a number of shares equal to up to 8.0% of the Common Stock to
be sold in the Offering. Collateral for the loan will be the Common Stock
purchased by the ESOP. The loan will be repaid principally from the Bank's
discretionary contributions to the ESOP over a period of up to 30 years. It is
anticipated that the interest rate for the loan will be equal to the prime rate
published in The Wall Street Journal at the time of the Offering. Shares
purchased by the ESOP will be held in a suspense account for allocation among
participants as the loan is repaid.
Contributions to the ESOP and shares released from the suspense account in
an amount proportional to the repayment of the ESOP loan will be allocated among
ESOP participants on the basis of compensation in the year of allocation. For
this purpose, compensation is defined as wages reported on federal income tax
form W-2 but not in excess of the Code Section 401(a)(17) limit. Participants
in the ESOP will receive credit for up to 2 years of service prior to the
effective date of the ESOP. Benefits generally vest over a six year period at
the rate of 20% per year, beginning in the second year of service, until a
participant is 100% vested after six years or upon normal retirement (as defined
in the ESOP), disability, or death of the participant. A participant who
terminates employment for reasons other than death, retirement, or disability
prior to six years of credited service will forfeit the nonvested portion of his
benefits under the ESOP. Benefits will be payable in the form of Common Stock
and cash upon death, retirement, early retirement, disability or separation from
service. The Bank's contributions to the ESOP are discretionary, subject to the
loan terms and tax law limits, and, therefore, benefits payable under the ESOP
cannot be estimated. In November 1993, the American Institute of Certified
Public Accountants (the "AICPA") issued Statement of Position ("SOP") 93-6,
which requires the Bank to
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record compensation expense in an amount equal to the fair market value of the
shares released from the suspense account each year.
In connection with the establishment of the ESOP, the Bank will establish a
committee of non-employee directors to administer the ESOP. The Bank will
either appoint its non-employee directors or an independent financial
institution to serve as trustee of the ESOP. The ESOP committee may instruct the
trustee regarding investment of funds contributed to the ESOP. The ESOP trustee,
subject to its fiduciary duty, must vote all allocated shares held in the ESOP
in accordance with the instructions of participating employees. Under the ESOP,
nondirected shares, and shares held in the suspense account, will be voted in a
manner calculated to most accurately reflect the instructions it has received
from participants regarding the allocated stock so long as such vote is in
accordance with the provisions of ERISA.
Stock Option Plan. At a meeting of the Company's shareholders to be held
no earlier than six months after the completion of the Reorganization, the Board
of Directors intends to submit for shareholder approval a Stock Option Plan for
directors and officers of the Bank and of the Company. If approved by the
shareholders, Common Stock in an aggregate amount equal to 10% of the shares
sold in the Offering would be reserved for issuance by the Company upon the
exercise of the stock options granted under the Stock Option Plan. Ten percent
of the shares sold in the Offering would amount to 867,747 shares, 1,020,911
shares, 1,174,048 shares or 1,350,155 shares at the minimum, mid-point, maximum
and adjusted maximum of the Estimated Valuation Range, respectively. If the plan
is approved within one year of the completion of the Reorganization, no options
would be granted under the Stock Option Plan until the date on which shareholder
approval is received.
The exercise price of the options granted under the Stock Option Plan will
be equal to the fair market value of the shares on the date of grant of the
stock options. If the Stock Option Plan is adopted within one year following the
Offering, options will become exercisable at a rate of 20% at the end of each
twelve (12) months of service with the Bank after the date of grant, subject to
early vesting in the event of death or disability. Options granted under the
Stock Option Plan would be adjusted for capital changes such as stock splits and
stock dividends. Notwithstanding the foregoing, awards will be 100% vested upon
termination of employment due to death or disability, and if the Stock Option
Plan is adopted more than 12 months after the Offering, awards would be 100%
vested upon normal retirement or a change in control of the Bank or the Company.
Under FDIC rules, if the Stock Option Plan is adopted within the first 12 months
after completion of the Offering, no individual officer can receive more than
25% of the awards under the plan, no outside director can receive more than 5%
of the awards under the plan, and all outside directors as a group can receive
no more than 30% of the awards under the plan in the aggregate.
The Stock Option Plan would be administered by a Committee of non-employee
members of the Company's Board of Directors. Options granted under the Stock
Option Plan to employees could be "incentive" stock options designed to result
in a beneficial tax treatment to the employee but no tax deduction to the
Company. Non-qualified stock options could also be granted under the Stock
Option Plan, and will be granted to the non-employee directors who receive
grants of stock options. In the event an option recipient terminated his
employment or service as an employee or director, the options would terminate
during certain specified periods.
Recognition and Retention Plan. At a meeting of the Company's shareholders
to be held no earlier than six months after the completion of the
Reorganization, the Board of Directors also intends to submit a restricted
stock plan for shareholder approval. The restricted stock plan will provide the
Bank's directors and officers an ownership interest in the Company in a manner
designed to encourage them to continue his or her service with the Bank. The
Bank will contribute funds to the restricted stock plan from time to time to
enable it to acquire an aggregate amount of Common Stock equal to up to 4% of
the shares of Common Stock sold in the Offering, either directly from the
Company or in open market purchases. Four percent of the shares sold in the
Offering would amount to 347,109 shares, 408,364 shares, 469,619 shares or
540,062 shares at the minimum, midpoint, maximum and adjusted maximum of the
Estimated Valuation Range, respectively. In the event that additional authorized
but unissued shares would be acquired by the restricted stock plan after the
Offering, the interests of existing shareholders would be diluted. The executive
officers and directors will be awarded Common Stock under the restricted stock
plan without having to pay cash for the shares. If the plan is
118
<PAGE>
adopted within one year of completion of the Reorganization, no awards under the
restricted stock plan would be made until the date the restricted stock plan is
approved by the Company's shareholders.
Awards under the restricted stock plan would be nontransferable and
nonassignable, and during the lifetime of the recipient could only be earned by
the director or officer. If the restricted stock plan is adopted within one
year following completion of the Offering, the shares which are subject to an
award would vest and be earned by the recipient at a rate of 20% of the shares
awarded at the end of each full twelve (12) months of service with the Bank
after the date of grant of the award. Awards would be adjusted for capital
changes such as stock dividends and stock splits. Notwithstanding the foregoing,
awards would be 100% vested upon termination of employment or service due to
death or disability, and if the restricted stock plan is adopted more than 12
months after completion of the Reorganization, awards would be 100% vested upon
normal retirement or a change in control of the Bank or the Company. If
employment or service were to terminate for other reasons, the award recipient
would forfeit any nonvested award. If employment or service is terminated for
cause (as would be defined in the restricted stock plan), shares not already
delivered under the restricted stock plan would be forfeited. Under FDIC
rules, if the restricted stock plan is adopted within the first 12 months after
completion of the Reorganization and Offering, no individual officer can receive
more than 25% of the awards under the plan, no outside Trustee can receive more
than 5% of the awards under the plan, and all outside Trustees as a group can
receive no more than 30% of the awards under the plan in the aggregate.
When shares become vested under the restricted stock plan, the participant
will recognize income equal to the fair market value of the Common Stock earned,
determined as of the date of vesting, unless the recipient makes an election
under (S) 83(b) of the Code to be taxed earlier. The amount of income recognized
by the participant would be a deductible expense for tax purposes for the
Company. If the restricted stock plan is adopted within one year following
completion of the Reorganization and Offering, dividends and other earnings will
accrue and be payable to the award recipient when the shares vest. If the
restricted stock plan is adopted within one year following completion of the
Reorganization and Offering, shares not yet vested under the restricted stock
plan will be voted by the trustee of the restricted stock plan, taking into
account the best interests of the recipients of the restricted stock plan
awards. If the restricted stock plan is adopted more than one year following
completion of the Reorganization and Offering, dividends declared on unvested
shares will be distributed to the participant when paid, and the participant
will be entitled to vote the unvested shares.
Indebtedness of Management
Under New York Banking law, the Bank, as a mutual institution, cannot make
a loan to a Trustee or a person who is an "executive officer" for regulatory
purposes, except for loans made to executive officers that are secured by a
first mortgage on a primary residence or by a deposit account at the Bank. Any
such loans that are outstanding have been made in the ordinary course of
business on the same terms and conditions as the Bank would make to any other
customer and do not involve more than a normal risk of collectibility or present
other unfavorable features. Following the Reorganization, the Bank will not be
subject to this restriction in connection with loans to Directors and executive
officers.
RESTRICTIONS ON ACQUISITION OF THE COMPANY
The Mutual Holding Company Structure. Under New York law, the Plan of
Reorganization, and our governing corporate instruments, at least 51% of the
Company's voting shares must be owned by the Mutual Holding Company. The Mutual
Holding Company will be controlled by its Board of Trustees, who will consist of
persons who also are members of the Board of Directors of the Company and the
Bank. The Mutual Holding Company will be able to elect all members of the Board
of Directors of the Company, and as a general matter, will be able to control
the outcome of all matters presented to the stockholders of the Company for
resolution by vote, except for matters that require a vote greater than a
majority. The Mutual Holding Company, acting through its Board of Trustees,
will be able to control the business, and operations of the Company and the
Bank, and will be able to prevent any challenge to the ownership or control of
the Company by Minority Stockholders. Accordingly, a change in control of the
Company and the Bank cannot occur
119
<PAGE>
unless the Mutual Holding Company first converts to the stock form of
organization. Although New York law, applicable regulations and the Plan of
Reorganization permit the Mutual Holding Company to convert from the mutual to
the capital stock form of organization, it is not anticipated that a conversion
of the Mutual Holding Company will occur in the foreseeable future.
In addition to the anti-takeover aspects of the Mutual Holding Company
structure, the following is a general summary of certain provisions of the
Company's certificate of incorporation and bylaws and certain other regulatory
provisions which will restrict the ability of stockholders to influence
management policies, and which may be deemed to have an "anti-takeover" effect.
The following description of certain of these provisions is necessarily general
and, with respect to provisions contained in the Company's certificate of
incorporation and bylaws and the Bank's proposed stock charter and bylaws,
reference should be made in each case to the document in question, each of which
is part of the Bank's application to the Superintendent and the Company's
Registration Statement filed with the SEC. See "Additional Information." The
following discussion does not reflect the powers and provisions of the Bank's
charter following the Bank offering.
Provisions of the Company's Certificate of Incorporation and Bylaws
Restrictions on Call of Special Meetings. The certificate of incorporation
provides that a special meeting of stockholders may be called by the Chairman of
the Board of the Company or pursuant to a resolution adopted by a majority of
the Board of Directors. Stockholders are not authorized to call a special
meeting of stockholders.
Absence of Cumulative Voting. The certificate of incorporation provides
that there shall be no cumulative voting rights in the election of directors.
Authorization of Preferred Stock (the "Preferred Stock"). The certificate
of incorporation authorizes 5,000,000 shares of serial preferred stock, par
value $0.01 per share. The Company is authorized to issue Preferred Stock from
time to time in one or more series subject to applicable provisions of law; and
the Board of Directors is authorized to fix the designations, and relative
preferences, limitations, voting rights, if any, including without limitation,
offering rights of such shares (which could be a multiple or as a separate
class). In the event of a proposed merger, tender offer or other attempt to
gain control of the Company that the Board of Directors does not approve, it
might be possible for the Board of Directors to authorize the issuance of a
series of Preferred Stock with rights and preferences that would impede the
completion of such a transaction. An effect of the possible issuance of
Preferred Stock, therefore, may be to deter a future takeover attempt. The
Board of Directors has no present plans or understandings for the issuance of
any Preferred Stock but it may issue any Preferred Stock on terms which the
Board deems to be in the best interests of the Company and its stockholders.
Limitation on Voting Rights. The certificate of incorporation provides
that (i) no person shall directly or indirectly offer to acquire or acquire the
beneficial ownership of more than 5% of any class of equity security of the
Company, inclusive of shares of such class held by the Mutual Holding Company
(provided that such limitation shall not apply to the Mutual Holding Company or
any tax-qualified employee stock benefit plans maintained by the Company); and
that (ii) shares beneficially owned in violation of the stock ownership
restriction described above shall not be entitled to vote and shall not be voted
by any person or counted as voting stock in connection with any matter submitted
to a vote of stockholders. For these purposes, a person (including management)
who has obtained the right to vote shares of the Common Stock pursuant to
revocable proxies shall not be deemed to be the "beneficial owner" of those
shares if that person is not otherwise deemed to be a beneficial owner of those
shares.
Amendments to Certificate of Incorporation and Bylaws. Amendments to the
certificate of incorporation must be approved by the Company's Board of
Directors and also by a majority of the outstanding shares of the Company's
voting stock; provided, however, that approval by at least 80% of the
outstanding voting stock is generally required for certain provisions (i.e.,
provisions relating to the call of special stockholder meetings, cumulative
voting, limitation on voting rights and director liability).
120
<PAGE>
The bylaws may be amended by the affirmative vote of the total number of
directors of the Company or the affirmative vote of at least 80% of the total
votes eligible to be voted at a duly constituted meeting of stockholders.
Federal Reserve Board Regulations
The Change in Bank Control Act and the BHCA, together with the Federal
Reserve Board regulations under those acts, require that the consent of the
Federal Reserve Board be obtained prior to any person or company acquiring
"control" of a bank holding company. Control is conclusively presumed to exist
if an individual or company acquires more than 25% of any class of voting stock
of the bank holding company. Control is rebuttably presumed to exist if the
person acquires more than 10% of any class of voting stock of a bank holding
company if either (i) the Company has registered securities under Section 12 of
the Exchange Act or (ii) no other person will own a greater percentage of that
class of voting securities immediately after the transaction. The regulations
provide a procedure to rebut the rebuttable control presumption. Since the
Company's Common Stock will be registered under Section 12 of the Exchange Act,
any acquisition of 10% or more of the Company's Common Stock will give rise to a
rebuttable presumption that the acquiror of such stock controls the Company,
requiring the acquiror, prior to acquiring such stock, to rebut the presumption
of control to the satisfaction of the Federal Reserve Board or obtain Federal
Reserve Board approval for the acquisition of control. Restrictions applicable
to the operations of bank holding companies may deter companies from seeking to
obtain control of the Company. See "Regulation."
New York Banking Law
In addition to federal law, the New York State Banking Law generally
requires prior approval of the New York State Banking Board before any action is
taken that causes any entity or person to acquire direct or indirect control of
a banking institution which is organized in New York State. Control is presumed
to exist if any company or person directly or indirectly owns, controls or holds
with power to vote 10% or more of the voting stock of a banking institution or
of any company or person that owns, controls or holds with power to vote 10% or
more of the voting stock of a banking institution.
DESCRIPTION OF CAPITAL STOCK OF THE COMPANY
General
The Company is authorized to issue 45,000,000 shares of Common Stock having
a par value of $.01 per share and 5,000,000 shares of serial Preferred Stock
having a par value of $.01 per share. The Company currently expects to issue
between 19,125,000 and 25,875,000 shares, with an adjusted maximum of 29,756,250
shares, of Common Stock and no shares of Preferred Stock in the Reorganization.
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 the Common Stock. Upon
payment of the purchase price for the Common Stock, in accordance with the Plan,
all such stock will be duly authorized, fully paid, validly issued, and non-
assessable.
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
Voting Rights. Under Delaware law, the holders of the Common Stock will
possess exclusive voting power in the Company. Each stockholder will be
entitled to one vote for each share held on all matters voted upon by
stockholders, except as discussed in Restrictions on Acquisitions of the
Company--Limitations on Voting Rights." If the Company issues Preferred Stock,
subsequent to the Reorganization, holders of the Preferred Stock may also
possess voting rights.
121
<PAGE>
Dividends. Upon consummation of the Reorganization, the Company's only
asset will be the net proceeds, the ESOP loan and the Bank's Common Stock. The
payment of dividends by the Company is subject to limitations which are imposed
by law and applicable regulation. See "Dividend Policy." The holders of Common
Stock 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
therefore. If the Company issues Preferred Stock, the holders thereof may have
a priority over the holders of the Common Stock with respect to dividends.
Liquidation or Dissolution. In the unlikely event of the liquidation or
dissolution of the Company, the holders of the Common Stock will be entitled to
receive -- after payment or provision for payment of all debts and liabilities
of the Company (including all deposits in the Bank and accrued interest thereon)
and after distribution of the liquidation account established upon stock
offering for the benefit of Eligible Account Holders and Supplemental Eligible
Account Holders who continue their deposit accounts at the Bank -- all assets of
the Company available for distribution, in cash or in kind. See "The
Reorganization and Offering--Liquidation Rights." If preferred stock is issued
subsequent to the Offering, the holders thereof may have a priority over the
holders of Common Stock in the event of liquidation or dissolution.
No Preemptive Rights. Holders of the Common Stock will not be entitled to
preemptive rights with respect to any shares which may be issued. The Common
Stock will not be subject to call for redemption, and, upon receipt by the
Company of the full purchase price therefor, each share of the Common Stock will
be fully paid and nonassessable.
Preferred Stock. None of the 5,000,000 authorized shares of Preferred
Stock of the Company will be issued in the Reorganization. The Company's Board
of Directors is authorized, without stockholder approval, to issue serial
preferred stock and to fix and state voting powers, designations, preferences or
other special rights of such shares. If and when issued, the serial preferred
stock may rank senior to the Common Stock as to dividend rights, liquidation
preferences, or both, and may have full, limited or no voting rights.
Accordingly, the issuance of preferred stock could adversely affect the voting
and other rights of holders of Common Stock.
TRANSFER AGENT AND REGISTRAR
Chase Mellon Shareholder Services, L.L.C. will act as the transfer agent
and registrar for the Common Stock.
LEGAL AND TAX MATTERS
The legality of the Common Stock and the federal income tax consequences of
the Reorganization will be passed upon for the Bank and the Company by the firm
of Luse Lehman Gorman Pomerenk & Schick, P.C., Washington, D.C., special
counsel to the Company and the Bank. The New York income tax consequences of the
Reorganization will be passed upon for the Company and the Bank by KPMG Peat
Marwick LLP. The federal income tax consequences of certain matters relating to
the establishment of the foundation will be passed upon for the Company and the
Bank by KPMG Peat Marwick LLP. Certain legal matters will be passed upon for
CIBC Oppenheimer Corp. and Trident Securities, Inc. by Silver, Freedman & Taff,
L.L.C., Washington, D.C.
EXPERTS
The consolidated financial statements of Lockport Savings Bank and
subsidiaries as of December 31, 1996 and 1995 and for each of the years in the
three-year period ended December 31, 1996 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, and 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
report to the Bank and the Company setting forth its opinion as to the estimated
pro forma market value of the Common Stock upon Reorganization and its valuation
with respect to Subscription Rights.
122
<PAGE>
ADDITIONAL INFORMATION
We have filed with the SEC a registration statement under the Securities
Act with respect to the Common Stock offered hereby. As permitted by the rules
and regulations of the SEC, this Prospectus does not contain all the information
set forth in the registration statement. Such information can be examined
without charge at the public reference facilities of the SEC located at 450
Fifth Street, NW, Washington, D.C. 20549, and copies of such material can be
obtained from the SEC at prescribed rates. The SEC maintains a web site that
contains reports, proxy and information statements and other information
regarding issuers that file electronically with the SEC. The address of this web
site is http://www.sec.gov. The statements contained herein as to the contents
of any contract or other document filed as an exhibit to the registration
statement are, of necessity, brief descriptions thereof and are not necessarily
complete but do contain all material information regarding such documents; each
such statement is qualified by reference to such contract or document.
We have filed an Application with the Department with respect to the
Reorganization. Pursuant to the rules and regulations of the Department, this
Prospectus omits certain information contained in that Application. The
Application may be examined at the office of the Department, 2 Rector Street,
New York, New York, and at our Administrative Center, at 6950 South Transit
Road, Lockport, New York, 14095-0908 without charge.
In connection with the Offering, the Company will register the Common Stock
with the SEC under Section 12(g) of the Exchange Act; and, upon such
registration, the Company and the holders of its Common Stock will become
subject to the proxy solicitation rules, reporting requirements and restrictions
on stock purchases and sales by directors, officers and greater than 10%
stockholders, the annual and periodic reporting and certain other requirements
of the Exchange Act. Under the Plan, the Company has undertaken that it will not
terminate such registration for a period of at least three years following the
Reorganization.
A copy of the certificate of incorporation and bylaws of the Company are
available without charge from the Bank.
123
<PAGE>
LOCKPORT SAVINGS BANK
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditor's Report......................................................... F-2
Consolidated Statements of Condition as of September 30, 1997 (unaudited)
and December 31, 1996 and 1995...................................................... F-3
Consolidated Statements of Income for the nine months ended September 30,
1997 and 1996 (unaudited) and the years ended December 31, 1996, 1995 and 1994...... 46
Consolidated Statements of Cash Flows for the nine months ended September 30, 1997
and 1996 (unaudited) and the years ended December 31, 1996, 1995 and 1994........... F-4
Notes to Consolidated Financial Statements........................................... F-6
</TABLE>
All schedules are omitted because they are not required or applicable, or
the required information is shown in the consolidated financial statements or
notes thereto.
The financial statements of Niagara Bancorp, Inc. have been omitted because
Niagara Bancorp, Inc. has not yet issued any stock, has no assets and no
liabilities, and has not conducted any business other than of an organizational
nature.
F-1
<PAGE>
Independent Auditors' Report
The Board of Trustees
Lockport Savings Bank:
We have audited the accompanying consolidated statements of condition of
Lockport Savings Bank and subsidiaries as of December 31, 1996 and 1995, and the
related consolidated statements of income and cash flows for each of the years
in the three-year period ended December 31, 1996. These consolidated financial
statements are the responsibility of the Bank's management. Our responsibility
is to express an opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Lockport
Savings Bank and subsidiaries as of December 31, 1996 and 1995, and the results
of their operations and their cash flows for each of the years in the three-year
period ended December 31, 1996, in conformity with generally accepted accounting
principles.
KPMG PEAT MARWICK LLP
Buffalo, New York
January 17, 1997
F-2
<PAGE>
LOCKPORT SAVINGS BANK
AND SUBSIDIARIES
Consolidated Statements of Condition
September 30, 1997 and December 31, 1996 and 1995
(In thousands)
<TABLE>
<CAPTION>
December 31
September 30, ----------------------
Assets 1997 1996 1995
- ------ ---------- --------- -----------
(unaudited)
<S> <C> <C> <C> <C>
Cash and cash equivalents:
Cash and due from banks $ 14,804 11,219 13,873
Federal funds sold 2,200 5,000 25,550
--------- --------- -----------
Total cash and cash
equivalents 17,004 16,219 39,423
Securities available for sale (note 2) 464,973 415,129 346,410
Securities held to maturity (note 3) 37,500 38,000 46,700
Loans, net (note 4) 622,487 598,486 535,971
Accrued interest receivable 7,343 6,348 5,622
Premises and equipment, net (note 5) 22,022 13,240 11,377
Other assets (notes 6, 10 and 11) 5,122 5,936 8,788
--------- --------- -----------
$ 1,176,451 1,093,358 994,291
========= ========= ===========
Liabilities and Net Worth
- -------------------------
Liabilities:
Deposits (note 7) $ 992,219 920,072 861,065
Mortgagors' payments held in escrow 8,387 8,773 10,189
Other borrowed funds (note 8):
Short-term 18,740 27,008 --
Long-term 10,000 5,000 --
Other liabilities (notes 10 and 11) 20,385 16,841 15,384
--------- --------- ---------
$ 1,049,731 977,694 886,638
--------- --------- ---------
Commitments and contingencies (notes 4 and 5)
Net worth (note 9):
Surplus and undivided profits 125,325 116,690 105,921
Net unrealized gain (loss) on securities
available for sale, net of deferred
income taxes 1,395 (1,026) 1,732
--------- --------- -----------
126,720 115,664 107,653
--------- --------- -----------
$ 1,176,451 1,093,358 994,291
========= ========= ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
LOCKPORT SAVINGS BANK
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Nine months ended September 30, 1997 and 1996
and years ended December 31, 1996, 1995 and 1994
(In thousands)
<TABLE>
<CAPTION>
Nine months ended
September 30, Years ended December 31,
----------------------- -----------------------------------
1997 1996 1996 1995 1994
-------- -------- -------- -------- --------
(unaudited)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income $ 8,635 8,226 10,768 9,925 8,801
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation of premises and equipment 1,635 1,400 1,911 1,607 1,256
Amortization and accretion of fees and discounts (312) (513) (717) 554 653
Provision for loan losses 975 1,861 2,187 1,016 948
Other provisions for losses 336 20 23 834 380
Net (gain) loss on sale of securities available for
sale (875) (532) (576) (1,477) 849
Deferred income taxes (164) (449) (387) (253) 43
(Increase) decrease in:
Accrued interest receivable (995) (733) (726) (198) (345)
Other assets (1,040) 3,657 3,824 (5,464) 767
Increase (decrease) in other liabilities 3,544 8,343 2,661 8,607 (508)
--------- -------- -------- -------- --------
Net cash provided by operating activities 11,739 21,280 18,968 15,151 12,844
--------- -------- -------- -------- --------
Cash flows from investing activities:
Purchase of investment securities available for sale (85,275) (75,453) (91,772) (16,696) (39,870)
Proceeds from sales of investment securities available
for sale 22,326 6,695 16,803 11,892 35,470
Purchase of mortgage-backed securities available for sale (67,340) (65,729) (85,506) (46,375) (112,295)
Proceeds from sales of mortgage-backed securities
available for sale 44,513 6,981 24,924 50,755 41,072
Principal payments on mortgage-backed securities
available for sale 29,729 27,111 35,522 29,780 80,142
Proceeds from maturities of investment securities
available for sale 11,175 22,215 27,215 -- --
Purchase of securities held to maturity (177,100) (185,700) (249,700) (239,100) (244,179)
Proceeds from maturities of securities held to maturity 177,600 193,400 258,400 227,368 252,257
Net increase in loans (22,815) (43,147) (65,123) (62,288) (54,131)
Other (12,260) (1,056) (2,534) (3,647) (2,290)
--------- -------- -------- -------- --------
Net cash used by investing activities $ (79,447) (114,683) (131,771) (48,311) (43,824)
--------- -------- -------- -------- --------
</TABLE>
F-4
<PAGE>
LOCKPORT SAVINGS BANK
AND SUBSIDIARIES
Consolidated Statements of Cash Flows, Continued
<TABLE>
<CAPTION>
Nine months ended
September 30, Years ended December 31,
----------------------- -----------------------------------
1997 1996 1996 1995 1994
-------- -------- -------- -------- --------
(unaudited)
<S> <C> <C> <C> <C> <C>
Cash flows from financing activities:
Net increase in deposits $ 72,147 57,988 59,007 41,375 6,751
Net increase (decrease) in mortgagors' payments held in
escrow (386) (3,153) (1,416) 589 905
Proceeds from (repayment of) short-term borrowings (8,268) 24,675 27,008 -- --
Proceeds from long-term borrowings 5,000 5,000 5,000 -- --
--------- -------- -------- -------- --------
Net cash provided by financing activities 68,493 84,510 89,599 41,964 7,656
--------- -------- -------- -------- --------
Net increase (decrease) in cash and cash equivalents 785 (8,893) (23,204) 8,804 (23,324)
Cash and cash equivalents at beginning of period 16,219 39,423 39,423 30,619 53,943
--------- -------- -------- -------- --------
Cash and cash equivalents at end of period $ 17,004 30,530 16,219 39,423 30,619
========= ======== ======== ======== ========
Supplemental disclosure of cash flow information:
Cash paid during the year:
Income taxes $ 3,850 4,942 6,597 4,110 5,283
Interest expense 33,107 29,851 40,485 38,972 31,361
========= ======== ======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
LOCKPORT SAVINGS BANK
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Nine Months Ended September 30, 1997 and 1996 (unaudited)
and Years Ended December 31, 1996, 1995 and 1994
(1) Summary of Significant Accounting Policies
- -----------------------------------------------
The accounting and reporting policies of Lockport Savings Bank, a New York
State chartered FDIC insured mutual savings bank, and its subsidiaries
conform to general practices within the banking industry and to generally
accepted accounting principles. The following is a description of the more
significant accounting policies.
(a) Principles of Consolidation
--------------------------------
The consolidated financial statements include the accounts of
Lockport Savings Bank (LSB) and its subsidiaries (the Bank), LSB
Associates, Inc., an agent for third party mutual fund and annuity
sales; LSB Realty, Inc., a real estate development company; LSB
Funding, Inc., a real estate investment trust; and LSB Securities,
Inc., a securities investment company. All significant
intercompany balances and transactions have been eliminated in
consolidation.
(b) Investment Securities
--------------------------
Debt securities and marketable equity securities are classified as
either available for sale or held to maturity. Held to maturity
securities are those that the Bank has the positive intent and
ability to hold to maturity. All other securities are classified
as available for sale.
Securities available for sale are carried at fair value with
unrealized gains and losses, net of the related deferred tax
effect, excluded from earnings and reported as a separate
component of net worth. Realized gains and losses are determined
using the specific identification method.
Securities held to maturity are recorded at cost with discounts
accreted and premiums amortized to maturity using a method that
approximates the level-yield method. If permanent impairment of a
security exists, that security is written down to fair value with
a charge to earnings.
(c) Loans
----------
Loans are stated at the principal amount outstanding, adjusted for
net unamortized deferred fees and costs which are accrued to
income on the interest method. Accrual of interest income on loans
is discontinued after payments become more than ninety days
delinquent, unless the status of a particular loan clearly
indicates earlier discontinuance is more appropriate. All
uncollected interest income previously recognized on non-accrual
loans is reversed and subsequently recognized only to the extent
payments are received. In those instances where there is doubt as
to the collectibility of principal, interest payments are applied
to principal. Loans are generally returned to accrual status when
principal and interest payments are current, full collectibility
of principal and interest is reasonably assured and a consistent
record of performance, generally six months, has been
demonstrated.
Purchased loans are recorded at cost with related premiums or
discounts amortized to expense or accreted to income using the
interest method over the estimated life of the loans. Mortgage
loans originated and intended for sale in the secondary market are
carried at the lower of cost or market. Net unrealized losses are
recognized through a valuation allowance by charges to earnings.
F-6
<PAGE>
LOCKPORT SAVINGS BANK
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(d) Real Estate Owned
----------------------
Real estate owned consists of property acquired in settlement of loans
which are initially valued at the lower of cost or fair value based on
appraisals at foreclosure and are periodically adjusted to the lower
of adjusted cost or net realizable value throughout the remaining
period.
(e) Allowance for Loan Losses
------------------------------
The allowance for loan losses is established through charges to
earnings. Management's determination of the balance of the allowance
is based on many factors including credit evaluation of the loan
portfolio, current and expected economic conditions and past loss
experience. While management uses available information to recognize
losses on loans, future additions to the allowance may be necessary
based on changes in economic conditions. In addition, various
regulatory agencies, as an integral part of their examination process,
periodically review the allowance for loan losses and may require the
Bank to recognize additions to the allowance based on their judgment
of information available to them at the time of their examination.
In 1995, the Bank adopted Statement of Financial Accounting Standards
No. 114, "Accounting by Creditors for Impairment of a Loan", as
amended by Statement of Financial Accounting Standards No. 118,
"Accounting by Creditors for Impairment of a Loan - Income Recognition
Disclosures". These new standards require that an impaired loan be
measured based on the present value of expected future cash flows
discounted at the loan's effective interest rate or, as a practical
expedient, the loan's observable market price or the fair value of the
underlying collateral if the loan is collateral dependent. These new
standards also made certain changes to existing accounting principles
applicable to in-substance foreclosures (ISF) and troubled debt
restructurings involving modifications of terms. SFAS 114 generally
does not apply to those smaller-balance homogeneous loans that are
collectively evaluated for impairment which for the Bank, include one-
to four-family residential mortgage loans, student loans and consumer
loans, other than those modified in a troubled debt restructuring. The
adoption of these standards did not have a material impact on the
Bank's consolidated financial statements.
In accordance with SFAS 114, the Bank considers a loan impaired when,
based upon current information and events, it is possible that it will
be unable to collect all amounts due, both principal and interest. The
measurement value of the Bank's impaired loans was based on the fair
value of the underlying collateral. The Bank identifies and measures
impaired loans in conjunction with its review of the adequacy of its
allowance for loan losses. Specific factors utilized in the
identification of impaired loans include, but are not limited to,
delinquency status, loan-to-value ratio, the condition of the
underlying collateral, credit history and debt coverage.
(f) Mortgage Servicing Rights
------------------------------
In 1996, the Bank adopted Statement of Financial Accounting Standards
No. 122, "Accounting for Mortgage Servicing Rights", an amendment to
SFAS 65. Accordingly, the rights to service mortgage loans for others
are carried as separate assets at fair value, whether acquired through
purchase transactions or through loan originations. The adoption of
this standard did not have a material impact on the Bank's
consolidated financial statements.
(g) Premises and Equipment
---------------------------
Premises and equipment are carried at cost, net of accumulated
depreciation and amortization.
F-7
<PAGE>
LOCKPORT SAVINGS BANK
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(1) Summary of Significant Accounting Policies, Continued
----------------------------------------------------------
Depreciation is computed on the straight-line method over the
estimated useful lives of the assets. Leasehold improvements are
amortized on the straight-line method over the lesser of the life of
the improvements or the lease term.
(h) Employee Benefits
----------------------
The Bank maintains a non-contributory, qualified, defined benefit
pension plan that covers substantially all full time employees. The
actuarially determined pension benefits in the form of a life
annuity are based on the employee's combined years of service, age
and compensation. The Bank's policy is to fund the minimum amount
required by government regulations.
The Bank also provides certain post-retirement benefits, principally
health care and group life insurance, to employees and their
beneficiaries and dependents. The Bank accrues for the expected cost
of providing these post-retirement benefits during an employee's
active years of service.
(i) Income Taxes
-----------------
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are reflected at currently
enacted income tax rates applicable to the period in which the
deferred tax assets or liabilities are expected to be realized or
settled. As changes in tax laws or rates are enacted, deferred tax
assets and liabilities are adjusted through the provision for income
taxes.
(j) Transfers and Servicing of Financial Assets and Extinguishments of
-----------------------------------------------------------------------
Liabilities
-----------
In June 1996, the Financial Accounting Standards Board issued SFAS
No. 125, "Accounting for Transfers and Servicing of Financial Assets
and Extinguishments of Liabilities." SFAS No. 125 provides
accounting and reporting standards for transfers and servicing of
financial assets and extinguishments of liabilities based on
consistent application of a financial-components approach that
focuses on control. It distinguishes transfers of financial assets
that are sales from transfers that are secured borrowings. The
adoption of SFAS No. 125 as of January 1, 1997 did not have a
material impact on the Bank's financial position, results of
operations, or liquidity.
(k) Use of Estimates
---------------------
Management of the Bank has made a number of estimates and
assumptions relating to the reporting of assets and liabilities and
disclosure of contingent assets and liabilities to prepare these
financial statements in conformity with generally accepted
accounting principles. Actual results could differ from those
estimates.
F-8
<PAGE>
LOCKPORT SAVINGS BANK
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(2) Securities Available for Sale
- ---------------------------------
The amortized cost and approximate fair value of securities available for
sale at September 30, 1997 (unaudited) are summarized as follows (in
thousands):
<TABLE>
<CAPTION>
Amortized Unrealized Unrealized Fair
cost gains losses value
--------- ---------- ----------- -------
<S> <C> <C> <C> <C>
Debt securities:
U.S. Treasury $ 84,856 776 (101) 85,531
U.S. government agencies 5,008 -- (6) 5,002
States and political
subdivisions 1,761 109 -- 1,870
Corporate 6,927 107 -- 7,034
-------- ----- ------ -------
98,552 992 (107) 99,437
-------- ----- ------ -------
Mortgage-backed securities:
Collateralized mortgage
obligations 107,744 522 (1,078) 107,188
Government National Mortgage
Association 33,461 1,095 (14) 34,542
Federal National Mortgage
Association 25,330 136 (73) 25,393
Freddie Mac 118,469 717 (547) 118,639
-------- ----- ------ -------
285,004 2,470 (1,712) 285,762
-------- ----- ------ -------
Asset-backed securities:
Home equity 53,482 54 (72) 53,464
Student Loans 9,741 -- (27) 9,714
Auto 4,047 18 -- 4,065
-------- ----- ------ -------
67,270 72 (99) 67,243
-------- ----- ------ -------
Equity securities:
FHLB stock 6,392 -- -- 6,392
Common stock 5,391 909 (161) 6,139
-------- ----- ------ -------
11,783 909 (161) 12,531
-------- ----- ------ -------
$462,609 4,443 (2,079) 464,973
======== ===== ====== =======
</TABLE>
Scheduled contractual maturities of securities, other than equity
securities, at September 30, 1997 (unaudited) are as follows (in thousands):
<TABLE>
<CAPTION>
Amortized Fair
cost value
--------- -------
<S> <C> <C>
Within one year $ 10,932 10,924
After one year through five years 121,266 121,953
After five years through ten years 82,012 82,296
After ten years 236,616 237,269
-------- -------
$450,826 452,442
======== =======
</TABLE>
F-9
<PAGE>
LOCKPORT SAVINGS BANK
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(2) Securities Available for Sale, Continued
- --------------------------------------------
The amortized cost and approximate fair value of securities available for
sale at December 31, 1996 are summarized as follows (in thousands):
<TABLE>
<CAPTION>
Amortized Unrealized Unrealized Fair
cost gains losses value
--------- ---------- ---------- -----
<S> <C> <C> <C> <C>
Debt securities:
U.S. Treasury $ 84,716 723 (219) 85,220
U.S. government agencies 5,012 -- (8) 5,004
States and political subdivisions 1,942 99 -- 2,041
Corporate 999 1 -- 1,000
-------- ------ ------ -------
92,669 823 (227) 93,265
-------- ------ ------ -------
Mortgage-backed securities:
Collateralized mortgage obligations 104,244 133 (2,385) 101,992
Government National Mortgage
Association 44,966 931 (117) 45,780
Federal National Mortgage Association 28,487 20 (251) 28,256
Freddie Mac 109,903 475 (1,546) 108,832
-------- ------ ------ -------
287,600 1,559 (4,299) 284,860
-------- ------ ------ -------
Asset-backed securities:
Home equity 28,090 36 (128) 27,998
-------- ------ ------ -------
Equity securities:
FHLB stock 5,394 -- -- 5,394
Common stock 3,115 594 (97) 3,612
-------- ------ ------ -------
8,509 594 (97) 9,006
-------- ------ ------ -------
$416,868 3,012 (4,751) 415,129
======== ====== ====== =======
</TABLE>
Scheduled contractual maturities of debt securities at December 31, 1996 are
as follows (in thousands):
<TABLE>
<CAPTION>
Amortized Fair
cost value
-------- -------
<S> <C> <C>
Within one year $ 16,167 16,177
After one year through five years 76,002 76,497
After ten years 500 591
-------- ------
$ 92,669 93,265
======== ======
</TABLE>
F-10
<PAGE>
LOCKPORT SAVINGS BANK
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(2) Securities Available for Sale, Continued
- --------------------------------------------
The amortized cost and approximate fair value of securities available for
sale at December 31, 1995 are summarized as follows (in thousands):
<TABLE>
<CAPTION>
Amortized Unrealized Unrealized Fair
cost gains losses value
--------- ---------- ---------- -------
<S> <C> <C> <C> <C>
Debt securities:
U.S. Treasury $ 54,839 1,005 (99) 55,745
U.S. government agencies -- -- -- --
States and political
subdivisions 9,118 200 (1) 9,317
Corporate 6,035 5 (5) 6,035
-------- ----- ------- -------
69,992 1,210 (105) 71,097
-------- ----- ------- -------
Mortgage-backed securities:
Collateralized mortgage
obligations 132,550 714 (1,672) 131,592
Government National Mortgage
Association 51,104 1,881 (1) 52,984
Federal National Mortgage
Association 33,170 415 (10) 33,575
Freddie Mac 43,000 456 (64) 43,392
-------- ----- ------- -------
259,824 3,466 (1,747) 261,543
-------- ----- ------- -------
Asset-backed securities:
Home equity 5,350 -- (72) 5,278
-------- ----- ------- -------
Equity securities:
FHLB stock 4,926 -- -- 4,926
Common stock 3,382 396 (212) 3,566
-------- ----- ------- -------
8,308 396 (212) 8,492
-------- ----- ------- -------
$343,474 5,072 (2,136) 346,410
======== ===== ======= =======
</TABLE>
F-11
<PAGE>
LOCKPORT SAVINGS BANK
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(2) Securities Available for Sale, Continued
- --------------------------------------------
Gross realized gains (losses) on sales of securities available for sale are
summarized as follows (in thousands):
<TABLE>
<CAPTION>
Nine months ended
September 30, Years ended December 31,
-------------------- -------------------------------
1997 1996 1996 1995 1994
-------- -------- -------- -------- --------
(unaudited)
<S> <C> <C> <C> <C> <C>
Realized gains $1,152 646 896 2,442 617
Realized losses (277) (114) (320) (965) (1,466)
====== ====== ====== ====== ======
</TABLE>
At September 30, 1997, approximately $5.0 million of U.S. Treasury Notes
were pledged under a collateral agreement with the Federal Reserve Treasury,
Tax and Loan Program and $20 million of U.S. Treasury Notes were pledged as
collateral under repurchase agreements.
In November 1995, the Financial Accounting Standards Board issued a Special
Report, "A Guide to Implementation of Statement 115 on Accounting for
Certain Investments in Debt and Equity Securities". This supplemental
guidance provided a one-time opportunity to reassess the appropriateness of
the Bank's classifications of all securities held at that time with any
resulting reclassifications being accounted for at fair value and occurring
on a single date no later than December 31, 1995, without calling into
question the intent of the Bank to hold other debt securities to maturity in
the future. As a result of this one-time reassessment the Bank reclassified
$9.2 million of state and political subdivision debt securities as available
for sale securities from the held to maturity portfolio and recognized
$199,000 of net unrealized appreciation on these securities, net of related
deferred taxes, as an increase to net worth on December 31, 1995.
F-12
<PAGE>
LOCKPORT SAVINGS BANK
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(3) Securities Held To Maturity
- --------------------------------
The Bank's held to maturity securities consist of money market preferred
stock. The amortized cost and approximate fair value of the money market
preferred stock at September 30, 1997 and December 31, 1996 and 1995, are
summarized as follows (in thousands):
<TABLE>
<CAPTION>
Years ended December 31,
September -----------------------------------------
1997 1996 1995
-------------------- ------------------- -------------------
(unaudited)
Amortized Fair Amortized Fair Amortized Fair
cost value cost value cost value
--------- ------- --------- ------- --------- -------
<S> <C> <C> <C> <C> <C>
$ $37,500 37,500 38,000 38,000 46,700 46,700
========= ======= ========= ======= ========= =======
</TABLE>
The money market preferred stock held by the Bank matures approximately
every 49 days. Each maturity and subsequent reinvestment in the stock
during the year is included in the accompanying consolidated statements of
cash flows as maturities and purchases, respectively, of securities held to
maturity. Aside from the rollover of that investment, there were no
maturities of held to maturity securities for the nine months ended
September 30, 1997 and the year ended December 31, 1996. There were
$5,152,000 of maturities of held to maturity securities in 1995. There were
no sales of, or transfers to or from, securities classified as held to
maturity other than those described in Note 2 in any of the periods.
F-13
<PAGE>
LOCKPORT SAVINGS BANK
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(4) Loans
- ----------
Loans receivable at September 30, 1997, December 31, 1996 and 1995 consist
of the following (in thousands):
<TABLE>
<CAPTION>
December 31,
September 30, ------------------
1997 1996 1995
-------------- -------- --------
(unaudited)
<S> <C> <C> <C>
Real Estate:
Residential conventional $359,628 337,402 301,327
Residential FHA insured and
VA guaranteed 26,866 23,171 18,013
Residential home equity 13,047 11,337 10,234
Commercial 142,414 139,998 133,494
Construction 13,964 12,493 7,891
-------- ------- -------
555,919 524,401 470,959
-------- ------- -------
Other:
Mobile home 22,675 21,406 20,630
Vehicle 7,326 18,747 12,591
Other consumer 24,465 22,412 20,229
Guaranteed student 10,907 10,702 9,874
Commercial 4,275 4,895 4,085
-------- ------- -------
69,648 78,162 67,409
-------- ------- -------
Total loans 625,567 602,563 538,368
Net deferred costs 3,376 2,809 2,349
Unearned discount (103) (347) (39)
Allowance for loan losses (6,353) (6,539) (4,707)
-------- ------- -------
Loans, net $622,487 598,486 535,971
======== ======= =======
</TABLE>
F-14
<PAGE>
LOCKPORT SAVINGS BANK
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(4) Loans, Continued
- ---------------------
Non-accrual loans amounted to $1,925,000 (unaudited), $4,718,000 and
$3,955,000 at September 30, 1997 and December 31, 1996 and 1995,
respectively, representing .31%, .78% and .74% of total loans at such
dates, respectively. Interest income that would have been recorded if the
loans had been performing in accordance with their original terms amounted
to $133,000 and $318,000 during the nine month periods ended September 30,
1997 and 1996 (unaudited) respectively, and $325,000, $367,000 and $315,000
in 1996, 1995 and 1994, respectively.
Mortgage loans sold amounted to $23.2 million and $19.3 million for the
nine month periods ended September 30, 1997 and 1996 (unaudited)
respectively, and $26.1 million, $30.1 million and $19.5 million for the
years ending December 31, 1996, 1995 and 1994, respectively. Servicing fee
income included in loan fees in the consolidated statements of income
amounted to $313,000 and $268,000 during the nine month periods ended
September 30, 1997 and 1996 (unaudited) respectively, and $363,000,
$274,000 and $223,000 in 1996, 1995 and 1994, respectively.
Mortgages serviced for others by the Bank amounted to $145.7 million
(unaudited), $129.0 million and $110.4 million at September 30, 1997 and
December 31, 1996 and 1995, respectively. At September 30, 1997, the Bank
maintained $3 million in fidelity blanket bond coverage and under its
mortgage impairment insurance policy, maintained errors and omissions
coverage of $2 million per commercial and residential mortgage occurrence.
At September 30, 1997 (unaudited), the Bank had outstanding commitments to
originate mortgage and other loans of approximately $46.5 million with
$18.9 million at fixed rates and $27.6 million at variable rates.
Changes in the allowance for loan losses for the nine months ended
September 30, 1997 and 1996 and the years ended December 31, 1996, 1995 and
1994 were as follows (in thousands):
<TABLE>
<CAPTION>
Nine months ended Years ended
September 30, December 31,
----------------- ----------------------
1997 1996 1996 1995 1994
---- ---- ---- ---- ----
(unaudited)
<S> <C> <C> <C> <C> <C>
Balance, beginning of period $ 6,539 4,707 4,707 4,192 4,030
Provision for loan losses 975 1,861 2,187 1,016 948
Charge-offs (1,271) (287) (436) (556) (825)
Recoveries on loans
previously charged-off 110 37 81 55 39
------- ----- ----- ----- -----
Balance, end of period $ 6,353 6,318 6,539 4,707 4,192
======= ===== ===== ===== =====
</TABLE>
Approximately 96% of the Bank's loans are mortgage and consumer loans in
New York State. Accordingly, the ultimate collectibility of a substantial
portion of the Bank's loan portfolio is susceptible to changes in market
conditions in this primary market area.
F-15
<PAGE>
LOCKPORT SAVINGS BANK
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(5) Premises and Equipment
- ---------------------------
A summary of premises and equipment at September 30, 1997, December 31,
1996 and 1995 follows (in thousands):
<TABLE>
<CAPTION>
December 31,
September 30, --------------
1997 1996 1995
---- ---- ----
(unaudited)
<S> <C> <C> <C>
Land $ 1,049 1,049 771
Buildings and improvements 20,027 10,996 8,943
Furniture and equipment 11,128 9,785 8,893
------- ------ ------
32,204 21,830 18,607
Less accumulated depreciation and amortization 10,182 8,590 7,230
------- ------ ------
$22,022 13,240 11,377
======= ====== ======
</TABLE>
Minimum rental commitments for premises and equipment under noncancellable
operating leases at December 31, 1996 follows (in thousands):
<TABLE>
<CAPTION>
Year ending December 31:
------------------------
<S> <C>
1997 $ 586
1998 522
1999 523
2000 514
2001 519
Later years 5,193
------
Total minimum lease payments $7,857
======
</TABLE>
Real estate taxes, insurance and maintenance expenses related to these
leases are obligations of the Bank. Rent expense was $419,000 and $325,000
during the nine months ended September 30, 1997 and 1996 (unaudited) and
$414,000, $271,000 and $251,000 in 1996, 1995 and 1994, respectively, and
is included in occupancy expense.
During 1997, the Bank completed construction of a new Administrative
Center. Buildings and improvements at September 30, 1997 and December 31,
1996 include $10.2 million (unaudited) and $1.8 million, respectively, of
costs relating to this new facility.
F-16
<PAGE>
LOCKPORT SAVINGS BANK
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(6) Other Assets
- -----------------
The significant components of other assets at September 30, 1997, December
31, 1996 and 1995 are as follows (in thousands):
<TABLE>
<CAPTION>
December 31,
September 30, --------------
1997 1996 1995
-------------- ------ ------
(unaudited)
<S> <C> <C> <C>
Deferred income taxes, net (note 10) $ 685 2,204 -
Nationar receivable - - 5,053
Investments in affiliates - 157 264
Real estate owned, net of allowance for losses 268 317 257
Prepaid expenses 1,577 1,165 1,383
Other 2,592 2,093 1,831
------ ----- -----
$5,122 5,936 8,788
====== ===== =====
</TABLE>
On February 6, 1995, the Superintendent of Banks for the State of New York
seized Nationar, a check-clearing and trust company, freezing all of
Nationar's assets. As of December 31, 1995, the Bank had $5.7 million in
demand deposits held in receivership by the New York State Banking
Department. Management established a $600,000 allowance for possible loss
as of December 31, 1995, the provision for which was reflected in other
operating expenses in the 1995 Consolidated Statement of Income. During
1996, the Bank received all funds due from Nationar and therefore reversed
the allowance for possible loss, with the benefit reflected as a reduction
of other operating expenses.
F-17
<PAGE>
LOCKPORT SAVINGS BANK
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(7) Deposits
- ---------------
Deposits consist of the following at September 30, 1997, December 31, 1996
and 1995 (in thousands):
<TABLE>
<CAPTION>
September 30, 1997
-----------------------
Weighted
average
rate Balance
----------- ----------
(unaudited)
<S> <C> <C>
Savings accounts 3.34% $302,447
---- --------
Certificates maturing:
Within one year 5.45 364,456
After one year, through two years 6.80 120,923
After two years, through three years 6.21 17,576
After three years, through four years 6.75 10,623
After four years, through five years 5.77 907
After five years 6.05 2,383
---- --------
5.82 516,868
---- --------
Checking accounts:
Non-interest bearing - 27,325
Interest-bearing:
NOW accounts 2.00 62,913
Money market accounts 4.10 82,666
--------
172,904
--------
4.52% $992,219
==== ========
</TABLE>
F-18
<PAGE>
LOCKPORT SAVINGS BANK
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(7) Deposits, Continued
- ------------------------
<TABLE>
<CAPTION>
December 31, 1996
-----------------------
Weighted
average
rate Balance
----------- ----------
<S> <C> <C>
Savings accounts 3.34% $ 300,747
---- --------
Certificates maturing:
Within one year 5.33 356,401
After one year, through two years 6.01 69,923
After two years, through three years 8.16 42,054
After three years, through four years 6.96 8,992
After four years, through five years 6.89 5,905
After five years 6.17 1,446
---- --------
5.72 484,721
---- --------
Checking accounts:
Non-interest bearing - 25,382
Interest-bearing:
NOW accounts 2.00 55,901
Money market accounts 3.54 53,321
--------
134,604
--------
4.43% $920,072
==== ========
</TABLE>
F-19
<PAGE>
LOCKPORT SAVINGS BANK
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(7) Deposits, Continued
- ------------------------
<TABLE>
<CAPTION>
December 31, 1995
-----------------------
Weighted
average
rate Balance
----------- ----------
<S> <C> <C>
Savings accounts 3.34% $308,842
---- --------
Certificates maturing:
Within one year 5.90 293,987
After one year, through two years 5.55 60,712
After two years, through three years 6.92 26,659
After three years, through four years 8.88 30,735
After four years, through five years 7.88 5,111
After five years 7.17 5,332
---- --------
6.17 422,536
---- --------
Checking accounts:
Non-interest bearing - 28,374
Interest-bearing:
NOW accounts 2.00 47,995
Money market accounts 3.68 53,318
--------
129,687
--------
4.57% $861,065
==== ========
</TABLE>
F-20
<PAGE>
LOCKPORT SAVINGS BANK
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(7) Deposits, Continued
- ------------------------
Generally, interest rates on certificates of deposit range from 3.34% to
9.50% at September 30, 1997 (unaudited).
Interest expense for the nine months ended September 30, 1997 and 1996 and
the years ended December 31, 1996, 1995 and 1994 is summarized as follows
(in thousands):
<TABLE>
<CAPTION>
Nine months ended Year ended
September 30 December 31,
------------------ --------------------------
1997 1996 1996 1995 1994
---- ---- ------ ---- ----
<S> <C> <C> <C> <C> <C>
(unaudited)
Savings accounts $ 7,626 7,814 10,353 11,636 12,869
Certificates 21,964 19,467 26,432 24,159 16,443
Money market accounts 1,612 1,443 1,916 2,164 1,533
NOW accounts 824 704 955 901 750
Mortgagors' payments
held in escrow 119 123 158 174 159
------- ------ ------ ------ ------
$32,145 29,551 39,814 39,034 31,754
======= ====== ====== ====== ======
</TABLE>
Included in 1995 interest expense is a special interest payment of
$1,251,000 which was approved by the Board of Trustees of the Bank and paid
on a pro rata basis on all interest-bearing accounts in recognition of the
Bank's 125th anniversary.
Certificates issued in amounts over $100,000 amounted to $90.4 million and
$83.3 million at September 30, 1997 and 1996 (unaudited), respectively, and
$83.9 million, $75.2 million and $62.3 million at December 31, 1996, 1995
and 1994, respectively. Interest expense thereon approximated $3.8 million
and $3.4 million during the nine month periods ended September 30, 1997 and
1996 (unaudited) and $4.6 million, $4.2 million and $3.2 million in 1996,
1995 and 1994, respectively.
F-21
<PAGE>
LOCKPORT SAVINGS BANK
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(8) Other Borrowed Funds
- -------------------------
The Bank has a $127.8 million line of credit with the Federal Home Loan
Bank (FHLB), secured by FHLB stock and the residential mortgage portfolio,
which was established in 1995. This borrowing capacity provides a secondary
funding source for real estate lending, liquidity, and asset/liability
management. The Bank also pledged, to broker-dealers, U.S. Treasury Notes
as collateral under agreements to repurchase. Under these agreements, the
broker-dealers are required to transfer securities to the Bank upon
maturity of the agreements, generally within 90 to 180 days after the
transaction date. Information relating to the borrowings and repurchase
agreements at September 30, 1997 and December 31, 1996 is summarized as
follows (in thousands):
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
-------------- ------------
(unaudited)
<S> <C> <C>
Short-term advances from Federal Home Loan Bank $ - 7,000
Reverse repurchase agreements 18,740 20,008
------- ------
18,740 27,008
Long-term advances from the FHLB, bearing fixed
interest rates:
5.72%, maturing on January 29, 2001 5,000 5,000
6.59%, amortizing through July 31, 2012 5,000 --
------- ------
$28,740 32,008
======= ======
</TABLE>
The aggregate maturities of FHLB advances for each of the five years
subsequent to September 30, 1997 are as follows (unaudited): 1998,
$206,000; 1999, $220,000; 2000, $235,000; 2001, $5,251,000; and 2002,
$268,000.
Information relating to the repurchase agreements at September 30, 1997
(unaudited) and December 31, 1996 is summarized as follows:
<TABLE>
<S> <C> <C>
Weighted average interest rate of reverse repurchase
agreements 5.68% 5.42
Maximum outstanding at any month end $28,961 24,675
Average amount outstanding during the period 22,030 11,091
======= ======
</TABLE>
The average amounts outstanding are computed using weighted monthly
averages. Related interest expense for the nine month periods ended
September 30, 1997 and 1996 (unaudited) was $916,000 and $281,000,
respectively, and $576,000 for the year ended December 31, 1996. The Bank
had no outstanding borrowings at December 31, 1995 and 1994.
F-22
<PAGE>
LOCKPORT SAVINGS BANK
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(9) Net Worth
- --------------
The changes in net worth for the nine months ended September 30, 1997 and
for the years ended December 31, 1996, 1995 and 1994 follow (in thousands):
<TABLE>
<CAPTION>
Nine months ended Years ended
September 30, December 31,
---------------------------
1997 1996 1995 1994
---- ---- ---- ----
(unaudited)
<S> <C> <C> <C> <C>
Net worth, beginning of period $115,664 107,653 81,322 87,195
Net income 8,635 10,768 9,925 8,801
Net unrealized gain (loss)
on securities available for
sale, net of taxes 2,421 (2,757) 16,406 (14,674)
-------- ------- ------- -------
Net worth, end of period $126,720 115,664 107,653 81,322
======== ======= ======= =======
</TABLE>
The Bank is subject to various regulatory capital requirements administered
by the Federal banking agencies. Failure to meet minimum capital
requirements can initiate certain mandatory - and possibly additional
discretionary - actions by regulators that, if undertaken, could have a
direct material effect on the Bank's financial statements. Under capital
adequacy guidelines and the regulatory framework for prompt corrective
action, the Bank must meet specific guidelines that involve quantitative
measures of the Bank's assets, liabilities, and certain off-balance-sheet
items as calculated under regulatory accounting practices. The Bank's
capital amounts and classifications are also subject to qualitative
judgements by the regulators about components, risk weightings, and other
factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios (set forth in the
table below) of total and Tier 1 capital to risk-weighted assets and of
Tier 1 capital to average assets. As of September 30, 1997, the Bank meets
all capital adequacy requirements to which it is subject.
As of September 30, 1997, the most recent notification from the Federal
Deposit Insurance Corporation categorized the Bank as well capitalized
under the regulatory framework for prompt corrective action. To be
categorized as adequately capitalized the Bank must maintain minimum total
risk-based, Tier 1 risk-based, and Tier 1 leverage ratios as set forth in
the following table. There are no conditions or events since that
notification that management believes have changed the Bank's category.
F-23
<PAGE>
LOCKPORT SAVINGS BANK
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(9) Net Worth, Continued
- ---------------------------
The Bank's actual capital amounts and ratios are presented in the following
table (in thousands):
<TABLE>
<CAPTION>
To Be Well
For Capital Capitalized Under
Adequacy Prompt Corrective
Actual Purposes Action Provisions
------------------- ----------------------------------- ---------------------------------
Amount Ratio Amount Ratio Amount Ratio
------ ----- ----------------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
As of September 30, 1997:
(unaudited): greater greater greater greater
Total capital to than or than or than or than or
risk-weighted assets $131,736 21.74% equal to 48,470 equal to 8.00% equal to $60,588 equal to 10.00%
greater greater greater greater
Tier 1 capital to than or than or than or than or
risk-weighted assets 125,383 20.69 equal to 24,235 equal to 4.00 equal to 36,353 equal to 6.00
greater greater greater greater
Tier 1 capital to than or than or than or than or
average assets 125,383 10.75 equal to 34,990 equal to 3.00 equal to 58,316 equal to 5.00
As of December 31, 1996: greater greater greater greater
Total capital to than or than or than or than or
risk-weighted assets 123,229 22.84 equal to 43,160 equal to 8.00 equal to 53,950 equal to 10.00
greater greater greater greater
Tier 1 capital to than or than or than or than or
risk-weighted assets 116,690 21.63 equal to 21,580 equal to 4.00 equal to 32,370 equal to 6.00
greater greater greater greater
Tier 1 capital to than or than or than or than or
average assets 116,690 10.77 equal to 32,492 equal to 3.00 equal to 54,154 equal to 5.00
As of December 31, 1995: greater greater greater greater
Total capital to than or than or than or than or
risk-weighted assets 110,778 22.34 equal to 39,672 equal to 8.00 equal to 49,590 equal to 10.00
greater greater greater greater
Tier 1 capital to than or than or than or than or
risk-weighted assets 106,071 21.39 equal to 19,836 equal to 4.00 equal to 29,754 equal to 6.00
greater greater greater greater
Tier 1 capital to than or than or than or than or
average assets 106,071 10.86 equal to 29,292 equal to 3.00 equal to 48,820 equal to 5.00
</TABLE>
F-24
<PAGE>
LOCKPORT SAVINGS BANK
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(10) Income Taxes
- --------------------
Total income taxes for the nine months ended September 30, 1997 and 1996,
and for the years ended December 31, 1996, 1995 and 1994 were allocated as
follows (in thousands):
<TABLE>
<CAPTION>
Nine months ended Years ended
September 30, December 31,
----------------- -------------------------------
1997 1996 1996 1995 1994
-------- ------- ------ ------ ------
<S> <C> <C> <C> <C> <C>
(unaudited)
Income from operations $4,905 4,667 6,278 5,144 4,704
Net worth, for unrealized
gain/loss on securities
available for sale 1,682 (3,719) (1,917) 10,028 (8,824)
====== ====== ====== ====== ======
</TABLE>
The components of income taxes attributable to income from operations for the
nine months ended September 30, 1997 and 1996 and for the years ended
December 31, 1996, 1995 and 1994 are as follows (in thousands):
<TABLE>
<CAPTION>
Nine months ended Years ended
September 30 December 31,
------------------ --------------------------
1997 1996 1996 1995 1994
--------- ------ ------ ------ -----
<S> <C> <C> <C> <C> <C>
(unaudited)
Current:
Federal $4,356 4,316 5,640 4,353 3,729
State 713 800 1,025 1,044 932
------ ----- ----- ----- -----
5,069 5,116 6,665 5,397 4,661
------ ----- ----- ----- -----
Deferred:
Federal (164) (449) (387) (253) 43
------ ----- ----- ----- -----
$4,905 4,667 6,278 5,144 4,704
====== ===== ===== ===== =====
</TABLE>
F-25
<PAGE>
LOCKPORT SAVINGS BANK
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(10) Income Taxes, Continued
- -----------------------------
Income tax expense attributable to income from operations for the nine
months ended September 30, 1997 and 1996 and the years ended December 31,
1996, 1995 and 1994 differs from the expected tax expense (computed by
applying the Federal corporate tax rate of 35% to income before income
taxes) as follows (in thousands):
<TABLE>
<CAPTION>
Nine months ended
December 31, Years ended September 30,
----------------- ------------------------------
1997 1996 1996 1995 1994
------- ------- ------ ----- ------
(unaudited)
<S> <C> <C> <C> <C> <C>
Expected tax expense $4,739 4,513 5,966 5,274 5,050
Increase (decrease)
attributable to:
State income taxes, net
of Federal benefit 463 520 666 679 606
Dividends received
deduction (326) (331) (434) (436) (411)
Non-taxable interest
income (25) (59) (68) (386) (400)
Other 15 (142) (116) (31) (342)
Increase in valuation
allowance for deferred
tax assets allocated
to income tax expense 39 166 264 44 201
------ ----- ----- ----- -----
$4,905 4,667 6,278 5,144 4,704
====== ===== ===== ===== =====
</TABLE>
F-26
<PAGE>
LOCKPORT SAVINGS BANK
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(10) Income Taxes, Continued
- ----------------------------
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at
September 30, 1997 and December 31, 1996 and 1995 are presented below:
<TABLE>
<CAPTION>
September 30 December 31,
-----------------
1997 1996 1995
---- ---- ----
(unaudited)
<S> <C> <C> <C>
Deferred tax assets:
Financial reporting allowance for loan
losses $ 2,605 2,681 1,930
Deferred compensation 701 576 501
Post-retirement benefits obligations 670 638 587
Losses on investments in affiliates 540 490 405
Net unrealized loss on securities
available for sale - 713 -
Deferred mortgage fees 218 283 371
Excess of financial reporting
depreciation over tax depreciation 178 - -
Other 342 376 659
------- ------ ------
Total gross deferred tax assets 5,254 5,757 4,453
Less valuation allowance (1,341) (1,302) (1,038)
------- ------ ------
Net deferred tax assets 3,913 4,455 3,415
------- ------ ------
Deferred tax liabilities:
Tax allowance for loan losses, in excess
of base year amount (1,884) (1,790) (1,768)
Net unrealized gain on securities
available for sale (969) - (1,204)
Prepaid pension costs (285) (301) (287)
Excess of tax depreciation over financial
reporting depreciation - (56) (119)
Other (90) (104) (137)
------- ------ ------
Total gross deferred tax liabilities (3,228) (2,251) (3,515)
------- ------ ------
Net deferred tax asset (liability) $ 685 2,204 (100)
======= ====== ======
</TABLE>
F-27
<PAGE>
LOCKPORT SAVINGS BANK
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(10) Income Taxes, Continued
- -----------------------------
The net increase in the total valuation allowance for the nine month
period ended September 30, 1997 and the year ended December 31, 1996 of
$39,000 and $264,000, respectively, is attributable to income from
operations. The net decrease in the total valuation allowance for the year
ended December 31, 1995 of $766,000 includes an increase of $44,000
attributable to income from operations, net of a decrease of $810,000
related to the unrealized gain on securities available for sale.
In assessing the realizability of deferred tax assets, management
considers whether it is more likely than not that some portion or all of
the deferred tax assets will not be realized. The ultimate realization of
deferred tax assets is dependent upon the generation of future taxable
income during the periods in which those temporary differences become
deductible. Management considers the scheduled reversal of deferred tax
liabilities, availability of operating loss carrybacks, projected future
taxable income, and tax planning strategies in making this assessment.
Based upon the level of historical taxable income, the opportunity for net
operating loss carrybacks, and projections for future taxable income over
the periods which deferred tax assets are deductible, management believes
it is more likely than not the Bank will realize the benefits of these
deductible differences, net of the existing valuation allowance, at
September 30, 1997.
At December 31, 1996, net worth includes approximately $11.1 million
representing bad debt deductions taken under the provisions of the
Internal Revenue Code. Recent Federal legislation repealed this provision
of the Tax Code thereby requiring the Bank to recapture $4.2 million in
additions to the tax bad debt reserve for periods after the 1987 base
year. At December 31, 1996, the deferred tax liability related to the tax
allowance for loan losses in excess of the base year amount includes $1.5
million of Federal income taxes which the Bank will repay over tax years
1998 through 2003.
F-28
<PAGE>
LOCKPORT SAVINGS BANK
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(11) Benefit Plans
- -------------------
Pension Plan
------------
The funded status of the Bank's pension plan and the amounts recognized in
the financial statements as of December 31, 1996 and 1995 follow (in
thousands):
<TABLE>
<CAPTION>
1996 1995
-------- ------
<S> <C> <C>
Actuarial present value of benefit obligation:
Vested $4,174 3,952
Non-vested 467 376
------ -----
Total accumulated benefit obligation $4,641 4,328
====== =====
Projected benefit obligation for service rendered to date $6,084 5,652
Plan assets at fair value 7,602 6,664
------ -----
Plan assets in excess of projected benefit obligation 1,518 1,012
Unrecognized net asset being recognized over 10 years (122) (184)
Unrecognized net gain (799) (258)
Prior service cost not yet recognized in net periodic
pension costs 14 18
------ -----
Prepaid pension costs, included in other assets $ 611 588
====== =====
</TABLE>
Net pension cost for years ended December 31, 1996, 1995 and 1994 is
comprised of the following (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
------ ------- -----
<S> <C> <C> <C>
Service cost, benefits earned during the period $ 340 277 286
Interest cost on projected benefit obligation 422 385 346
Actual return on plan assets (949) (1,133) (7)
Net amortization and deferral 366 640 476
----- ------ ----
Net periodic pension cost $ 179 169 149
===== ====== ====
</TABLE>
F-29
<PAGE>
LOCKPORT SAVINGS BANK
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(11) Benefit Plans, Continued
- ------------------------------
The principal actuarial assumptions used in 1996, 1995 and 1994 were as
follows:
<TABLE>
<CAPTION>
1996 1995 1994
----- ---- ----
<S> <C> <C> <C>
Discount rate 7.75% 7.50 8.25
Expected long-term rate of return on assets 8.00 8.00 8.00
Assumed rate of future compensation increase 5.50 5.50 6.00
==== ==== ====
</TABLE>
The plan assets are in mutual funds consisting primarily of listed stocks
and bonds, government securities and cash equivalents.
401(k) Plan
-----------
All employees are also eligible to participate in a Bank sponsored 401(k)
plan. Participants may make contributions to the Plan in the form of
salary reductions of up to 15% of their eligible compensation subject to
the Internal Revenue Code limit. The Bank contributes an amount to the
Plan equal to 50% of employee contributions, up to a maximum of 6% of the
employee's eligible compensation. The Bank's contribution was $143,000 and
$123,000 for the nine month periods ended September 30, 1997 and 1996
(unaudited), respectively, and $169,000, $143,000 and $128,000 in 1996,
1995 and 1994, respectively.
Other Post-retirement Benefits
------------------------------
In addition to providing pension benefits, the Bank provides post-
retirement health care and life insurance benefits for substantially all
of the Bank's full-time employees and their beneficiaries and dependents
if they reach normal retirement age while working for the Bank.
The components of net periodic post-retirement benefit cost for the years
ended December 31, 1996, 1995, and 1994 are as follows (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
----- ---- ----
<S> <C> <C> <C>
Service cost $ 64 49 52
Interest cost 105 101 96
----- ---- ----
Total cost $ 169 150 148
===== ==== ====
</TABLE>
F-30
<PAGE>
LOCKPORT SAVINGS BANK
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(11) Benefit Plans, Continued
- ------------------------------
The accumulated post-retirement benefit obligation recognized as of
December 31, 1996 and 1995 is as follows (in thousands):
<TABLE>
<CAPTION>
1996 1995
------- -----
<S> <C> <C>
Fully eligible active participants $ 45 113
Active participants not yet eligible 427 423
Retirees 798 894
Unrecognized net gain 285 2
------ -----
Total accumulated post-retirement benefit obligation,
included in other liabilities $1,555 1,432
====== =====
</TABLE>
The post-retirement benefit obligation was determined using a discount rate
of 8.0% for 1996 and 7.5% for 1995. The assumed health care cost trend rate
used in measuring the accumulated post-retirement benefit obligation was 10%
in 1997, decreasing by 1% per year to an ultimate rate of 5.0% in 2002 and
thereafter, over the projected payout of benefits. The health care cost
trend rate assumption can have a significant effect on the amounts reported.
If the health care cost trend rate were increased one percent, the
accumulated post-retirement benefit obligation as of December 31, 1996 would
have increased by 2.3% and the aggregate of service and interest cost would
increase by 2.6%. However, the plan limits the increase in the Bank's annual
contributions to the plan for most participants to the increase in base
compensation for active employees.
As of January 1, 1994, the Bank adopted SFAS 106 "Employers' Accounting for
Post-retirement Benefits Other Than Pensions". The transition obligation
related to the adoption of this standard of $1,224,000 was recognized in the
1994 Consolidated Statement of Income, net of $300,000 previously accrued for
this liability.
Other Plans
-----------
The Bank also sponsors two non-qualified compensation plans, one for officers
and one for employees. Awards are payable if certain earnings and
performance objectives are met. The Bank had accrued $886,000 and $890,000
for awards under these plans for the nine month periods ended September 30,
1997 and 1996 (unaudited), respectively. Awards under these plans were
$1,202,000, $1,173,000 and $1,363,000 in 1996, 1995 and 1994, respectively.
The Bank also maintains a supplemental benefit plan for certain executive
officers that is funded by the Bank through life insurance contracts.
F-31
<PAGE>
LOCKPORT SAVINGS BANK
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(12) Fair Value of Financial Instruments
- ----------------------------------------
The carrying value and estimated fair values of the Bank's financial
instruments, all of which are non-trading, are as follows (in thousands):
<TABLE>
<CAPTION>
September 30, 1997
----------------------------
Estimated
Carrying fair
value value
-------- ---------
(unaudited)
<S> <C> <C>
Financial assets:
Cash and cash equivalents $ 17,004 17,004
Securities available for sale 464,973 464,973
Securities held to maturity 37,500 37,500
Loans 622,487 628,908
Accrued interest receivable 7,343 7,343
Financial liabilities:
Deposits $992,219 995,217
Mortgagors' payments held in escrow 8,387 8,387
Other borrowed funds 28,740 28,688
Accrued interest payable 558 558
Unrecognized financial instruments:
Commitments to extend credit $ 46,513 46,513
</TABLE>
<TABLE>
<CAPTION>
December 31, 1996
----------------------------
Estimated
Carrying fair
value value
-------- ---------
<S> <C> <C>
Financial assets:
Cash and cash equivalents $ 16,219 16,219
Securities available for sale 415,129 415,129
Securities held to maturity 38,000 38,000
Loans 598,486 604,000
Accrued interest receivable 6,348 6,348
Financial liabilities:
Deposits $920,072 923,796
Mortgagors' payments held in escrow 8,773 8,773
Other borrowed funds 32,008 31,863
Accrued interest payable 330 330
Unrecognized financial instruments:
Commitments to extend credit $ 34,193 34,193
</TABLE>
F-32
<PAGE>
LOCKPORT SAVINGS BANK
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(12) Fair Value of Financial Instruments, Continued
- ---- ----------------------------------------------
<TABLE>
<CAPTION>
December 31, 1995
-----------------------
Estimated
Carrying fair
value value
-------- ---------
<S> <C> <C>
Financial assets:
Cash and cash equivalents $ 31,374 31,374
Securities available for sale 346,410 346,410
Securities held to maturity 46,700 46,700
Loans 535,971 546,592
Accrued interest receivable 5,622 5,622
Nationar receivable 5,053 N/A
Financial liabilities:
Deposits $861,065 869,265
Mortgagors' payments held in escrow 10,189 10,189
Accrued interest payable 160 160
Unrecognized financial instruments:
Commitments to extend credit $ 30,583 30,583
</TABLE>
Fair value estimates are based on existing on and off balance sheet financial
instruments without attempting to estimate the value of anticipated future
business and the value of assets and liabilities that are not considered
financial instruments. In addition, the tax ramifications related to the
realization of the unrealized gains and losses can have a significant effect
on fair value estimates and have not been considered in these estimates.
Fair value estimates, methods, and assumptions are set forth below for each
type of financial instrument.
Fair value estimates are made at a specific point in time, based on relevant
market information and information about the financial instrument, including
judgments regarding future expected loss experience, current economic
conditions, risk characteristics of various financial instruments, and other
factors. These estimates are subjective in nature and involve uncertainties
and matters of significant judgment and therefore cannot be determined with
precision. Changes in assumptions could significantly affect the estimates.
Cash and Cash Equivalents
-------------------------
The carrying value approximates the fair value because the instruments mature
in 90 days or less.
Securities
----------
The fair values are estimated based on quoted market prices supplied by the
Bank's custody agent and investment broker (notes 2 and 3).
F-33
<PAGE>
LOCKPORT SAVINGS BANK
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(12) Fair Value of Financial Instruments, Continued
- ---- ----------------------------------------------
Loans
-----
Residential revolving home equity and personal and commercial open ended
lines of credit reprice as the prime rate changes. Therefore, the carrying
values of such loans, totaling $15.4 million (unaudited), $14.0 million
and $12.2 million at September 30, 1997, December 31, 1996 and 1995,
respectively, approximate their fair value.
The fair value of fixed-rate performing loans is calculated by discounting
scheduled cash flows through the estimated maturity using the Bank's
current origination rates. The estimate of maturity is based on the Bank's
contractual cash flows adjusted for prepayment estimates based on current
economic and lending conditions. Fair value for significant nonperforming
loans is based on carrying value which does not exceed recent external
appraisals of any underlying collateral.
Deposits
--------
The fair value of deposits with no stated maturity, such as savings, money
market, checking, as well as mortgagors' payments held in escrow, is equal
to the amount payable on demand as of September 30, 1997, December 31,
1996 and 1995. The fair value of certificates of deposit is based on the
discounted value of contractual cash flows, using rates currently offered
for deposits of similar remaining maturities.
Other Borrowed Funds
--------------------
The fair value of the Bank's other borrowed funds is calculated by
discounting scheduled cash flows through the estimated maturity using
current market rates.
Other Assets and Liabilities
----------------------------
The fair value of the Bank's accrued interest receivable on loans and
investments and accrued interest payable to depositors approximates the
carrying value because all interest is payable or receivable in 90 to 120
days.
Commitments to Extend Credit
-----------------------------
The fair value of the Bank's commitments to extend credit approximates the
notional amount of the agreements because of the short-term (90 to 120
days) commitment period or because they reprice as market rates change.
F-34
<PAGE>
LOCKPORT SAVINGS BANK
AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(13) Plan of Reorganization and Stock Issuance
- ---- -----------------------------------------
On September 15, 1997, the Board of Trustees of LSB unanimously adopted a
Plan of Reorganization (the Plan) whereby LSB will be reorganized into a
New York chartered two-tiered mutual holding company.
The Reorganization will be accomplished in the following manner: (i) LSB
will organize an interim stock savings bank as a wholly-owned subsidiary
("Interim One"); (ii) Interim One will organize an interim stock savings
bank as a wholly-owned subsidiary ("Interim Two"); (iii) Interim One will
organize Niagara Bancorp, Inc. (the Company) as a wholly-owned subsidiary;
(iv) LSB will exchange its charter for a New York stock savings bank
charter to become the Stock Bank and Interim One will exchange its charter
for a New York mutual holding company charter to become the MHC; (v)
simultaneously with step (iv), Interim Two will merge with and into the
Stock Bank with the Stock Bank as the resulting institution; (vi) all of
the initially issued stock of the Stock Bank will be transferred to the MHC
in exchange for membership interests in the MHC; and (vii) the MHC will
contribute the capital stock of the Stock Bank to the Company, and the
Stock Bank will become a wholly-owned subsidiary of the Company.
Contemporaneously with the Reorganization, the Company will offer for sale
in the Stock Offering shares of Common Stock representing the pro forma
market value of the Company and the Bank. Each savings account of LSB at
the time of Reorganization will become a savings account in the newly-
formed bank in the same amount and upon the same terms and conditions,
except the holder of each such deposit account will have liquidation rights
with respect to the Mutual Holding Company rather than the Bank.
LSB will be applying to the Federal Reserve Board, the New York State
Banking Department, the FDIC and the SEC for approval of transactions
contemplated by the Plan. The Plan authorizes the stock holding company to
offer stock in one or more stock offerings up to a maximum of 49% of the
issued and outstanding shares of its common stock. The common stock will be
offered on a priority basis to depositors, employee benefit plans of LSB,
certain other eligible subscribers, the community and a charitable
foundation to be established pursuant to the Plan.
The Company proposes to fund the foundation by contributing a number of
authorized but unissued shares of common stock or grants of cash,
securities or other assets to the foundation, immediately following the
conversion. Such contribution, once made, will not be recoverable by the
Company or the Stock Bank. The Company will recognize expense equal to the
fair value of the stock, cash, securities or other assets in the quarter in
which the contribution occurs, which is expected to be the first or second
quarter of 1998. Such expense will reduce earnings and have a material
impact on the Company's earnings for such quarter and for 1998.
The costs of the Reorganization and Offering will be deferred and reduce
the proceeds from the shares sold in the Offering. If the Reorganization
and Offering is not completed, all costs will be charged to expense.
F-35
<PAGE>
GLOSSARY
<TABLE>
<S> <C>
1933 Act Securities Act of 1933, as amended
1934 Act Securities Exchange Act of 1934, as amended
Associate The term "Associate" of a person is defined to mean
(i) any corporation or organization (other than the
Bank or its subsidiaries or the Company) of which
such person is a director, officer, partner or 10%
shareholder;
(ii) any trust or other estate in which such person
has a substantial beneficial interest or serves as
trustee or in a similar fiduciary capacity;
provided, however that such term shall not include
any employee stock benefit plan of the Company or
the Bank in which such a person has a substantial
beneficial interest or as a trustee or in a similar
fiduciary capacity, and
(iii) any relative or spouse of such person, or
relative of such spouse, who either has the same
home as such person or who is a director or officer
of the Bank or its subsidiaries or the Company
ATM Automated Teller Machine
Bank Lockport Savings Bank
BIF Bank Insurance Fund of the FDIC
Code The Internal Revenue Code of 1986, as amended
Community Offering Offering for sale to members of the general public
of any shares of common stock not subscribed for in
the Subscription Offering, with preference given to
natural persons residing in Niagara, Orleans, Erie
and Genesee Counties, New York
Common Stock Common Stock, par value of $.01 per share, offered
by Niagara Bancorp, Inc. in connection with the
Reorganization
Company Niagara Bancorp, Inc., the parent holding company
for Lockport Savings Bank, and the issuer of the
shares of Common Stock in the Offering
Department The New York State Banking Department
Eligible Account Holders Holders of deposit accounts with Lockport Savings
Bank with account balances of at least $100 as of
the close of business on August 31, 1996
ERISA Employee Retirement Income Security Act of 1974, as
amended
ESOP The Niagara Bancorp, Inc. Employee Stock Ownership
Plan and Trust
Estimated Valuation Range Estimated pro forma market value of the Common
Stock ranging from
</TABLE>
G-1
<PAGE>
<TABLE>
<S> <C>
$191,250,000 to $258,750,000. The estimated
valuation range may be increased to $297,562,500
without a resolicitation of subscribers
Expiration Date ______ noon, New York Time, on March ___, 1997
FASB Financial Accounting Standards Board
Federal Reserve Board Board of Governors of the Federal Reserve System
FDIC Federal Deposit Insurance Corporation
FDICIA Federal Deposit Insurance Corporation Improvement
Act of 1991, as amended
Freddie Mac Freddie Mac
FHLB of New York Federal Home Loan Bank of New York
Foundation The Lockport Savings Bank Charitable Foundation to
be established by Lockport Saving Bank and Niagara
Bancorp, Inc. and to which the Bank and the Company
will contribute cash and shares of Common Stock
FNMA Federal National Mortgage Association
Independent Valuation The appraisal of the pro forma market value of the
Company's Common Stock as determined by RP
Financial, LC as of November __, 1997
IRA Individual retirement account or arrangement
IRS Internal Revenue Service
Minority Shares The shares of Common Stock sold to the depositors
and the public in the Offering pursuant to the
Prospectus, which will represent, in the aggregate,
a minority ownership position in the Company
MMDA Money Market Demand Account
Mutual Holding Company Niagara Bancorp, MHC, a New York chartered mutual
corporation, which will own, and which by law must
own, a majority of the shares of Common Stock of
the Company
NASD National Association of Securities Dealers, Inc.
Nasdaq System National Association of Securities Dealers
Automated Quotation System
NOW account Negotiable Order of Withdrawal Account
NPV Net portfolio value
Offering The offer and sale of Common Stock to depositors
and the public pursuant to the Prospectus
</TABLE>
G-2
<PAGE>
<TABLE>
<S> <C>
Offering Range The offer and sale by the Company of between
8,677,747 and 11,740,482 shares (subject to
adjustment to 13,501,554 shares) of Common Stock
pursuant to the Prospectus
Order Form Form for ordering stock accompanied by a
certification concerning certain matters
Plan Reorganization Lockport Savings Bank Plan of Reorganization from a
Mutual Savings Bank to a Mutual Holding Company and
Stock Issuance Plan
Reorganization The reorganization of the Bank from the mutual to
the stock form of organization, the organization of
the Company, the issuance of all of the Bank's
common stock to the Company, the issuance of a
majority of the Company's Common Stock to the
Mutual Holding Company, and the offer and sale of
the Minority Shares to depositors and the public
pursuant to the Prospectus
REO Real Estate Owned
Recognition and
Retention Plan The Recognition and Retention Plan to be submitted
for approval at a meeting of the Company's
shareholders to be held no earlier than six months
after the completion of the Reorganization
SAIF Savings Association Insurance Fund of the FDIC
SEC Securities and Exchange Commission
Special Meeting Special Meeting of depositors of the Bank called
for the purpose of approving the Plan of
Reorganization
Stock Option Plan The Stock Option Plan for directors and officers to
be submitted for approval at a meeting of the
Company's shareholders to be held no earlier than
six months after the completion of the conversion
Subscription Offering Offering of non-transferable rights to subscribe
for the common stock, in order of priority, to
eligible account holders, the ESOP, and
supplemental eligible account holders
Supplemental Eligible
Account Holders Depositors of the Bank, who are not eligible
account holders, with account balances of at least
$100 on December 31, 1997
Superintendent The Superintendent of Banks of the State of New
York
Voting Record Date The close of business on January __, 1998, the date
for determining depositors entitled to vote at the
Special Meeting
</TABLE>
G-3
<PAGE>
================================================================================
No person has been authorized to give any information or to make any
representation other than as contained in this prospectus and, if given or made,
such information or representation must not be relied upon as having been
authorized by the Company or the Bank. This prospectus does not constitute an
offer to sell or the solicitation of an offer to buy any security other than the
shares of common stock offered hereby to any person in any jurisdiction in which
such offer or solicitation is not authorized, or in which the person making such
offer or solicitation is not qualified to do so, or to any person to whom it is
unlawful to make such offer or solicitation. Neither the delivery of this
prospectus nor any sale hereunder shall, under any circumstances, create any
implication that information herein is correct as of any time subsequent to the
date hereof.
Niagara Bancorp, Inc.
(Proposed Holding Company for
Lockport Savings Bank)
Up to 135,015,540.00 Shares
Common Stock
($.01 par value per share)
----------
PROSPECTUS
----------
CIBC OPPENHEIMER CORP.
TRIDENT SECURITIES, INC.
February , 1998
THESE SECURITIES ARE NOT DEPOSITS OR ACCOUNTS
AND ARE NOT FEDERALLY INSURED OR GUARANTEED
Until March __, 1998 or 25 days after the commencement of the Offering, all
dealers effecting transactions in the registered securities, whether or not
participating in this distribution, may be required to deliver a prospectus.
This is in addition to the obligation of dealers to deliver a prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.
<PAGE>
PART II: INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The information required hereunder has previously been provided.
Item 14. Indemnification of Directors and Officers
The information required hereunder has previously been provided.
Item 15. Recent Sales of Unregistered Securities.
Not Applicable.
Item 16. Exhibits and Financial Statement Schedules:
The exhibits and financial statement schedules filed as part of this
amended registration statement are as follows:
(a) List of Exhibits
1.1 Form of Agency Agreement among Niagara Bancorp, Inc., Lockport Savings
Bank, Trident Securities, Inc. and CIBC Oppenheimer Corp.
<PAGE>
2 Plan of Reorganization*
3.1 Certificate of Incorporation of Niagara Bancorp, Inc.
3.2 Bylaws of Niagara Bancorp, Inc.*
4 Form of Common Stock Certificate of Niagara Bancorp, Inc.*
5 Opinion of Luse Lehman Gorman Pomerenk & Schick, P.C. regarding legality
of securities being registered
8.1 Form of Federal Tax Opinion of Luse Lehman Gorman Pomerenk & Schick, P.C.
8.2 Form of State Tax Opinion.*
8.3 Letter from RP Financial, Inc. with respect to Subscription Rights
10.1 Form of Employment Agreement*
10.2 Lockport Savings Bank Deferred Compensation Plan*
10.3 Employee Stock Ownership Plan*
21 Subsidiaries of the Registrant*
23.1 Consent of Luse Lehman Gorman Pomerenk & Schick, P.C. (contained in opinion
filed as Exhibit 5)
23.2 Consents of KPMG Peat Marwick LLP
23.3 Consent of RP Financial, Inc.
24 Power of Attorney*
27 EDGAR Financial Data Schedule*
99.1 Appraisal Report of RP Financial, Inc.
99.2 Marketing Materials*
99.3 Order and Acknowledgment Form*
- -----------------
* Previously filed.
** To be filed by amendment.
(b) FINANCIAL STATEMENT SCHEDULES
No financial statement schedules are filed because the required
information is not applicable or is included in the consolidated financial
statements or related notes.
ITEM 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:
<PAGE>
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(4) To provide to the underwriter at the closing specified in the
underwriting agreements, certificates in such denominations and registered in
such names as required by the underwriter to permit prompt delivery to each
purchaser.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act, and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the questions whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Lockport, New York on February 1,
1998.
NIAGARA BANCORP, INC.
By: /s/ William E. Swan
-------------------
William E. Swan
President and Chief Executive Officer
(Duly Authorized Representative)
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in the
capacities and as of the dates indicated.
<TABLE>
<CAPTION>
Signatures Title Date
---------- ----- ----
<S> <C> <C>
/s/ William E. Swan President, and Chief Executive February 1, 1998
- ------------------- Officer (Principal Executive
William E. Swan Officer) and Director
/s/ Paul J. Kolkmeyer Executive Vice President and February 1, 1998
- --------------------- Chief Financial Officer
Paul J. Kolkmeyer (Principal Accounting Officer)
/s/ Gordon P. Assad* Director February 1, 1998
- -------------------
Gordan P. Assad
/s/ Christa P. Caldwell* Director February 1, 1998
- -----------------------
Christa P. Caldwell
/s/ James W. Currie* Director February 1, 1998
- -------------------
James W. Currie
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Signatures Title Date
---------- ----- ----
<S> <C> <C>
/s/ Gary B. Fitch* Director February 1, 1998
- ---------------------
Gary B. Fitch
/s/ David W. Heinrich* Director February 1, 1998
- ---------------------
David W. Heinrich
/s/ Daniel W. Judge* Director February 1, 1998
- ---------------------
Daniel W. Judge
/s/ B. Thomas Mancuso* Director February 1, 1998
- ---------------------
B. Thomas Mancuso
/s/ James Miklinski* Director February 1, 1998
- ---------------------
James Miklinski
/s/ Barton G. Smith* Director February 1, 1998
- ---------------------
Barton G. Smith
/s/ Robert G. Weber* Director February 1, 1998
- ---------------------
Robert G. Weber
</TABLE>
* Pursuant to Power of Attorney
<PAGE>
As filed with Securities and Exchange Commission on February 3, 1998
Registration No. 333-42977
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________________________
EXHIBITS
TO
PRE-EFFECTIVE
AMENDMENT NO. 1 TO
REGISTRATION STATEMENT
ON
FORM S-1
_________________________
NIAGARA BANCORP, INC.
================================================================================
<PAGE>
EXHIBIT INDEX
1.1 Form of Agency Agreement among Niagara Bancorp, Inc., Lockport Savings
Bank, Trident Securities, Inc. and CIBC Oppenheimer Corp.
2 Plan of Reorganization*
3.1 Certificate of Incorporation of Niagara Bancorp, Inc.
3.2 Bylaws of Niagara Bancorp, Inc.*
4 Form of Common Stock Certificate of Niagara Bancorp, Inc.*
5 Opinion of Luse Lehman Gorman Pomerenk & Schick, P.C. regarding legality
of securities being registered
8.1 Form of Federal Tax Opinion of Luse Lehman Gorman Pomerenk & Schick, P.C.
8.2 Form of State Tax Opinion.*
8.3 Letter from RP Financial, Inc. with respect to Subscription Rights
10.1 Form of Employment Agreement*
10.2 Lockport Savings Bank Deferred Compensation Plan*
10.3 Employee Stock Ownership Plan*
21 Subsidiaries of the Registrant*
23.1 Consent of Luse Lehman Gorman Pomerenk & Schick, P.C. (contained in
opinion filed as Exhibit 5)
23.2 Consents of KPMG Peat Marwick LLP
23.3 Consent of RP Financial Inc.
24 Power of Attorney*
27 EDGAR Financial Data Schedule*
99.1 Appraisal Report of RP Financial, Inc.
99.2 Marketing Materials*
99.3 Order and Acknowledge Form*
- ---------------------------
*Previously filed.
**To be filed by amendment.
<PAGE>
Exhibit 1.1
NIAGARA BANCORP, INC.
LOCKPORT SAVINGS BANK
8,677,747 to 11,740,482 Shares
Common Stock
(Par Value $.01 Per Share)
$10.00 Per Share
SALES AGENCY AGREEMENT
----------------------
February __, 1998
CIBC Oppenheimer Corp.
World Financial Center
New York, New York 10281
Trident Securities, Inc.
4601 Six Forks Road, Suite 400
Raleigh, North Carolina 27609
Dear Sirs:
Niagara Bancorp, Inc., a Delaware-chartered corporation (the "Company"),
Lockport Savings Bank, a New York chartered mutual savings bank (the "Bank") and
Niagara Bancorp, MHC, a New York chartered mutual holding company ("MHC"),
hereby confirm, as of December __, 1997, their respective agreements with CIBC
Oppenheimer Corp. ("CIBC Oppenheimer") and Trident Securities, Inc. ("Trident"),
broker-dealers registered with the Securities and Exchange Commission
("Commission") and members of the National Association of Securities Dealers,
Inc. ("NASD"), as follows:
1. Introductory. Under the Bank's plan of reorganization, adopted on
------------
________, 1997 (the "Plan"), the Company will be formed as a Delaware
corporation, a New York chartered mutual holding company will be formed, MHC
and the Bank will be reorganized into the capital stock form of organization
(together with the Offerings, as defined below, the "Reorganization"). In
accordance with the Plan, the Company is offering shares of its common stock,
par value $.01 per share (the "Shares" and the "Common Stock"), pursuant to
nontransferable subscription rights in a subscription offering (the
"Subscription Offering") to certain depositors and borrowers of the Bank, to
directors, officers and employees of the Bank, and to the Bank's tax-qualified
employee benefit plans (i.e., the Bank's Employee Stock Ownership Plan (the
"ESOP")). Concurrently with, during or promptly after the Subscription
Offering, shares of the Common Stock not sold in the Subscription Offering may
be offered to the general public in a community offering, with preference being
given to natural persons residing in Niagara, Orleans, Erie and Genesee
Counties, New York (the "Community Offering") (the Subscription and Community
Offerings are sometimes referred to collectively as the "Offerings"), subject to
the right of the Company and the Bank, in their absolute discretion, to reject
orders in the Community Offering in whole or in part. In the Offerings, the
Company is offering between 8,677,747 and 11,740,482 Shares, with the
possibility of offering up to 13,501,554 Shares without a resolicitation of
subscribers, as contemplated by Title 12 of the Code of Federal Regulations,
Part
<PAGE>
CIBC Oppenheimer Corp. and
Trident Securities, Inc.
Sales Agency Agreement
Page 2
303.15. Except for certain benefit plans, and certain larger depositors, no
person may purchase more than $200,000 of the Shares issued in the
Reorganization and no person, together with associates of and persons acting in
concert with such person, may purchase in the aggregate more than $400,000 of
the Shares issued in the Reorganization.
In connection with the Reorganization and pursuant to the terms of the Plan
as described in the Prospectus, immediately following the consummation of the
Reorganization, subject to the approval of the members of Bank and compliance
with certain conditions as may be imposed by regulatory authorities, the Company
will contribute an amount of Common Stock equal to 3% of the shares sold in the
Offerings to a charitable foundation (the "Foundation") such shares hereinafter
being referred to as the ("Foundation Shares"). The Company will also
contribute at that time an amount of cash equal to the value of 2% of the shares
sold in the Offerings.
The Company, MHC and the Bank have been advised by CIBC Oppenheimer and
Trident that they will utilize their best efforts in assisting the Company, MHC
and the Bank with the sale of the Shares in the Offerings and, if deemed
necessary by the Company in a syndicated public offering. Prior to the execution
of this Agreement, the Company has delivered to CIBC Oppenheimer and Trident the
Prospectus dated __________ __,1997 (as hereinafter defined) and all supplements
thereto to be used in the Offerings. Such Prospectus contains information with
respect to the Company, MHC, the Bank and the Shares.
2. Representations and Warranties.
------------------------------
(a) The Company, MHC and the Bank jointly and severally represent and
warrant to CIBC Oppenheimer and Trident that:
(i) The Company has filed with the Securities and Exchange
Commission (the "Commission") a registration statement, including
exhibits and an amendment or amendments thereto, on Form S-1 (No. 333-
______), including a Prospectus relating to the Offerings, for the
registration of the Shares and the Foundation Shares under the
Securities Act of 1933, as amended (the "Act"); and such registration
statement has become effective under the Act and no stop order has
been issued with respect thereto and no proceedings therefor have been
initiated or, to the Company's best knowledge, threatened by the
Commission. Except as the context may otherwise require, such
registration statement, as amended or supplemented, on file with the
Commission at the time the registration statement became effective,
including the Prospectus, financial statements, schedules, exhibits
and all other documents filed as part thereof, as amended and
supplemented, is herein called the "Registration Statement," and the
prospectus, as amended or supplemented, on file with the Commission at
the time the Registration Statement became effective is herein called
the "Prospectus," except that if the prospectus filed by the Company
with the Commission pursuant to Rule 424(b) of the general rules and
regulations of the
<PAGE>
CIBC Oppenheimer Corp. and
Trident Securities, Inc.
Sales Agency Agreement
Page 3
Commission under the Act (together with the enforceable published
policies and actions of the Commission thereunder, the "SEC
Regulations") differs from the form of prospectus on file at the time
the Registration Statement became effective, the term "Prospectus"
shall refer to the Rule 424(b) prospectus from and after the time it
is filed with or mailed for filing to the Commission and shall include
any amendments or supplements thereto from and after their dates of
effectiveness or use, respectively. If any Shares remain unsubscribed
following completion of the Subscription Offering and, if any, the
Community Offering, the Company (i) will promptly file with the
Commission a post-effective amendment to such Registration Statement
relating to the results of the Subscription Offering and, if any, the
Community Offering, any additional information with respect to the
proposed plan of distribution and any revised pricing information or
(ii) if no such post-effective amendment is required, will file with,
or mail for filing to, the Commission a prospectus or prospectus
supplement containing information relating to the results of the
Subscription and the Community Offerings and pricing information
pursuant to Rule 424(c) of the Regulations, in either case in a form
reasonably acceptable to the Company, CIBC Oppenheimer and Trident.
(ii) The Bank has filed an application for approval to convert
from the mutual form of ownership to the stock form of ownership with
the New York State Bank Department (the "Department") and the Federal
Deposit Insurance Corporation ("FDIC"). The Department and the FDIC
have approved the Bank's application, including the waiver of certain
provisions of regulations specified in such approval with respect to
the establishment of and contribution to the Foundation. The
Prospectus and the proxy statement for the solicitation of proxies
from members for the special meeting to approve the Plan (the "Proxy
Statement") included as part of the Bank's application to convert have
been approved for use by the Department and the FDIC. No order has
been issued by the Department or the FDIC preventing or suspending the
use of the Prospectus or the Proxy Statement; and no action by or
before the Department or the FDIC revoking such approvals is pending
or, to the Bank's best knowledge, threatened. Additionally, the MHC
and the Company have filed an application to register as a bank
holding company in the Federal Reserve Bank of New York ("FRB") and
has received approval from the FRB. (The Company, MHC and Bank
applications are hereinafter called the "Applications.")
(iii) At the date of the Prospectus and at all times subsequent
thereto through and including the Closing Date (i) the Registration
Statement and the Prospectus (as amended or supplemented, if amended
or supplemented) complied with the Act and the SEC Regulations, (ii)
the Registration Statement (as amended or supplemented, if amended or
supplemented) did not contain an untrue statement of a material fact
or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, and (iii) the
Prospectus (as
<PAGE>
CIBC Oppenheimer Corp. and
Trident Securities, Inc.
Sales Agency Agreement
Page 4
amended or supplemented, if amended or supplemented) did not contain
any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Representations or warranties in this subsection shall not
apply to statements or omissions made in reliance upon and in
conformity with written information furnished to the Company or the
Bank relating to CIBC Oppenheimer and Trident by or on behalf of CIBC
Oppenheimer and Trident expressly for use in the Registration
Statement or Prospectus.
(iv) The Company has been duly incorporated and is in good
standing as a Delaware corporation, MHC has been duly incorporated and
is in good standing as a New York chartered mutual holding company,
and the Bank has been duly organized and has a corporate existence as
a New York chartered mutual savings bank, and each of them is validly
existing under the laws of the jurisdiction of its organization with
full power and authority to own its property and conduct its business
as described in the Registration Statement and Prospectus; the Bank is
a member in good standing of the Federal Home Loan Bank of New York;
and the deposit accounts of the Bank are insured up to applicable
limits by the Bank Insurance Fund ("BIF") of the Federal Deposit
Insurance Corporation ("FDIC"). Each of the Company, MHC and the Bank
is not required to be qualified to do business as a foreign
corporation in any jurisdiction where non-qualification would have a
material adverse effect on the Company and the Bank, taken as a whole.
The Bank does not own equity securities of or an equity interest in
any business enterprise except as described in the Prospectus. Upon
amendment of the Bank's mutual charter and bylaws to stock chartered
bylaws, and completion of the sale by the Company of the Shares as
contemplated by the Prospectus, (i) the Bank will be converted
pursuant to the Plan to a New York chartered capital stock savings
bank with full power and authority to own its property and conduct its
business as described in the Prospectus, (ii) all of the authorized
and outstanding capital stock of the Bank will be owned of record and
beneficially by the Company, (iii) the Company will issue common stock
to MHC and the public and (iv) the Company will have no direct
subsidiaries other than the Bank.
(v) The Bank does not own equity securities of or an equity
interest in any business enterprise except as described in the
Prospectus.
(vi) The Bank has good, marketable and insurable title to all
assets material to its business and to those assets described in the
Prospectus as owned by it, free and clear of all material liens,
charges, encumbrances or restrictions, except for liens for taxes not
yet due, except as described in the Prospectus and except as could not
in the aggregate have a material adverse effect upon the operations or
financial condition of the Bank; and all of the leases and subleases
material to the operations or financial
<PAGE>
CIBC Oppenheimer Corp. and
Trident Securities, Inc.
Sales Agency Agreement
Page 5
condition of the Bank, under which it holds properties, including
those described in the Prospectus, are in full force and effect as
described therein.
(vii) The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby and all actions
in connection with the contribution to the Foundation have been duly
and validly authorized by all necessary actions on the part of each of
the Company, MHC and the Bank, and this Agreement is a valid and
binding obligation with valid execution and delivery of each of the
Company, MHC and the Bank, enforceable in accordance with its terms
(except as the enforceability thereof may be limited by bankruptcy,
insolvency, moratorium, reorganization or similar laws relating to or
affecting the enforcement of creditors' rights generally or the rights
of creditors of savings and loan holding companies the accounts of
whose subsidiaries are insured by the FDIC or by general equity
principles, regardless of whether such enforceability is considered in
a proceeding in equity or at law, and except to the extent that the
provisions of Sections 8 and 9 hereof may be unenforceable as against
public policy or pursuant to Sections 23A or 23B of the Federal
Reserve Act, 12 U.S. C. Sections 371c ("Section 23A" or 371c-1
("Section 23B")).
(viii) There is no litigation or governmental proceeding pending
or, to the best knowledge of the Company, MHC or the Bank, threatened
against or involving the Company, MHC, the Bank, or any of their
respective assets which individually or in the aggregate would
reasonably be expected to have a material adverse effect on the
condition (financial or otherwise), results of operations and
business, including the assets and properties, of the Company, MHC and
the Bank, taken as a whole.
(ix) The Company, MHC and the Bank have received the opinions
of Luse Lehman Gorman Pomerenk & Schick, P.C. with respect to federal
and New York State income tax consequences of the Reorganization, to
the effect that the Reorganization will constitute a tax-free
reorganization under the Internal Revenue Code of 1986, as amended,
and will not be a taxable transaction for the Bank or the Company
under the laws of New York, and the facts relied upon in such opinion
are accurate and complete.
(x) Each of the Company, MHC and the Bank has all such
corporate power, authority, authorizations, approvals and orders as
may be required to enter into this Agreement and to carry out the
provisions and conditions hereof and to issue and sell the shares in
the Offerings, and to issue and contribute the Foundation Shares,
subject to the limitations set forth herein and subject to the
satisfaction of certain conditions imposed by the Department, FDIC and
the FRB in connection with its approvals of the Applications, and
except as may be required under the securities, or "blue sky," laws of
various jurisdictions, and in the case of the Company, as of the
<PAGE>
CIBC Oppenheimer Corp. and
Trident Securities, Inc.
Sales Agency Agreement
Page 6
Closing Date, will have such approvals and orders to issue and sell
the Shares to be sold by the Company as provided herein, and in the
case of the Bank, as of the Closing Date, will have such approvals and
orders to issue and sell the Shares of its Common Stock to be sold to
the Company as provided in the Plan, subject to the issuance of
amended charter in the form required for New York State chartered
stock savings banks (the "Stock Charter'), the form of which Stock
Charter has been approved by the Department.
(xi) To the best of its knowledge, neither the Company, MHC
nor the Bank is in violation of any rule or regulation of the
Department or the FDIC that could reasonably be expected to result in
any enforcement action against the Company, MHC, the Bank, or their
officers or directors that might have a material adverse effect on the
financial condition, operations, businesses, assets or properties of
the Company, MHC and the Bank, taken as a whole.
(xii) The consolidated financial statements and any related
notes or schedules which are included in the Registration Statement
and the Prospectus fairly present the consolidated financial
condition, income, retained earnings and cash flows of the Bank at the
respective dates thereof and for the respective periods covered
thereby and comply as to form with the applicable accounting
requirements of the Regulations and the applicable accounting
regulations of the Department. Such financial statements have been
prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods involved, except as set
forth therein, and such financial statements are consistent with
financial statements and other reports filed by the Bank with
supervisory and regulatory authorities except as such generally
accepted accounting principles may otherwise require. The tables in
the Prospectus accurately present the information purported to be
shown thereby at the respective dates thereof and for the respective
periods therein.
(xiii) There has been no material change in the financial
condition, results of operations or business, including assets and
properties, of the Company, MHC and the Bank, taken as a whole, since
the latest date as of which such condition is set forth in the
Prospectus, except as set forth therein; and the capitalization,
assets, properties and business of each of the Company, MHC and the
Bank conform to the descriptions thereof contained in the Prospectus.
None of the Company, MHC nor the Bank has any material liabilities of
any kind, contingent or otherwise, except as set forth in the
Prospectus.
(xiv) There has been no breach or default (or the occurrence of
any event which, with notice or lapse of time or both, would
constitute a default) under, or creation or imposition of any lien,
charge or other encumbrance upon any of the properties or assets of
the Company, MHC and the Bank pursuant to any of the
<PAGE>
CIBC Oppenheimer Corp. and
Trident Securities, Inc.
Sales Agency Agreement
Page 7
terms, provisions or conditions of, any agreement, contract,
indenture, bond, debenture, note, instrument or obligation to which
the Company, MHC or the Bank is a party or by which any of them or any
of their respective assets or properties may be bound or is subject,
or violation of any governmental license or permit or any enforceable
published law, administrative regulation or order or court order,
writ, injunction or decree, which breach, default, encumbrance or
violation would have a material adverse effect on the financial
condition, operations, business, assets or properties of the Company,
MHC and the Bank taken as a whole; all agreements which are material
to the financial condition, results of operations or business of the
Company, MHC and the Bank taken as a whole are in full force and
effect, and no party to any such agreement has instituted or, to the
best knowledge of the Company, MHC and the Bank, threatened any action
or proceeding wherein the Company, MHC or the Bank would be alleged to
be in default thereunder.
(xv) None of the Company, MHC or the Bank is in violation of
its respective charter or bylaws. The execution and delivery hereof
and the consummation of the transactions contemplated hereby by the
Company, MHC and the Bank do not conflict with or result in a breach
of the charter or bylaws of the Company, MHC or the Bank (in either
mutual or stock form) or constitute a material breach of or default
(or an event which, with notice or lapse of time or both, would
constitute a default) under, give rise to any right of termination,
cancellation or acceleration contained in, or result in the creation
or imposition of any lien, charge or other encumbrance upon any of the
properties or assets of the Company, MHC or the Bank pursuant to any
of the terms, provisions or conditions of, any material agreement,
contract, indenture, bond, debenture, note, instrument or obligation
to which the Company, MHC or the Bank is a party or violate any
governmental license or permit or any enforceable published law,
administrative regulation, order or court order, writ, injunction or
decree (subject to the satisfaction of certain conditions imposed by
the Department in connection with its approval of the Reorganization
Application), which breach, default, encumbrance or violation would
have a material adverse effect on the financial condition, operations
or business of the Company, MHC and the Bank taken as a whole.
(xvi) Subsequent to the respective dates as of which
information is given in the Registration Statement and Prospectus and
prior to the Closing Date (as hereinafter defined), except as
otherwise may be indicated or contemplated therein, none of the
Company, MHC or the Bank has issued any securities which will remain
issued at the Closing Date or incurred any liability or obligation,
direct or contingent, or borrowed money, except borrowings in the
ordinary course of business, or entered into any other transaction not
in the ordinary course of business and consistent with prior
practices, which is material in light of the business of the Company,
MHC and the Bank, taken as a whole.
<PAGE>
CIBC Oppenheimer Corp. and
Trident Securities, Inc.
Sales Agency Agreement
Page 8
(xvii) Upon consummation of the Reorganization, the authorized,
issued and outstanding equity capital of the Bank shall be within the
range as set forth in the Prospectus under the caption
"Capitalization," and no Common Stock of the Bank shall be outstanding
immediately prior to the Closing Date; the issuance and the sale of
the Shares of the Bank and the Foundation Shares have been duly
authorized by all necessary action of the Bank and approved by the
Department and, when issued in accordance with the terms of the Plan
and paid for, shall be validly issued, fully paid and nonassessable
and shall conform to the description thereof contained in the
Prospectus; the issuance of the Shares or the Foundation Shares are
not subject to preemptive rights, except as set forth in the
Prospectus; and good title to the Shares will be transferred by the
Company upon issuance thereof against payment therefor, free and clear
of all claims, encumbrances, security interests and liens against the
Company whatsoever. The certificates representing the Shares and the
Foundation Shares will conform in all material respects with the
requirements of applicable laws and regulations. The issuance and
sale of the capital stock of the Bank to the Company and from the
Company to MHC and the public and the Foundation Shares has been duly
authorized by all necessary action of the Bank and the Company and
appropriate regulatory authorities (subject to the satisfaction of
various conditions imposed by the Department in connection with its
approval of the Reorganization Application), and such capital stock
and Foundation Shares, when issued in accordance with the terms of the
Plan, will be fully paid and nonassessable and will conform in all
material respects to the description thereof contained in the
Prospectus.
(xviii) No approval of any regulatory or supervisory or other
public authority is required in connection with the execution and
delivery of this Agreement or the issuance of the Shares, except for
the declaration of effectiveness of any required post-effective
amendment by the Commission and approval thereof by the Department and
the FDIC, and approval of MHC's and Company's applications by the FRB,
the issuance of the Stock Charter by the Department and as may be
required under the securities laws of various jurisdictions.
(xix) All material contracts and other documents required to be
filed as exhibits to the Registration Statement or the Reorganization
Application have been filed with the Commission and/or the Department
or the FRB, as the case may be.
(xx) KPMG Peat Marwick LLP, which has audited the consolidated
financial statements of the Bank at December 31, 1996 and 1995 and for
the years ended December 31, 1996, 1995 and 1994 included in the
Prospectus, is an independent public accountant within the meaning of
the Code of Professional Ethics of the American Institute of Certified
Public Accountants and Title 12 of the Code of Federal Regulations,
Section 303.15.
<PAGE>
CIBC Oppenheimer Corp. and
Trident Securities, Inc.
Sales Agency Agreement
Page 9
(xxi) For the past five years, the Company, MHC and the Bank
have timely filed all required federal, state and local franchise tax
returns, and no deficiency has been asserted with respect to such
returns by any taxing authorities, and the Company, MHC and the Bank
have paid all taxes that have become due and, to the best of their
knowledge, have made adequate reserves for similar future tax
liabilities, except where any failure to make such filings, payments
and reserves, or the assertion of such a deficiency, would not have a
material adverse effect on the condition of the Company, MHC and the
Bank taken as a whole.
(xxii) All of the loans represented as assets of the Bank on the
most recent financial statements of the Bank included in the
Prospectus meet or are exempt from all requirements of federal, state
or local law pertaining to lending, including without limitation truth
in lending (including the requirements of Regulation Z and 12 C.F.R.
Part 226 and Section 563.99), real estate settlement procedures,
consumer credit protection, equal credit opportunity and all
disclosure laws applicable to such loans, except for violations which,
if asserted, would not have a material adverse effect on the Company,
MHC and the Bank taken as a whole.
(xxiii) The records of account holders, depositors, borrowers
and other members of the Bank delivered to CIBC Oppenheimer and
Trident by the Bank or its agent for use during the Reorganization
have been prepared or reviewed by the Bank and, to the best knowledge
of the Company, MHC and the Bank, are reliable and accurate.
(xxiv) To the knowledge of the Company, MHC and the Bank, none
of the Company, the Bank nor directors or employees of the Company,
MHC or the Bank have made any payment of funds of the Company, MHC or
the Bank as a loan to any person other than the Employee Stock
Ownership Plan Trust for the purchase of the Shares.
(xxv) To the best knowledge of the Company, MHC and the Bank,
the Company, MHC and the Bank are in compliance with all laws, rules
and regulations relating to the discharge, storage, handling and
disposal of hazardous or toxic substances, pollutants or contaminants
and neither the Company, MHC nor the Bank believes that the Company,
MHC or the Bank is subject to liability under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as
amended, or any similar law, except for violations which, if asserted,
would not have a material adverse effect on the Company, MHC and the
Bank, taken as a whole. There are no actions, suits, regulatory
investigations or other proceedings pending or, to the best knowledge
of the Company, MHC or the Bank, threatened against the Company or the
Bank relating to the discharge, storage, handling and disposal of
hazardous or toxic substances, pollutants or contaminants. To the
best knowledge
<PAGE>
CIBC Oppenheimer Corp. and
Trident Securities, Inc.
Sales Agency Agreement
Page 10
of the Company, MHC and the Bank, no disposal, release or discharge of
hazardous or toxic substances, pollutants or contaminants, including
petroleum and gas products, as any of such terms may be defined under
federal, state or local law, has been caused by the Company, MHC or
the Bank or, to the best knowledge of the Company, MHC or the Bank,
has occurred on, in or at any of the facilities or properties of the
Company, MHC or the Bank, except such disposal, release or discharge
which would not have a material adverse effect on the Company, MHC and
the Bank, taken as a whole.
(xxvi) At the Closing Date, the Company, MHC and the Bank will
have completed the conditions precedent to, and shall have conducted
the Reorganization in all material respects in accordance with, the
Plan, the Department Regulations, FRB and all other applicable laws,
regulations, published decisions and orders, including all terms,
conditions, requirements and provisions precedent to the
Reorganization imposed by the Department and FRB.
(xxvii) The Foundation has been duly incorporated and is validly
existing as a private charitable foundation in good standing under the
laws of the State of Delaware with corporate power and authority to
own, lease and operate its properties and to conduct its business as
described in the Prospectus; the Foundation will not be a savings and
loan holding company within the meaning of 12 C.F.R. Section 574.2(q)
as a result of the issuance of the Foundation Shares to it in
accordance with the terms of the Plan and in the amounts as described
in the Prospectus to the knowledge of the Bank, MHC and the Company,
all approvals required to establish the Foundation and to contribute
the Foundation Shares thereto have been performed as described in the
Prospectus; except as specifically disclosed in the Prospectus and the
Proxy Statement, there are no agreements and/or understandings,
written or oral or otherwise, between the Company, MHC and/or the Bank
and the Foundation with respect to the control, directly or
indirectly, over the voting and the acquisition or disposition of the
shares of Common Stock to be contributed by the Company to the
Foundation; the Foundation Shares to be issued to the Foundation in
accordance with the Plan and as described in the Prospectus will have
been duly authorized for issuance and, when issued and contributed by
the Company pursuant to the Plan, will be duly and validly issued and
fully paid and non-assessable.
(b) CIBC Oppenheimer and Trident represents and warrants to the Company,
MHC and the Bank that:
(i) CIBC Oppenheimer and Trident are registered as broker-
dealers with the Commission, and are in good standing with the
Commission and the NASD.
<PAGE>
CIBC Oppenheimer Corp. and
Trident Securities, Inc.
Sales Agency Agreement
Page 11
(ii) CIBC Oppenheimer is validly existing as a corporation in
good standing under the laws of New York, with full corporate power
and authority to provide the services to be furnished to the Company
and the Bank hereunder. Trident is validly existing as a corporation
in good standing under the laws of North Carolina, with full corporate
power and authority to provide the services to be furnished to the
Company, MHC and the Bank hereunder.
(iii) The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly
and validly authorized by all necessary action on the part of CIBC
Oppenheimer and Trident, and this Agreement is a legal, valid and
binding obligation of CIBC Oppenheimer and Trident, enforceable in
accordance with its terms (except as the enforceability thereof may be
limited by bankruptcy, insolvency, moratorium, reorganization or
similar laws relating to or affecting the enforcement of creditors'
rights generally or the rights of creditors of registered broker-
dealers accounts of whose may be protected by the Securities Investor
Protection Corporation or by general equity principles, regardless of
whether such enforceability is considered in a proceeding in equity or
at law, and except to the extent that the provisions of Sections 8 and
9 hereof may be unenforceable as against public policy or pursuant to
Section 23A or Section 23B).
(iv) Each of CIBC Oppenheimer and Trident and, to Oppenheimer's
and Trident's knowledge, its employees, agents and representatives who
shall perform any of the services required hereunder to be performed
by CIBC Oppenheimer and Trident shall be duly authorized and shall
have all licenses, approvals and permits necessary to perform such
services, and CIBC Oppenheimer and Trident are a registered selling
agents in the jurisdictions listed in Exhibit A hereto and will remain
registered in such jurisdictions in which the Company is relying on
such registration for the sale of the Shares, until the Reorganization
is consummated or terminated.
(v) The execution and delivery of this Agreement by CIBC
Oppenheimer and Trident, the fulfillment of the terms set forth herein
and the consummation of the transactions contemplated hereby shall not
violate or conflict with the corporate charter or bylaws of CIBC
Oppenheimer and Trident or violate, conflict with or constitute a
breach of, or default (or an event which, with notice or lapse of
time, or both, would constitute a default) under, any material
agreement, indenture or other instrument by which CIBC Oppenheimer and
Trident are bound or under any governmental license or permit or any
law, administrative regulation, authorization, approval or order or
court decree, injunction or order.
(vi) Any funds received by CIBC Oppenheimer and Trident to
purchase Common Stock will be handled in accordance with Rule 15c2-4
under the Securities Exchange Act of 1934, as amended (the "Exchange
Act").
<PAGE>
CIBC Oppenheimer Corp. and
Trident Securities, Inc.
Sales Agency Agreement
Page 12
(vii) There is not now pending or, to CIBC Oppenheimer and
Trident's knowledge, threatened against CIBC Oppenheimer and Trident
any action or proceeding before the Commission, the NASD, any state
securities commission or any state or federal court concerning
Oppenheimer's and Trident's activities as broker-dealers.
3. Employment of CIBC Oppenheimer and Trident: Sale and Delivery of the
--------------------------------------------------------------------
Shares. On the basis of the representations and warranties herein contained,
- ------
but subject to the terms and conditions herein set forth, the Company, MHC and
the Bank hereby employ CIBC Oppenheimer and Trident as their agents to utilize
their efforts in assisting the Company with the Company's sale of the Shares in
the Subscription Offering and Community Offering.
In the event the Company is unable to sell a minimum of 8,677,747 Shares
(or such lesser amount as the Department may permit) within the period herein
provided, this Agreement shall terminate, and the Company, MHC and the Bank
shall refund promptly to any persons who have subscribed for any of the Shares,
the full amount which it may have received from them, together with interest as
provided in the Prospectus, and no party to this Agreement shall have any
obligation to the other party hereunder, except as set forth in Sections 6, 8(a)
and 9 hereof. Appropriate arrangements for placing the funds received from
subscriptions for Shares in special interest-bearing accounts with the Bank
until all Shares are sold and paid for were made prior to the commencement of
the Subscription and Community Offering, with provision for prompt refund to the
purchasers as set forth above, or for delivery to the Company if all Shares are
sold.
If all conditions precedent to the consummation of the Reorganization are
satisfied, including the sale of all Shares required by the Plan to be sold, the
Company agrees to issue or have issued such Shares and to release for delivery
certificates to subscribers thereof for such Shares on the Closing Date against
payment to the Company by any means authorized pursuant to the Prospectus, at
the principal office of the Company at 6950 South Transit Road, Lockport, New
York 14095-0514 or at such other place as shall be agreed upon between the
parties hereto. The date upon which CIBC Oppenheimer and Trident are paid the
compensation due hereunder is herein called the "Closing Date."
CIBC Oppenheimer and Trident agree either (a) upon receipt of an executed
order form of a subscriber to forward the offering price of the Common Stock
ordered on or before twelve noon on the next business day following receipt or
execution of an order form by CIBC Oppenheimer and Trident to the Bank for
deposit in a segregated account or (b) to solicit indications of interest in
which event (i) CIBC Oppenheimer and Trident will subsequently contact any
potential subscriber indicating interest to confirm the interest and give
instructions to execute and return an order form or to receive authorization to
execute the order form on the subscribers behalf, (ii) CIBC Oppenheimer and
Trident will mail acknowledgments of receipt of orders to each subscriber
confirming interest on the business day following such confirmation, (iii) CIBC
Oppenheimer and Trident will debit accounts of such subscribers on the third
business day ("debit date") following
<PAGE>
CIBC Oppenheimer Corp. and
Trident Securities, Inc.
Sales Agency Agreement
Page 13
receipt of the confirmation referred to in (i), and (iv) CIBC Oppenheimer and
Trident will forward completed order forms together with such funds to the Bank
on or before twelve noon on the next business day following the debit date for
deposit in a segregated account. CIBC Oppenheimer and Trident acknowledges that
if the procedure in (b) is adopted, subscribers' funds are not required to be in
their accounts until the debit date.
In addition to the expenses specified in Section 6 hereof, CIBC Oppenheimer
and Trident shall receive the following compensation for its services hereunder:
(a) A commission equal to ninety-five basis points (.95%) of the aggregate
dollar amount of Common Stock sold in the Offerings, excluding any shares of
stock sold to the Bank's trustees, executive officers and ESOP. Additionally,
commissions are excluded on sales of Common Stock to "Associates" (as defined in
the Bank's Plan) of the Bank's trustees and executive officers. A commission
will also be paid equal to seventy-five basis points (.75%) of the aggregate
dollar amount of stock sold in the Offerings to persons who reside outside of
Niagara, Orleans, Erie and Genesee counties. The total compensation paid to
CIBC Oppenheimer and Trident shall not exceed $1 million.
(b) For stock sold by other NASD member firms under selected dealer's
agreements, the commission shall not exceed four and one-half percent (4.5%).
(c) CIBC Oppenheimer and Trident shall be reimbursed for allowable
expenses, incurred by them whether or not the Offerings are successfully
completed; provided, however, that reimbursable legal fees (non "Blue Sky"
related matters) will not exceed $40,000 exclusive of disbursements, that other
reimbursable expenses will not exceed $25,000 and that neither the Company nor
the Bank shall pay or reimburse CIBC Oppenheimer and Trident for any of the
foregoing expenses accrued after CIBC Oppenheimer and Trident shall have
notified the Company or the Bank of its election to terminate this Agreement
pursuant to Section 11 hereof or after such time as the Company or the Bank
shall have given notice in accordance with Section 12 hereof that CIBC
Oppenheimer and Trident are in breach of this Agreement. Full payment to defray
Oppenheimer's and Trident's reimbursable expenses shall be made in next-day
funds on the Closing Date or, if the Reorganization is not completed and is
terminated for any reason, within ten (10) business days of receipt by the
Company of a written request from CIBC Oppenheimer and Trident for reimbursement
of its expenses. CIBC Oppenheimer and Trident each acknowledge receipt of
$10,000 advance payment from the Bank which shall be credited against the total
reimbursement due CIBC Oppenheimer and Trident hereunder.
(d) Notwithstanding the limitations on reimbursement of CIBC Oppenheimer
and Trident for allocable expenses provided in the immediately preceding
paragraph (c), in the event that a resolicitation or other event causes the
Offerings to be extended beyond their original expiration date, CIBC Oppenheimer
and Trident shall be reimbursed for their allocable expenses incurred during
such
<PAGE>
CIBC Oppenheimer Corp. and
Trident Securities, Inc.
Sales Agency Agreement
Page 14
extended period, provided that the allowance for allowable expenses provided for
in the immediately preceding paragraph (c) above have been exhausted and subject
to the following.
The Company shall pay any stock issue and transfer taxes which may be
payable with respect to the sale of the Shares. The Company and the Bank shall
also pay all expenses of the Reorganization incurred by them or on their prior
approval including but not limited to their attorneys' fees, NASD filing fees,
and attorneys' fees relating to any required state securities laws research and
filings, telephone charges, air freight, rental equipment, supplies, transfer
agent charges, fees relating to auditing and accounting and costs of printing
all documents necessary in connection with the Reorganization.
4. Offering. Subject to the provisions of Section 7 hereof, CIBC
--------
Oppenheimer and Trident is assisting the Company on a best efforts basis in
offering a minimum of 8,677,747 and a maximum of 11,740,482 Shares, with the
possibility of offering up to 13,501,554 Shares (except as the Department and
the FDIC may permit such amount to be decreased or increased) in the
Subscription and Community Offerings. The Shares are to be offered to the
public at the price set forth on the cover page of the Prospectus and the first
page of this Agreement.
5. Further Agreements. The Company, MHC and the Bank jointly and
------------------
severally covenant and agree that:
(a) The Company shall deliver to CIBC Oppenheimer and Trident, from time to
time, such number of copies of the Prospectus as CIBC Oppenheimer and Trident
reasonably may request. The Company authorizes CIBC Oppenheimer and Trident to
use the Prospectus in any lawful manner in connection with the offer and sale of
the Shares.
(b) The Company will notify CIBC Oppenheimer and Trident immediately upon
discovery, and confirm the notice in writing, (i) when any post-effective
amendment to the Registration Statement becomes effective or any supplement to
the Prospectus has been filed, (ii) of the issuance by the Commission of any
stop order relating to the Registration Statement or of the initiation or the
threat of any proceedings for that purpose, (iii) of the receipt of any notice
with respect to the suspension of the qualification of the Shares for offering
or sale in any jurisdiction, and (iv) of the receipt of any comments from the
staff of the Commission relating to the Registration Statement. If the
Commission enters a stop order relating to the Registration Statement at any
time, the Company will make every reasonable effort to obtain the lifting of
such order at the earliest possible moment.
(c) During the time when a prospectus is required to be delivered under the
Act, the Company will comply so far as it is able with all requirements imposed
upon it by the Act, as now in effect and hereafter amended, and by the
Regulations, as from time to time in force, so far as necessary to permit the
continuance of offers and sales of or dealings in the Shares in accordance with
the provisions hereof and the Prospectus. If during the period when the
Prospectus is required to be delivered in connection with the offer and sale of
the Shares any event relating to or affecting the
<PAGE>
CIBC Oppenheimer Corp. and
Trident Securities, Inc.
Sales Agency Agreement
Page 15
Company, MHC and the Bank, taken as a whole, shall occur as a result of which it
is necessary, in the opinion of counsel for CIBC Oppenheimer and Trident, with
the concurrence of counsel to the Company, to amend or supplement the Prospectus
in order to make the Prospectus not false or misleading in light of the
circumstances existing at the time it is delivered to a purchaser of the Shares,
the Company forthwith shall prepare and furnish to CIBC Oppenheimer and Trident
a reasonable number of copies of an amendment or amendments or of a supplement
or supplements to the Prospectus (in form and substance satisfactory to counsel
for CIBC Oppenheimer and Trident) which shall amend or supplement the Prospectus
so that, as amended or supplemented, the Prospectus shall not contain an untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements therein, in light of the circumstances existing at the
time the Prospectus is delivered to a purchaser of the Shares, not misleading.
The Company will not file or use any amendment or supplement to the Registration
Statement or the Prospectus of which CIBC Oppenheimer and CIBC Oppenheimer and
Trident have not first been furnished a copy or to which CIBC Oppenheimer and
Trident shall reasonably object after having been furnished such copy. For the
purposes of this subsection the Company and the Bank shall furnish such
information with respect to themselves as CIBC Oppenheimer and Trident from time
to time may reasonably request.
(d) The Company, MHC and the Bank have taken or will take all reasonably
necessary action as may be required to qualify or register the Shares for offer
and sale by the Company under the securities or blue sky laws of such
jurisdictions as CIBC Oppenheimer and Trident and either the Company or its
counsel may agree upon; provided, however, that the Company shall not be
obligated to qualify as a foreign corporation to do business under the laws of
any such jurisdiction. In each jurisdiction where such qualification or
registration shall be effected, the Company, unless CIBC Oppenheimer and Trident
agrees that such action is not necessary or advisable in connection with the
distribution of the Shares, shall file and make such statements or reports as
are, or reasonably may be, required by the laws of such jurisdiction.
(e) Appropriate entries will be made in the financial records of the Bank
sufficient to establish a liquidation account for the benefit of eligible
account holders as of August 31, 1996 and supplemental eligible account holders
as of December 31, 1997 in accordance with the requirements of the Department
and the FDIC.
(f) The Company will file a registration statement for the Common Stock
under Section 12(g) of the Exchange Act, prior to completion of the stock
offering pursuant to the Plan and shall request that such registration statement
be effective upon completion of the Reorganization. The Company shall maintain
the effectiveness of such registration for a minimum period of three years or
for such shorter period as may be required by applicable law.
(g) The Company will make generally available to its security holders as
soon as practicable, but not later than 45 days after the close of the period
covered thereby, an earnings statement (in form complying with the provisions of
Rule 158 of the regulations promulgated under
<PAGE>
CIBC Oppenheimer Corp. and
Trident Securities, Inc.
Sales Agency Agreement
Page 16
the Act) covering a twelve-month period beginning not later than the first day
of the Company's fiscal quarter next following the effective date (as defined in
said Rule 158) of the Registration Statement.
(h) For a period of three (3) years from the date of this Agreement (unless
the Common Stock shall have been deregistered under the Exchange Act), the
Company will furnish to CIBC Oppenheimer and Trident, as soon as publicly
available after the end of each fiscal year, a copy of its annual report to
shareholders for such year; and the Company will furnish to CIBC Oppenheimer and
Trident (i) as soon as publicly available, a copy of each report or definitive
proxy statement of the Company filed with the Commission under the Exchange Act
or mailed to shareholders, and (ii) from time to time, such other public
information concerning the Company as CIBC Oppenheimer and Trident may
reasonably request.
(i) The Company shall use the net proceeds from the sale of the Shares
consistently with the manner set forth in the Prospectus.
(j) The Company shall not deliver the Shares until each and every condition
set forth in Section 7 hereof has been satisfied, unless such condition is
waived by CIBC Oppenheimer and Trident.
(k) The Company shall advise CIBC Oppenheimer and Trident, if necessary, as
to the allocation of deposits, in the case of eligible account holders and
supplemental eligible account holders and votes, in the case of other members,
and of the Shares in the event of an oversubscription and shall provide CIBC
Oppenheimer and Trident final instructions as to the allocation of the Shares
("Allocation Instructions") in such event and such information shall be accurate
and reliable. CIBC Oppenheimer and Trident shall be entitled to rely on such
instructions and shall have no liability in respect of its reasonable reliance
thereon, including without limitation, no liability for or related to any denial
or grant of a subscription in whole or in part.
(1) The Company, MHC and the Bank will take such actions and furnish such
information as are reasonably requested by CIBC Oppenheimer and Trident in order
for CIBC Oppenheimer and Trident to ensure compliance with the NASD's
"Interpretation Relating to Free-Riding and withholding."
(m) The Company, MHC and the Bank shall use their best efforts to ensure
that the Foundation submits within the time frames required by applicable law a
request to the Internal Revenue Service to be recognized as a tax-exempt
organization under Section 501(c)(3) of the Internal Revenue Code of 1986, as
amended (the "Code"); the Company, MHC and the Bank will take no action which
will result in the possible loss of the Foundation's tax-exempt status; and
neither the Company, MHC nor the Bank will contribute any additional assets to
the Foundation until such time that such additional contributions will be
deductible for federal and state income tax purposes.
<PAGE>
CIBC Oppenheimer Corp. and
Trident Securities, Inc.
Sales Agency Agreement
Page 17
6. Payment of Expenses. Whether or not the Reorganization is
-------------------
consummated, the Company, MHC and the Bank shall pay or reimburse CIBC
Oppenheimer and Trident for (a) all filing fees paid or incurred by CIBC
Oppenheimer and Trident in connection with all filings with the NASD with
respect to the Subscription and Community Offerings and, (b) in addition, if the
Company is unable to sell a minimum of 8,677,747 Shares or such lesser amount as
the Department may permit or the Reorganization is otherwise terminated, the
Company and the Bank shall reimburse CIBC Oppenheimer and Trident for allowable
expenses incurred by CIBC Oppenheimer and Trident relating to the offering of
the Shares as provided in Section 3 hereof; provided, however, that neither the
Company nor the Bank shall pay or reimburse CIBC Oppenheimer and Trident for any
of the foregoing expenses accrued after CIBC Oppenheimer and Trident shall have
notified the Company or the Bank of its election to terminate this Agreement
pursuant to Section 11 hereof or after such time as the Company or the Bank
shall have given notice in accordance with Section 12 hereof that CIBC
Oppenheimer and Trident are in breach of this Agreement.
7. Conditions of Oppenheimer's and Trident's Obligations. Except as may
-----------------------------------------------------
be waived by CIBC Oppenheimer and Trident, the obligations of CIBC Oppenheimer
and Trident as provided herein shall be subject to the accuracy of the
representations and warranties contained in Section 2 hereof as of the date
hereof and as of the Closing Date, to the performance by the Company, MHC and
the Bank of their obligations hereunder and to the following conditions:
(a) At the Closing Date, CIBC Oppenheimer and Trident shall receive the
favorable opinion of Luse, Lehman, Gorman, Pomerenk & Schick, special counsel
for the Company and the Bank, dated the Closing Date, addressed to CIBC
Oppenheimer and Trident, in form and substance reasonably satisfactory to
counsel for CIBC Oppenheimer and Trident substantially as set forth in Exhibit B
hereto.
In rendering such opinions, such counsel may rely as to matters of fact on
certificates of officers and directors of the Company, MHC and the Bank and
certificates of public officials delivered pursuant hereto. Such counsel may
assume that any agreement is the valid and binding obligation of any parties to
such agreement other than the Company, MHC and the Bank. Such opinions may be
governed by, and interpreted in accordance with, the Legal Opinion Accord (the
"Accord") of the ABA Section of Business Law (1991), and, as a consequence,
references in such opinions to such counsel's "knowledge" may be limited to
"actual knowledge" as defined in the Accord (or knowledge based on
certificates). Such opinions may be limited to present statutes, regulations
and judicial interpretations and to facts as they presently exist; in rendering
such opinions, such counsel need assume no obligation to revise or supplement
them should the present laws be changed by legislative or regulatory action,
judicial decision or otherwise; and such counsel need express no view, opinion
or belief with respect to whether any proposed or pending legislation, if
enacted, or any regulations or any policy statements issued by any regulatory
agency, whether or not promulgated pursuant to any such legislation, would
affect the validity of the execution and delivery by the Company, MHC and the
Bank of this Agreement or the issuance of the Shares.
<PAGE>
CIBC Oppenheimer Corp. and
Trident Securities, Inc.
Sales Agency Agreement
Page 18
(b) At the Closing Date, CIBC Oppenheimer and Trident shall receive the
letter of Luse, Lehman, Gorman, Pomerenk & Schick, dated the Closing Date,
addressed to CIBC Oppenheimer and Trident, in form and substance reasonably
satisfactory to counsel for CIBC Oppenheimer and Trident substantially as set
forth in Exhibit C, hereto:
(c) Counsel for CIBC Oppenheimer and Trident shall have been furnished such
documents as they reasonably may require for the purpose of enabling them to
review or pass upon the matters required by CIBC Oppenheimer and Trident, and
for the purpose of evidencing the accuracy, completeness or satisfaction of any
of the representations, warranties or conditions herein contained, including but
not limited to, resolutions of the Board of Directors of the Company, MHC and
the Bank regarding the authorization of this Agreement and the transactions
contemplated hereby.
(d) Prior to and at the Closing Date, in the reasonable opinion of CIBC
Oppenheimer and Trident, (i) there shall have been no material change in the
financial condition, business or results of operations of the Company, MHC and
the Bank, taken as a whole, since the latest date as of which such condition is
set forth in the Prospectus, except as referred to therein; (ii) there shall
have been no transaction entered into by the Company, MHC and the Bank after the
latest date as of which the financial condition of the Company, MHC or the Bank
is set forth in the Prospectus other than transactions referred to or
contemplated therein, transactions in the ordinary course of business, and
transactions which are not material to the Company, MHC and the Bank, taken as a
whole; (iii) none of the Company, MHC or the Bank shall have received from the
Department, FRB or Commission any direction (oral or written) to make any change
in the method of conducting their respective businesses which is material to the
business of the Company, MHC and the Bank, taken as a whole, with which they
have not complied; (iv) no action, suit or proceeding, at law or in equity or
before or by any federal or state commission, board or other administrative
agency, shall be pending or threatened against the Company, MHC or the Bank or
affecting any of their respective assets, wherein an unfavorable decision,
ruling or finding would have a material adverse effect on the business,
operations, financial condition or income of the Company, MHC and the Bank,
taken as a whole; and (v) the Shares shall have been qualified or registered for
offering and sale by the Company under the securities or blue sky laws of such
jurisdictions as CIBC Oppenheimer and Trident and the Company shall have agreed
upon.
(e) At the Closing Date, CIBC Oppenheimer and Trident shall receive a
certificate of the principal executive officer and the principal financial
officer of each of the Company, MHC and the Bank, dated the Closing Date, to the
effect that: (i) they have examined the Prospectus and, at the time the
Prospectus became authorized by the Company for use, the Prospectus did not
contain an untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading with respect to the Company, MHC or
the Bank; (ii) since the date the Prospectus became authorized by the Company
for use, no event has occurred which should have been set forth in an amendment
or supplement to the Prospectus which has not been so set forth, including
specifically, but without limitation, any material change in the business,
financial condition or results of operations of the
<PAGE>
CIBC Oppenheimer Corp. and
Trident Securities, Inc.
Sales Agency Agreement
Page 19
Company, MHC or the Bank and, the conditions set forth in clauses (ii) through
(iv) inclusive of subsection (d) of this Section 7 have been satisfied; (iii) to
the best knowledge of such officers, no order has been issued by the Commission,
FRB, FDIC or the Department to suspend the Subscription Offering or the
Community Offering or the effectiveness of the Prospectus, and no action for
such purposes has been instituted or threatened by the Commission or the
Department; (iv) to the best knowledge of such officers, no person has sought to
obtain review of the final actions of the FDIC, Department or FRB approving the
Plan; and (v) all of the representations and warranties contained in Section 2
of this Agreement are true and correct, with the same force and effect as though
expressly made on the Closing Date.
At the Closing Date, CIBC Oppenheimer and Trident shall receive, among
other documents, (i) copies of the letters from the FDIC and the Department
authorizing the use of the Prospectus and the Proxy Statement, (ii) a copy of
the order of the Commission declaring the Registration Statement effective;
(iii) copies of the letters from the Department evidencing the corporate
existence of the Bank and MHC; (iv) a copy of the letter from the appropriate
Delaware authority evidencing the incorporation (and, if generally available
from such authority, good standing) of the Company; (v) a copy of the Company's
corporate charter certified by the appropriate Delaware governmental authority;
and, (vi) if available, a copy of the letter from the Department approving the
Bank's Stock Charter.
(g) As soon as available after the Closing Date, CIBC Oppenheimer and
Trident shall receive a copy of the Bank's certified New York State Stock
Charter executed by the appropriate state governmental authority.
(h) Concurrently with the execution of this Agreement, CIBC Oppenheimer and
Trident acknowledges receipt of a letter from KPMG Peat Marwick, LLP,
independent certified public accountants, addressed to CIBC Oppenheimer and
Trident and the Company, in substance and form satisfactory to counsel for CIBC
Oppenheimer and Trident, with respect to the financial statements and certain
financial information contained in the Prospectus.
(i) At the Closing Date, CIBC Oppenheimer and Trident shall receive a
letter in form and substance satisfactory to counsel for CIBC Oppenheimer and
Trident from KPMG Peat Marwick, LLP, independent certified public accountants,
dated the Closing Date and addressed to CIBC Oppenheimer and Trident and the
Company, confirming the statements made by them in the letter delivered by them
pursuant to the preceding subsection as of a specified date not more than five
(5) days prior to the Closing Date.
All such opinions, certificates, letters and documents shall be in
compliance with the provisions hereof only if they are, in the reasonable
opinion of CIBC Oppenheimer and Trident and their counsel, satisfactory to CIBC
Oppenheimer and Trident and their counsel. Any certificates
<PAGE>
CIBC Oppenheimer Corp. and
Trident Securities, Inc.
Sales Agency Agreement
Page 20
signed by an officer or director of the Company or the Bank prepared for
Oppenheimer's and Trident's reliance and delivered to CIBC Oppenheimer and
Trident or to counsel for CIBC Oppenheimer and Trident shall be deemed a
representation and warranty by the Company, MHC and the Bank to CIBC Oppenheimer
and Trident as to the statements made therein. If any condition to Oppenheimer's
and Trident's obligations hereunder to be fulfilled prior to or at the Closing
Date is not so fulfilled, CIBC Oppenheimer and Trident may terminate this
Agreement or, if CIBC Oppenheimer and Trident so elects, may waive any such
conditions which have not been fulfilled, or may extend the time of their
fulfillment. If CIBC Oppenheimer and Trident terminate this Agreement as
aforesaid, the Company, MHC and the Bank shall reimburse CIBC Oppenheimer and
Trident for their expenses as provided in Section 3(b) hereof.
8. Indemnification.
---------------
(a) The Company, MHC and the Bank jointly and severally agree to
indemnify and hold harmless CIBC Oppenheimer and Trident, its officers,
directors and employees and each person, if any, who controls CIBC
Oppenheimer and Trident within the meaning of Section 15 of the Act or
Section 20(a) of the Exchange Act, against any and all loss, liability,
claim, damage and expense whatsoever and shall further promptly reimburse
such persons for any legal or other expenses reasonably incurred by each or
any of them in investigating, preparing to defend or defending against any
such action, proceeding or claim (whether commenced or threatened) arising
out of or based upon (A) any misrepresentation by the Company, MHC or the
Bank in this Agreement or any breach of warranty by the Company, MHC or the
Bank with respect to this Agreement or arising out of or based upon any
untrue or alleged untrue statement of a material fact or the omission or
alleged omission of a material fact required to be stated or necessary to
make not misleading any statements contained in (i) the Registration
Statement or the Prospectus or (ii) any application (including the
Applications or other document or communication (in this Section 8
collectively called "Application") prepared or executed by or on behalf of
the Company, MHC or the Bank or based upon written information furnished by
or on behalf of the Company, MHC or the Bank, whether or not filed in any
jurisdiction, to effect the Reorganization or qualify the Shares under the
securities laws thereof or filed with the Department, FRB or Commission,
unless such statement or omission was made in reliance upon and in
conformity with written information furnished to the Company, MHC or the
Bank with respect to CIBC Oppenheimer and Trident by or on behalf of CIBC
Oppenheimer and Trident expressly for use in the Prospectus or any
amendment or supplement thereof or in any Application, as the case may be,
or (B) the participation by CIBC Oppenheimer and Trident in the
Reorganization. This indemnity shall be in addition to any liability the
Company, MHC and the Bank may have to CIBC Oppenheimer and Trident
otherwise.
(b) The Company shall indemnify and hold CIBC Oppenheimer and Trident
harmless for any liability whatsoever arising out of (i) the Allocation
Instructions or (ii) any records of account holders, depositors, borrowers
and other members of the Bank delivered
<PAGE>
CIBC Oppenheimer Corp. and
Trident Securities, Inc.
Sales Agency Agreement
Page 21
to CIBC Oppenheimer and Trident by the Bank or its agents for use during
the Reorganization.
(c) CIBC Oppenheimer and Trident agree to indemnify and hold harmless
the Company, MHC and the Bank, their officers, directors and employees and
each person, if any, who controls the Company, MHC and the Bank within the
meaning of Section 15 of the Act or Section 20(a) of the Exchange Act, to
the same extent as the foregoing indemnity from the Company, MHC and the
Bank to CIBC Oppenheimer and Trident, but only with respect to (A)
statements or omissions, if any, made in the Prospectus or any amendment or
supplement thereof, in any Application or to a purchaser of the Shares in
reliance CIBC Oppenheimer and Trident upon, and in conformity with, written
information furnished to the Company, MHC or the Bank with respect to CIBC
Oppenheimer and Trident by or on behalf of CIBC Oppenheimer and Trident
expressly for use in the Prospectus or in any Application (provided that it
is agreed and understood that the only information so furnished is set
forth in the Prospectus under the caption. "The Reorganization and
Offering - Plan of Distribution and Selling Commissions." (B) any
misrepresentation by CIBC Oppenheimer or Trident in Section 2(b) of this
Agreement; or (C) any liability of the Company, MHC or the Bank which is
found in a final judgment by a court of competent jurisdiction (not subject
to further appeal) to have principally and directly resulted from gross
negligence or willful misconduct of CIBC Oppenheimer and Trident. It is
expressly agreed, however, that CIBC Oppenheimer and Trident shall not be
liable for any loss, liability, claim, damage or expense which in the
aggregate exceeds the amount paid (excluding reimbursable expenses) to CIBC
Oppenheimer and Trident under this Agreement.
(d) Promptly after receipt by an indemnified party under this Section
8 of notice of the commencement of any action, such indemnified party will,
if a claim in respect thereof is to be made against the indemnifying party
under this Section 8, notify the indemnifying party of the commencement
thereof; but the omission so to notify the indemnifying party will not
relieve it from any liability which it may have to any indemnified party
otherwise than under this Section 8. In case any such action is brought
against any indemnified party, and it notifies the indemnifying party of
the commencement thereof, the indemnifying party will be entitled to
participate therein and, to the extent that it may wish, jointly with the
other indemnifying party similarly notified, to assume the defense thereof,
with counsel satisfactory to such indemnified party, and after notice from
the indemnifying party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party will not be liable to
such indemnified party under this Section 8 for any legal or other expenses
subsequently incurred by such indemnified party in connection with the
defense thereof other than the reasonable cost of investigation except as
otherwise provided herein. In the event the indemnifying party elects to
assume the defense of any such action and retain counsel acceptable to the
indemnified party, the indemnified party may retain additional counsel, but
shall bear the fees and expenses of such counsel unless (i) the
indemnifying party shall have specifically authorized the indemnified party
to retain such counsel or (ii) the parties to such
<PAGE>
CIBC Oppenheimer Corp. and
Trident Securities, Inc.
Sales Agency Agreement
Page 22
suit include such indemnifying party and the indemnified party, and such
indemnified party shall have been advised by counsel that one or more
material legal defenses may be available to the indemnified party which may
not be available to the indemnifying party, in which case the indemnifying
party shall not be entitled to assume the defense of such suit
notwithstanding the indemnifying party's obligation to bear the fees and
expenses of such counsel. An indemnifying party against whom indemnity may
be sought shall not be liable to indemnify an indemnified party under this
Section 8 if any settlement of any such action is effected without such
indemnifying party's consent. Notwithstanding the provisions of this
Section 8, the Bank shall not provide indemnification to the Company or
CIBC Oppenheimer and Trident solely to the extent that such indemnification
would cause the Bank to violate Section 23A or Section 23B.
9. Survival of Agreements, Representations and Indemnities. The
-------------------------------------------------------
respective indemnities of the Company, MHC and the Bank and CIBC Oppenheimer and
Trident and the representation and warranties of the Company, MHC and the Bank
and of CIBC Oppenheimer and Trident set forth in or made pursuant to this
Agreement shall remain in full force and effect, regardless of any termination
or cancellation of this Agreement or any investigation made by or on behalf of
CIBC Oppenheimer and Trident or the Company, MHC or the Bank or any controlling
person or indemnified party referred to in Section 8 hereof, and shall survive
any termination or consummation of this Agreement and/or the issuance of the
Shares, and any legal representative of CIBC Oppenheimer and Trident, the
Company, MHC, the Bank and any such controlling persons shall be entitled to the
benefit of the respective agreements, indemnities, warranties and
representations.
10. Termination. CIBC Oppenheimer and Trident may terminate this
-----------
Agreement by giving the notice indicated below in this Section at any time after
this Agreement becomes effective as follows:
(a) If any domestic or international event or act or occurrence has
materially disrupted the United States securities markets such as to make
it, in CIBC Oppenheimer and Trident's reasonable opinion, impracticable to
proceed with the offering of the Shares; or if trading on the New York
Stock Exchange shall have suspended; or if the United States shall have
become involved in a war or major hostilities; or if a general banking
moratorium has been declared by a state or federal authority which has
material effect on the Bank or the Reorganization; or if a moratorium in
foreign exchange trading by major international associations or persons has
been declared; or if there shall have been a material change in the
capitalization, condition or business of the Company, MHC or if the Bank
shall have sustained a material or substantial loss by fire, flood,
accident, hurricane, earthquake, theft, sabotage or other calamity or
malicious act, whether or not said loss shall have been insured; or if
there shall have been a material change in the condition or prospects of
the Company, MHC or the Bank.
<PAGE>
CIBC Oppenheimer Corp. and
Trident Securities, Inc.
Sales Agency Agreement
Page 23
(b) If CIBC Oppenheimer and Trident elects to terminate this Agreement
as provided in this Section, the Company, MHC and the Bank shall be
notified promptly by CIBC Oppenheimer and Trident by telephone or telegram
and confirmed by letter.
(c) If this Agreement is terminated by CIBC Oppenheimer and Trident
for any of the reasons set forth in subsection (a) above, and to fulfill
its obligations, if any, pursuant to Sections 3, 6, 8(a) and 9 of this
Agreement and upon demand, the Company, MHC and the Bank shall pay CIBC
Oppenheimer and Trident the full amount so owing thereunder.
(d) The Bank may terminate the Reorganization in accordance with the
terms of the Plan. Such termination shall be without liability to any
party, except that the Company, MHC and the Bank shall be required to
fulfill their obligations, to the extent applicable, pursuant to Sections
3(b), 3(c), 6, 8(a) and 9 of this Agreement.
11. Notices. All communications hereunder, except as herein otherwise
-------
specifically provided, shall be in writing and if sent to CIBC Oppenheimer and
Trident shall be mailed, delivered or telegraphed and confirmed to CIBC
Oppenheimer Corp., 200 Liberty Street, 39/th/ Floor, New York, New York 10281,
Attention: Mark C. Biderman, Trident Securities, Inc., 4601 Six Forks Road,
Suite 400, Raleigh, North Carolina 27609, Attention: Tim Lavelle (with a copy to
Silver, Freedman & Taff, L.L.P., 1100 New York Avenue, N.W., Washington, D.C.
20005, Attention: Martin L. Meyrowitz, P.C.) and if sent to the Company or the
Bank shall be mailed, delivered or telegraphed and confirmed to Niagara Bancorp,
Inc., 6950 South Transit Road, Lockport, New York 14095-0514, Attention: William
E. Swan, President and Chief Executive Officer (with a copy to Luse, Lehman,
Gorman, Pomerenk & Schick, 5335 Wisconsin Avenue, N.W., Suite 400, Washington,
D.C. 20015, Attention: John Gorman, Esq.).
12. Parties. This Agreement shall inure solely to the benefit of, and
-------
shall be binding upon, CIBC Oppenheimer and Trident, the Company, MHC, the Bank
and the controlling and other persons referred to in Section 8 hereof, and their
respective successors, legal representatives and assigns, and no other person
shall have or be construed to have any legal or equitable right, remedy or claim
under or in respect of or by virtue of this Agreement or any provision herein
contained.
13. Construction Unless governed by preemptive federal law, this
------------
Agreement shall be governed by and construed in accordance with the substantive
laws of New York.
14. Counterparts. This Agreement may be executed in separate
------------
counterparts, each of which when so executed and delivered shall be an original,
but all of which together shall constitute but one and the same instrument.
<PAGE>
CIBC Oppenheimer Corp. and
Trident Securities, Inc.
Sales Agency Agreement
Page 24
Please acknowledge your agreement to the foregoing by signing below and
returning to the Company one copy of this letter.
NIAGARA BANCORP, INC. LOCKPORT SAVINGS BANK
By: By:
------------------------ -----------------------
William E. Swan William E. Swan
President and Chief Executive President and Chief Executive
Officer Officer
Date: Date:
---------------------- ---------------------
NIAGARA BANCORP, MHC
By:
------------------------
William E. Swan
President and Chief Executive Officer
Date:
----------------------
Agreed to and accepted:
CIBC OPPENHEIMER CORP. TRIDENT SECURITIES, INC.
By: By:
------------------------ -------------------------
Date: Date:
---------------------- -----------------------
<PAGE>
Exhibit A
---------
Jurisdictions where Trident is a Registered Selling Agent
Trident Securities, Inc. is a registered selling agent in the jurisdictions
--
listed below:
Alabama Missouri
Arizona Nebraska
Arkansas Nevada
California New Hampshire
Colorado New Jersey
Connecticut New Mexico
Delaware New York
District of Columbia North Carolina
Florida North Dakota (Trident Securities, Inc. only, no agents)
Georgia Ohio
Idaho Oklahoma
Illinois Oregon
Indiana Pennsylvania
Iowa Rhode Island
Kansas South Carolina
Kentucky Tennessee
Louisiana Texas
Maine Vermont
Maryland Virginia
Massachusetts Washington
Michigan West Virginia
Minnesota Wisconsin
Mississippi Wyoming
Trident Securities, Inc. is not a registered selling agent in the jurisdictions
---
listed below:
Alaska
Hawaii
Montana
South Dakota
Utah
A-1
<PAGE>
CIBC OPPENHEIMER CORP.
Jurisdictions where CIBC Oppenheimer is a Registered Selling Agent
CIBC Oppenheimer Corp. is a registered selling agent in the jurisdictions listed
--
below:
CIBC Oppenheimer Corp. is not a registered selling agent in the jurisdictions
---
listed below:
A-2
<PAGE>
Exhibit B
---------
[Luse, Lehman to insert introduction]
(i) the Company and the MHC have each been duly incorporated, and is
validly existing as corporations in good standing under the laws of its
jurisdiction of incorporation, and the Bank is validly existing as a mutual
savings association under the laws of the State of New York, each with full
power and authority to own its properties and conduct its business as
described in the Prospectus;
(ii) the Bank is a member of the Federal Home Loan Bank of New York,
and the deposit accounts of the Bank are insured by the BIF up to the
applicable legal limits;
(iii) to the best of our knowledge, the activities of the Bank as
such activities are described in the Prospectus are permitted under laws of
the State of New York State and the United States to subsidiaries of a
Delaware business corporation and the Bank does not have any subsidiaries;
(iv) The Plan complies with, and, to the best of our knowledge, the
Reorganization of the Bank from a New York chartered mutual savings bank to
a New York chartered stock savings bank and the creation of the Company and
the MHC as the holding companies for the Bank have been effected in all
material respects in accordance with, the Bank Holding Company Act of 1956,
as amended and the regulations of the Department and the FDIC; to the best
of our knowledge, all of the terms, conditions, requirements and provisions
with respect to the Plan and the Reorganization imposed by the Department
and the FDIC, except with respect to the filing or submission of certain
required post-Reorganization reports or other materials by the Company, the
MHC or the Bank, have been complied with by the Company, the MHC and the
Bank; and, to the best of our knowledge, no person has sought to obtain
regulatory or judicial review of the final action of the Department or the
FDIC in approving the Plan;
(v) The Foundation, has been effected in all material respects in
accordance with the requirements of the Department and the FDIC; all the
terms, conditions, requirements and provisions with respect to the
organization and purpose of the Foundation imposed by the Department,
except with respect to the filing or submission of any required reports
after the Foundation is formed or other materials by the Foundation, have
been complied with by the Foundation; and, to the best of our knowledge, no
person has sought to obtain regulatory or judicial review of the final
action of the Department or the FDIC in approving the formation of the
Foundation;
(vi) the Company has authorized Common Stock as set forth in the
Registration Statement and the Prospectus, and the description of such
Common Stock in the Registration Statement and the Prospectus is accurate
in all material respects;
(vii) the issuance and sale of the Shares and contribution of
Foundation Shares have been duly and validly authorized by all necessary
corporate action on the part of the
B-1
<PAGE>
Company; the Shares and Foundation Shares, upon receipt of payment and
issuance in accordance with the terms of the Plan and this Agreement, will
be validly issued, fully paid, nonassessable and, except as disclosed in
the Prospectus, free of preemptive rights, and good title thereto shall be
transferred by the Company free and clear of all claims, encumbrances,
security interests and liens created by the Company;
(viii) the form of certificate used to evidence the Shares is in
proper form and complies in all material respects with applicable Delaware
law;
(ix) the issuance and sale of the capital stock of the Bank to the
Company have been duly authorized by all necessary corporate action of the
Bank and the Company and have received the approval of the FDIC and the
Department, and such capital stock, upon receipt of payment and issuance in
accordance with the terms of the Plan, will be validly issued, fully paid
and nonassessable and owned of record and, to our actual knowledge,
beneficially by the Company;
(x) The Foundation has been duly incorporated and is validly
existing as a non-stock corporation in good standing under the laws of the
State of Delaware with corporate power and authority to own, lease and
operate its properties and to conduct its business as described in the
Prospectus; the Foundation is not a bank holding company within the meaning
of 12 C.F.R. Part 225 as a result of the issuance of the Foundation Shares
to it in accordance with the terms of the Plan and in the amounts as
described in the Prospectus; no approvals are required to establish the
Foundation and to contribute the Foundation Shares thereto as described in
the Prospectus other than those set forth in the New York State Banking
Department's approval order; the Foundation Shares to be issued to the
Foundation in accordance with the Plan and as described in the Prospectus
will have been duly authorized for issuance and, when issued and
contributed by the Company pursuant to the Plan, will be duly and validly
issued and fully paid and non-assessable.
(xi) subject to the satisfaction of the conditions imposed by the
FDIC, FRB and Department, no further approval, authorization, consent or
other order of any federal government board or body is required in
connection with the execution and delivery of this Agreement, and the
consummation of the Reorganization, except with respect to the issuance to
the Bank of the Stock Charter by the Department and as may be required
under the "blue sky" laws of various jurisdictions;
(xii) the execution and delivery of this Agreement and the
consummation of the Reorganization (including the establishment of the
Foundation and the contribution thereto of the Foundation Shares and cash)
have been duly and validly authorized by all necessary corporate action on
the part of each of the Company and the Bank;
(xiii) the statements in the Prospectus and incorporated by reference
in the Proxy Statement under the captions "Regulation," "Dividends,"
"Restrictions on Acquisitions of Stock and Related Takeover Defensive
Provisions" and "Description of Capital Stock," insofar as they are, or
refer to, statements of law or legal conclusions (excluding financial data
B-2
<PAGE>
included therein, as to which no opinion is expressed), have been prepared
or reviewed by us and are correct in all material respects;
(xiv) the Application for a merger or other Transaction and the Form
86-AC (including the establishment of the Foundation and the contribution
thereto of the Foundation Shares and cash) has been approved by the FDIC
and the Department, respectively, and the Prospectus and the Proxy
Statement have been authorized for use by the Department; the Registration
Statement and any post-effective amendment thereto has been declared
effective by the Commission; except as to any necessary qualifications or
registration under the securities laws of the jurisdictions in which the
Shares were offered, no further approval of any governmental authority is
required for the issuance and sale of the Shares (subject to the
satisfaction of various conditions subsequent imposed by the FDIC and the
Department in connection with its approval of the Reorganization
Application), and, to the best of our knowledge, no proceedings are pending
by or before the Commission or the Department seeking to revoke or rescind
the orders declaring the Registration Statement effective or approving the
Reorganization Application or, to the best of our knowledge, are
contemplated or threatened (provided that for this purpose we do not regard
any litigation or governmental procedure to be "threatened" unless the
potential litigant or government authority has manifested to the management
of the Company or the Bank, or to us, a present intention to initiate such
litigation or proceeding);
(xv) the execution and delivery of this Agreement and the
consummation of the Reorganization by the MHC, the Company and the Bank do
not conflict with or result in a breach of the charter or bylaws of the
MHC, the Company or the Bank (in either mutual or stock form)
(xvi) the Reorganization Application, the Registration Statement, the
Prospectus and the Proxy Statement, in each case as amended, comply as to
form in all material respects with the requirements of the Act, the Bank
Holding Company Act of 1956, as amended, the SEC Regulations, the FDIC
regulations and the Department Regulations, as the case may be (except as
to information with respect to Trident included therein and financial
statements, notes to financial statements, financial tables and other
financial and statistical data, including the appraisal, included therein,
as to which no opinion is expressed); to the best of our knowledge, all
material documents and exhibits required to be filed with the
Reorganization Application and the Registration Statement have been so
filed and the descriptions in the Reorganization Application and the
Registration Statement of such documents and exhibits are accurate in all
material respects.
(xvii) to our actual knowledge, the Bank has obtained all licenses,
permits and other governmental authorizations currently required for the
conduct of its business as such business is described in the Prospectus,
all such licenses, permits and other governmental authorizations are in
full force and effect and the Bank is in all material respects complying
therewith, except where the failure to hold such licenses, permits or
governmental authorizations or the failure to so comply would not have a
material adverse effect on the Company and the Bank, taken as a whole;
B-3
<PAGE>
(xviii) there are no material legal or governmental proceedings
pending or, to our actual knowledge, threatened against or involving the
assets of the Company, the Bank or the Foundation (provided that for this
purpose we do not regard any litigation or governmental procedure to be
"threatened" unless the potential litigant or government authority has
manifested to the management of the Company or the Bank, or to us, a
present intention to initiate such litigation or proceeding);
(xix) to our actual knowledge, the execution and delivery of the
Agreement and the consummation of the Reorganization by the Company and the
Bank do not constitute a material breach of or default (or an event which,
with notice or lapse of time or both, would constitute a default) under,
give rise to any right of termination, cancellation or acceleration
contained in, or result in the creation or imposition of any lien, charge
or other encumbrance upon any of the properties or assets of the Company or
the Bank pursuant to any of the terms, provisions or conditions of, any
material agreement, contract, indenture, bond, debenture, note, instrument
or obligation to which the Company or the Bank is a party or violate any
governmental license or permit or any enforceable published law,
administrative regulation or order or court order, writ, injunction or
decree (subject to the satisfaction of certain conditions imposed by the
Department in connection with Department's approval of the Reorganization
Application), which breach, default, encumbrance or violation would have a
material adverse effect on the financial condition, operations, business,
assets or properties of the Company and the Bank taken as a whole;
(xx) to our actual knowledge, there has been no material breach of
any provision of the Company's or the Bank's charter or bylaws or breach or
default (or the occurrence of any event which, with notice or lapse of time
or both, would constitute a default) under any agreement, contract,
indenture, bond, debenture, note, instrument or obligation to which the
Company or the Bank is a party or by which any of them or any of their
respective assets or properties may be bound, or any governmental license
or permit, or a violation of any enforceable published law, administrative
regulation or order, or court order, writ, injunction or decree which
breach, default, encumbrance or violation would have a material adverse
effect on the financial condition, operations, business, assets or
properties of the Company and the Bank taken as a whole; and,
(xxi) the Agreement is a legal, valid and binding obligation of each
of the Company and the Bank, enforceable in accordance with its terms
(except as the enforceability thereof may be limited by bankruptcy,
insolvency, moratorium, reorganization, receivership, conservatorship or
similar laws relating to or affecting the enforcement of creditors' rights
generally or the rights of creditors of depository institutions whose
accounts are insured by the FDIC or savings and loan holding companies the
accounts of whose subsidiaries are insured by the FDIC or by general equity
principles, regardless of whether such enforceability is considered in a
proceeding in equity or at law, and except to the extent that the
provisions of Sections 8 and 9 hereof may be unenforceable as against
public policy or pursuant to Section 23A or Section 23B, as to which we
render no opinion);
[Luse, Lehman to insert conclusion]
B-4
<PAGE>
Exhibit C
---------
[Luse, Lehman to insert introduction]
Based on such counsel's participation in conferences with representatives
of the Company, the Bank, its counsel, the independent appraiser, the
independent certified public accountants, CIBC Oppenheimer and Trident and its
counsel, review of documents and understanding of applicable law (including the
requirements of Form S-1 and the character of the Registration Statement
contemplated thereby) and the experience such counsel has gained in its practice
under the Act, nothing has come to such counsel's attention that would lead it
to believe that the Registration Statement, as amended (except as to information
in respect of CIBC Oppenheimer and Trident contained therein and except as to
the financial statements, notes to financial statements, financial tables and
other financial and statistical data contained therein, as to which such counsel
expresses no opinion), at the time it became effective contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements made therein, in light of the
circumstances under which they were made, not misleading, or that the
Prospectus, as amended (except as to information in respect of CIBC Oppenheimer
and Trident contained therein and except as to financial statements, notes to
financial statements, financial tables and other financial and statistical data
contained therein as to which such counsel expresses no opinion), as of the date
of the Prospectus and at the Closing Date, contained any untrue statement of a
material fact or omitted to state a material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading (in making this statement such counsel may state that it has not
undertaken to verify independently the information in the Registration Statement
or Prospectus and, therefore, does not assume any responsibility for the
accuracy or completeness thereof.
[Luse, Lehman to insert conclusion]
D-1
<PAGE>
Exhibit 3.1
CERTIFICATE OF INCORPORATION
OF
NIAGARA BANCORP, INC
Article 1. Corporate Title. The name of the Corporation is Niagara
Bancorp, Inc (hereinafter referred to as (the "Corporation").
Article 2. Registered Office. The address of the registered office of the
Corporation in the State of Delaware is Corporation Trust Center, 1209 Orange
Street, in the City of Wilmington, County of New Castle. The name of the
registered agent at that address is The Corporation Trust Company.
Article 3. Purpose. The purpose of the Corporation is to engage in any
lawful act or activity for which a corporation may be organized under the
General Corporation Law of Delaware.
Article 4. Capital Stock.
A. The total number of shares of all classes of stock which the Corporation
shall have authority to issue is fifty million (50,000,000) consisting of:
1. Five million (5,000,000) shares of Preferred Stock, par value one
cent ($.01) per share (the "Preferred Stock"); and
2. Forty-five million (45,000,000) shares of Common Stock, par value
one cent ($.01) per share (the "Common Stock").
B. The Board of Directors is authorized, subject to any limitations
prescribed by law, to provide for the issuance of the shares of Preferred Stock
in series, and by filing a certificate pursuant to the applicable law of the
State of Delaware (such certificate being hereinafter referred to as a
"Preferred Stock Designation"), to establish from time to time the number of
shares to be included in each such series, and to fix the designation, powers,
preferences, and rights of the shares of each such series and any
qualifications, limitations or restrictions thereof. The number of authorized
shares of Preferred Stock may be increased or decreased (but not below the
number of shares thereof then outstanding) by the affirmative vote of the
holders of a majority of the Common Stock, without a vote of the holders of the
Preferred Stock, or of any series thereof, unless a vote of any such holders is
required pursuant to the terms of any Preferred Stock Designation.
C. 1. Notwithstanding any other provision of this Certificate of
Incorporation, in no event shall any record owner of any outstanding Common
Stock which is beneficially owned, directly or indirectly, by a person who, as
of any record date for the determination of stockholders entitled to vote on any
matter, beneficially owns in excess of 5% of the then-outstanding shares of
Common Stock (the "Limit"), be entitled, or permitted to any vote in respect of
the shares held in excess of
<PAGE>
Exhibit 5
(202) 274-2000
February 1, 1998
The Board of Trustees
Lockport Savings Bank
6950 South Transit Road, P.O. Box 514
Lockport, New York 14095-0514
RE: NIAGARA BANCORP, INC.
COMMON STOCK PAR VALUE $.01 PER SHARE
-------------------------------------
Ladies and Gentlemen:
You have requested the opinion of this firm as to certain matters in
connection with the offer and sale (the "Offering") of Niagara Bancorp, Inc.
(the "Company") common stock, par value $.01 per share ("Common Stock"). We
have reviewed the Company's Certificate of Incorporation, Registration Statement
on Form S-1 ("Form S-1"), as well as applicable statutes and regulations
governing the Company and the offer and sale of the Common Stock.
We are of the opinion that upon the declaration of effectiveness of the
Form S-1, the Common Stock, when sold, will be legally issued, fully paid and
non-assessable. We hereby consent to our firm being referenced under the caption
"Legal and Tax Matters."
Very truly yours,
/s/ Luse Lehman Gorman Pomerenk & Schick
------------------------------------------------
LUSE LEHMAN GORMAN POMERENK & SCHICK
A PROFESSIONAL CORPORATION
<PAGE>
Exhibit 8.1
FORM OF
FEDERAL TAX OPINION
February 1, 1998
Boards of Trustees
Lockport Savings Bank
Board of Directors
Niagara Bancorp, Inc.
Board of Trustees
Niagara Bancorp, MHC
6950 South Transit Road
Lockport, New York 14095-0514
Re: MUTUAL HOLDING COMPANY FORMATION AND STOCK ISSUANCE
---------------------------------------------------
Ladies and Gentlemen:
We have been requested as special counsel to Lockport Savings Bank, a New
York-chartered mutual savings bank (the "Bank" or the "Stock Bank", as the
context requires), Niagara Bancorp, MHC, a New York-chartered mutual holding
company ("Mutual Holding Company") and Niagara Bancorp, a Delaware corporation
("Stock Holding Company"), to express our opinion concerning certain Federal
income tax matters relating to the Plan of Reorganization (as defined herein).
In connection therewith, we have examined the Plan of Reorganization and
certain other documents of or relating to the Reorganization (as defined below),
some of which are described or referred to in the Plan of Reorganization and
which we deemed necessary to examine in order to issue the opinions set forth
below. Unless otherwise defined, all terms used herein have the meanings given
to such terms in the Plan of Reorganization.
In our examination, we have assumed the authenticity of original documents,
the accuracy of copies and the genuineness of signatures. We have further
assumed the absence of adverse facts not apparent from the face of the
instruments and documents we examined.
In issuing our opinions, we have assumed that the Plan of Reorganization
has been duly and validly authorized and has been approved and adopted by the
board of directors of the Bank at a meeting duly called and held; that the Bank
will comply with the terms and conditions of the Plan of Reorganization, and
that the various representations and warranties which are provided to us are
accurate, complete, true and correct. Accordingly, we express no opinion
concerning the effect, if
<PAGE>
Boards of Trustees
Lockport Savings Bank
Board of Directors
Niagara Bancorp, Inc.
Board of Trustees
Niagara Bancorp, MHC
February 1, 1998
Page 2
any, of variations from the foregoing. We specifically express no opinion
concerning tax matters relating to the Plan of Reorganization under state and
local tax laws and under Federal income tax laws except on the basis of the
documents and assumptions described above.
For purposes of this opinion, we are relying on the representations
provided to us by the Bank, which are incorporated herein by reference.
In issuing the opinions set forth below, we have referred solely to
existing provisions of the Internal Revenue Code of 1986, as amended (the
"Code"), existing and proposed Treasury Regulations thereunder, current
administrative rulings, notices and procedures and court decisions. Such laws,
regulations, administrative rulings, notices and procedures and court decisions
are subject to change at any time. Any such change could affect the continuing
validity of the opinions set forth below. This opinion is as of the date
hereof, and we disclaim any obligation to advise you of any change in any matter
considered herein after the date hereof.
In rendering our opinions, we have assumed that the persons and entities
identified in the Plan of Reorganization will at all times comply with the
requirements of Code sections 368 and 351, the other applicable state and
Federal laws and the representations of the Bank. In addition, we have assumed
that the activities of the persons and entities identified in the Plan of
Reorganization will be conducted strictly in accordance with the Plan of
Reorganization. Any variations may affect the opinions we are rendering.
We emphasize that the outcome of litigation cannot be predicted with
certainty and, although we have attempted in good faith to opine as to the
probable outcome of the merits of each tax issue with respect to which an
opinion was requested, there can be no assurance that our conclusions are
correct or that they would be adopted by the IRS or a court.
SUMMARY OF OPINIONS
-------------------
Based on the facts, representations and assumptions set forth herein, we
are of the opinion that:
<PAGE>
Boards of Trustees
Lockport Savings Bank
Board of Directors
Niagara Bancorp, Inc.
Board of Trustees
Niagara Bancorp, MHC
February 1, 1998
Page 3
WITH RESPECT TO THE EXCHANGE OF THE BANK'S CHARTER FOR A STOCK CHARTER
("BANK CONVERSION"):
1. Bank's exchange of its charter for a federal stock savings association
charter is a mere change in identity and form and therefore qualifies as a
reorganization within the meaning of Section 368(a)(1)(F) of the Internal
Revenue Code.
2. No gain or loss will be recognized by Bank upon the transfer of its
assets to Stock Bank solely in exchange for shares of Stock Bank stock and the
assumption by Stock Bank of the liabilities of Bank. (Code Sections 361(a) and
357(a)).
3. No gain or loss will be recognized by Stock Bank upon the receipt of
the assets of Bank in exchange for shares of Stock Bank common stock. (Code
Section 1032(a)).
4. Stock Bank's holding period in the assets received from Bank will
include the period during which such assets were held by the Bank. (Code
Section 1223(2)).
5. Stock Bank's basis in the assets of Bank will be the same as the basis
of such assets in the hands of Bank immediately prior to the proposed
transaction. (Code Section 362(b)).
6. Bank members will recognize no gain or loss upon the constructive
receipt of Stock Bank common stock solely in exchange for their membership
interests in Bank. (Code Section 354(a)(1)).
7. The basis of the Stock Bank common stock to be constructively received
by the Bank's members will be the same as their basis in their membership
interests in the Bank surrendered in exchange therefor. (Code Section
358(a)(1)).
8. The holding period of the Stock Bank common stock constructively
received by the members of the Bank will include the period during which the
Bank members held their membership interests, provided that the membership
interests were held as capital assets on the date of the exchange. (Code
Section 1223(1)).
<PAGE>
Boards of Trustees
Lockport Savings Bank
Board of Directors
Niagara Bancorp, Inc.
Board of Trustees
Niagara Bancorp, MHC
February 1, 1998
Page 4
9. The Stock bank will succeed to and take into account the Bank's
earnings and profits or deficit in earnings and profits, as of the date of the
proposed transaction. (Code Section 381).
WITH RESPECT TO THE TRANSFER OF STOCK BANK STOCK TO MUTUAL HOLDING COMPANY
FOR MEMBERSHIP INTERESTS (THE A351 TRANSACTION"):
10. The exchange of stock by the Stock Bank stockholders in exchange for
membership interests in the Mutual Holding Company will constitute a tax-free
exchange of property solely for voting "stock" pursuant to Section 351 of the
Internal Revenue Code.
11. Stock Bank's stockholders will recognize no gain or loss upon the
transfer of the Stock Bank stock they constructively received in the Bank
conversion to the Mutual Holding Company solely in exchange for membership
interests in the Mutual Holding Company. (Code Section 351).
12. Stock Bank stockholder's basis in the Mutual Holding Company
membership interests received in the transaction will be the same as the basis
of the property transferred in exchange therefor, reduced by the sum of the
liabilities assumed by Mutual Holding Company or to which assets transferred are
taken subject. (Code Section 358(a)(1)).
13. Stock Bank stockholder's holding period for the membership interests
in Mutual Holding Company received in the transaction will include the period
during which the property exchanged was held by Stock Bank stockholders,
provided that such property was a capital asset on the date of the exchange.
(Code Section 1223(1)).
14. Mutual Holding Company will recognize no gain or loss upon the receipt
of property from Stock Bank stockholders in exchange for membership interests in
the Mutual Holding Company. (Code Section 1032(a)).
<PAGE>
Boards of Trustees
Lockport Savings Bank
Board of Directors
Niagara Bancorp, Inc.
Board of Trustees
Niagara Bancorp, MHC
Febrary 1, 1998
Page 5
15. Mutual Holding Company's basis in the property received from Stock
Bank stockholders will be the same as the basis of such property in the hands of
Stock Bank stockholders immediately prior to the transaction. (Code Section
362(a)).
16. Mutual Holding Company's holding period for the property received from
Stock Bank's stockholders will include the period during which such property was
held by Stock Bank stockholders. (Code Section 1223(2)).
17. Stock Bank depositors will recognize no gain or loss solely by reason
of the transaction.
WITH RESPECT TO THE TRANSFERS TO THE STOCK HOLDING COMPANY IN EXCHANGE FOR
COMMON STOCK IN THE STOCK HOLDING COMPANY
18. The Mutual Holding Company and the persons who purchased Common Stock
of the Stock Holding Company in the Subscription and Community Offering
("Minority Stockholders") will recognize no gain or loss upon the transfer of
Stock Bank stock and cash, respectively, to the Stock Holding Company in
exchange for stock in the Stock Holding Company. Code Sections 351(a) and
357(a).
19. Stock Holding Company will recognize no gain or loss on its receipt of
Stock Bank stock and cash in exchange for Stock Holding Company Stock. (Code
Section 1032(a)).
20. The basis of the Stock Holding Company Common Stock to the Minority
Stockholders will be the actual purchase price thereof, and a shareholders
holding period for Common Stock acquired through the exercise of subscription
rights will begin on the date the rights are exercised.
<PAGE>
Boards of Trustees
Lockport Savings Bank
Board of Directors
Niagara Bancorp, Inc.
Board of Trustees
Niagara Bancorp, MHC
February 1, 1998
Page 6
PROPOSED TRANSACTION
--------------------
On September 15, 1997, the board of trustees of the Bank adopted that
certain Plan of Reorganization From A Mutual Savings Bank to A Mutual Holding
Company and Stock Issuance Plan (the "Plan of Reorganization"). For what are
represented to be valid business purposes, the Bank's board of directors has
decided to convert to a mutual holding company structure pursuant to statutes.
The following steps are proposed:
(i) The Bank will organize an interim New York-chartered stock savings
bank (Interim One) as its wholly-owned subsidiary;
(ii) Interim One will organize a Delaware mid-tier holding company as its
wholly-owned subsidiary (Stock Holding Company); and
(iii) Interim One will also organize another interim New York-chartered
stock savings bank as its wholly-owned subsidiary (Interim Two).
The following transactions will occur simultaneously:
(iv) The Bank will exchange its charter for a New York stock savings bank
charter and become a stock savings bank that will constructively
issue its common stock to members of the Bank;
(v) Interim One will cancel its outstanding stock and exchange its
charter for a New York mutual holding company charter and thereby
become the Mutual Holding Company;
(vi) Interim Two will merge with and into the Bank with the Bank as the
surviving entity, the former members of the Bank who constructively
hold stock in the Bank will exchange their stock in the Bank for
membership interests in the Mutual Holding Company; and
<PAGE>
Boards of Trustees
Lockport Savings Bank
Board of Directors
Niagara Bancorp, Inc.
Board of Trustees
Niagara Bancorp, MHC
February 1, 1998
Page 7
(vii) The Mutual Holding Company will contribute the Bank's stock to the
Stock Holding Company, a wholly-owned subsidiary of the Mutual
Holding Company, for additional shares of Bank Stock.
(viii) Contemporaneously, with the contribution set forth in "(vii)" the
Stock Holding Company will offer to sell up to 49.9% of its Common
Stock in the Subscription Offering and, if applicable, the Direct
Community Offering.
These transactions are referred to herein collectively as the
"Reorganization."
Those persons who, as of the date of the Bank Conversion (the "Effective
Date"), hold depository rights with respect to the Bank will thereafter have
such rights solely with respect to the Stock Bank. Each deposit account with
the Bank at the time of the exchange will become a deposit account in the Stock
Bank in the same amount and upon the same terms and conditions. Following the
completion of the Reorganization, all depositors who had liquidation rights with
respect to the Bank immediately prior to the Reorganization will continue to
have such rights solely with respect to the Mutual Holding Company so long as
they continue to hold deposit accounts with the Stock Bank. All new depositors
of the Stock Bank after the completion of the Reorganization will have
liquidation rights solely with respect to the Mutual Holding Company so long as
they continue to hold deposit accounts with the Stock Bank.
The shares of Interim Two common stock owned by the Mutual Holding Company
prior to the Reorganization shall be converted into and become shares of common
stock of the Stock Bank on the Effective Date. The shares of Stock Bank common
stock constructively received by the Stock Bank stockholders (formerly the
members holding liquidation rights of the Bank) will be transferred to the
Mutual Holding Company by such persons in exchange for liquidation rights in the
Mutual Holding Company.
The Stock Holding Company will have the power to issue shares of capital
stock (including common and preferred stock) to persons other than the Mutual
Holding Company. So long as the Mutual Holding Company is in existence,
however, it must own a majority of the voting stock of Stock Holding Company.
Stock Holding Company may issue any amount of non-voting stock to
<PAGE>
Boards of Trustees
Lockport Savings Bank
Board of Directors
Niagara Bancorp, Inc.
Board of Trustees
Niagara Bancorp, MHC
February 1, 1998
Page 8
persons other than Mutual Holding Company. No such non-voting stock will be
issued as of the date of the Reorganization.
* * *
The opinions set forth above represent our conclusions as to the
application of existing Federal income tax law to the facts of the instant
transaction, and we can give no assurance that changes in such law, or in the
interpretation thereof, will not affect the opinions expressed by us. Moreover,
there can be no assurance that contrary positions may not be taken by the IRS,
or that a court considering the issues would not hold contrary to such opinions.
All of the opinions set forth above are qualified to the extent that the
validity of any provision of any agreement may be subject to or affected by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the rights of creditors generally. We do not express any opinion as
to the availability of any equitable or specific remedy upon any breach of any
of the covenants, warranties or other provisions contained in any agreement. We
have not examined, and we express no opinion with respect to the applicability
of, or liability under, any Federal, state or local law, ordinance, or
regulation governing or pertaining to environmental matters, hazardous wastes,
toxic substances, asbestos, or the like.
It is expressly understood that the opinions set forth above represent our
conclusions based upon the documents reviewed by us and the facts presented to
us. Any material amendments to such documents or changes in any significant fact
would affect the opinions expressed herein.
<PAGE>
Boards of Trustees
Lockport Savings Bank
Board of Directors
Niagara Bancorp, Inc.
Board of Trustees
Niagara Bancorp, MHC
February 1, 1998
Page 9
We have not been asked to, and we do not, render any opinion with respect
to any matters other than those expressly set forth above.
Very truly yours,
/s/ Luse Lehman Gorman Pomerenk & Schick
----------------------------------------
LUSE LEHMAN GORMAN POMERENK & SCHICK
A Professional Corporation
<PAGE>
EXHIBIT 8.3
RP FINANCIAL, LC.
- -------------------------------------------
Financial Services Industry Consultants
February 1, 1998
Board of Trustees
Lockport Savings Bank
6950 South Transit Road
Lockport, New York 14095-0514
Re: Plan of Conversion: Subscription Rights
Gentlemen:
All capitalized terms not otherwise defined in this letter have the
meanings given such terms in the Plan of Conversion and Reorganization (the
"Plan of Conversion") adopted by the Board of Trustees of Lockport Savings Bank
("Lockport Savings" or the "Bank"). Pursuant to the Plan of Conversion, Lockport
Savings will become a wholly-owned subsidiary of Niagara Bancorp, Inc. (the
"Holding Company"), a Delaware Corporation, and Niagara Bancorp, Inc. will issue
a majority of its common stock to Niagara Bancorp, M.H.C. (the "MHC"), and sell
a minority of its common stock to the public.
We understand that in accordance with the Plan of Conversion,
Subscription Rights to purchase shares of Common Stock in the Holding Company
are to be issued to: (1) Eligible Accounts Holders; (2) the Bank's Employee
Plans including the ESOP; and (3) Supplemental Eligible Account Holders. Based
solely upon our observation that the Subscription Rights will be available to
such parties without cost, will be legally non-transferable and of short
duration, and will afford such parties the right only to purchase shares of
Common Stock at the same price as will be paid by members of the general public
in the 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, as a factual matter:
(1) the Subscription Rights will have no ascertainable market value;
and,
(2) the price at which the Subscription Rights are exercisable will not
be more or less than the pro forma market value of the shares upon
issuance.
Changes in the local and national economy, the legislative and regulatory
environment, the stock market, interest rates, and other external forces (such
as natural disasters or significant world events) may occur from time to time,
often with great unpredictability and may materially impact the value of thrift
stocks as a whole or the Holding Company's value alone. Accordingly, no
assurance can be given that persons who subscribe to shares of Common Stock in
the conversion will thereafter be able to buy or sell such shares at the same
price paid in the Subscription Offering.
Very truly yours,
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 23.2
The Board of Trustees
Lockport Savings Bank
We consent to the use of our independent auditors' report dated January 17,
1997, on the consolidated financial statements of Lockport Savings Bank and
subsidiaries as of December 31, 1996 and 1995, and the related consolidated
statements of income and cash flows for each of the years in the three-year
period ended December 31, 1996 included herein, and to the reference to our firm
under the heading "Experts" in the prospectus.
/s/ KPMG Peat Marwick LLP
-------------------------------
KPMG Peat Marwick LLP
Buffalo, New York
February 1, 1998
<PAGE>
EXHIBIT 23.2
The Employee Benefits Committee of
Lockport Savings Bank
We consent to the use of our independent auditors' report dated August 26,
1997, on the statements of net assets available for plan benefits of Lockport
Savings Bank 401(k) Plan as of December 31, 1996 and 1995, and the related
statements of changes in net assets available for plan benefits for each of the
years in the two year period then ended included in the prospectus supplement.
/s/ KPMG Peat Marwick LLP
-------------------------------
KPMG Peat Marwick LLP
Buffalo, New York
February 1, 1998
<PAGE>
EXHIBIT 23.3
RP FINANCIAL, LC.
- ---------------------------------------------
FINANCIAL SERVICES INDUSTRY CONSULTANTS
February 1, 1998
Board of Trustees
Lockport Savings Bank
6950 South Transit Road
Lockport, New York 14095-0514
Gentlemen:
We hereby consent to the use of our firm's name in the Application for
Conversion of Lockport Savings Bank, Lockport, New York, and any amendments
thereto, and in the Form S-1 Registration Statement and any amendments thereto
for Niagara Bancorp, Inc. We also hereby consent to the inclusion of, summary of
references to our Appraisal Report and our statement concerning subscription
rights in such filings including the Prospectus of Niagara Bancorp, Inc.
Sincerely,
RP FINANCIAL, LC.
/s/ James P. Hennessey
James P. Hennessey
Senior Vice President
================================================================================
WASHINGTON HEADQUARTERS
Rosslyn Center Telephone:(703) 528-1700
1700 North Moore Street, Suite 2210 Fax No:(703) 528-1788
Arlington, VA 22209
<PAGE>
Exhibit 99.1
- -------------------------------------------------------------------------------
PRO FORMA VALUATION REPORT
MUTUAL HOLDING COMPANY
STOCK OFFERING
LOCKPORT SAVINGS BANK
LOCKPORT, NEW YORK
DATED AS OF:
NOVEMBER 28, 1997
- --------------------------------------------------------------------------------
PREPARED BY:
RP FINANCIAL, LC.
1700 NORTH MOORE STREET
SUITE 2210
ARLINGTON, VIRGINIA 22209
<PAGE>
[LETTERHEAD OF RP FINANCIAL, LC. APPEARS HERE]
November 28, 1997
Board of Trustees
Lockport Savings Bank
6950 South Transit Road
Lockport, New York 14095-0514
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 offered 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 New York State Department of Banking (the "Department") 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 Trustees of Lockport Savings Bank,
Lockport, New York ("Lockport Savings" or the "Bank") has adopted a Plan of
Conversion, incorporated herein by reference, in which the Bank will reorganize
from the mutual form of organization to the mutual holding company form of
organization. In the reorganization process, to become effective concurrent with
the completion of the stock sale, Lockport Savings will become a wholly-owned
subsidiary of Niagara Bancorp, Inc. (the "Holding Company"), a Delaware
Corporation, and Niagara Bancorp, Inc. will issue a majority of its common stock
to Niagara Bancorp, M.H.C. (the "MHC"), and sell a minority of its common stock
to the public. It is anticipated that the public shares will be issued to the
Bank's Eligible Account Holders, Tax-Qualified Employee Plans, Supplemental
Eligible Account Holders, with any shares not sold in the subscription offering
sold in the community offering. In addition, the Holding Company intends to
donate to a charitable foundation, immediately following the Conversion,
authorized but unissued shares of the Holding Company stock equal to 3 percent
of the number of shares of Conversion Stock issued in the offering and cash
equal to 2 percent of the amount of stock sold in the offering.
The aggregate amount of Common Stock sold by the Holding Company cannot
exceed the appraised value of the Bank. Immediately following the conversion,
the primary assets of the Holding Company will be the capital stock of the Bank
and the net conversion proceeds remaining after purchase of the Bank's common
stock by the Holding Company. The Holding Company will use up to 50 percent of
the net conversion proceeds to purchase the Bank's common stock. The remaining
net conversion proceeds, retained at the Holding Company, will be used to fund a
loan to the Employee Stock Ownership Plan ("ESOP") with the remainder to be used
as general working capital.
<PAGE>
RP Financial, LC.
Board of Trustees
November 28, 1997
Page 2
RP Financial, LC.
- ----------------
RP Financial, LC. ("RP Financial") is a financial consulting firm
serving the financial services industry nationwide that, among other things,
specializes in financial valuations and analyses of business enterprises and
securities, including the pro forma valuation for savings institutions
converting from mutual-to-stock form. The background and experience of RP
Financial is detailed in Exhibit V-1. We believe that, except for the fee we
will receive for our appraisal and assisting the Bank in the preparation of its
business plan, we are independent of the Bank and the other parties engaged by
the Bank to assist in the stock conversion process.
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 Department and the FDIC, and 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 December 31,
1992 through 1996 and various unaudited information and internal financial
reports through September 30, 1997 and due diligence related discussions with
the Bank's management; KPMG Peat Marwick, LLP., the Bank's independent auditor;
Luse Lehman Gorman Pomerenk & Schick, PC, the Bank's conversion counsel; and
LIBC Oppenheimer Corp. and Trident Securities, the Bank's financial and
marketing advisors 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 economy in the Bank's primary
market area and have compared the Bank's financial performance and condition
with publicly-traded thrifts in mutual holding company form, as well as all
publicly-traded thrifts. We have reviewed 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. We have considered the market for the stock of all publicly-traded
mutual holding companies. We have also considered the expected market for the
Bank's public shares. We have excluded from such analyses thrifts subject to
announced or rumored acquisition, mutual holding company institutions that have
announced their intent to pursue second step conversions, and/or those
institutions that exhibit 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 and mutual
holding companies, the
<PAGE>
RP Financial, LC.
Board of Trustees
November 28, 1997
Page 3
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 Bank's and Holding Company's values alone. It is our
understanding that there are no current or long-term plans for pursuing a second
step conversion or 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.
Pro forma market value is defined as the price at which Lockport
Savings' stock, immediately upon completion of the 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 November 28, 1997, the estimated aggregate
pro forma market value of the shares to be issued immediately following the
conversion, both shares issued publicly as well as to the MHC, was $225,000,000
at the midpoint, equal to 22,500,000 shares issued at a per share value of
$10.00 for the public shares. Pursuant to conversion guidelines, the 15 percent
offering range indicates a minimum value of $191,250,000, and a maximum value of
$258,750,000. Based on the $10.00 per share offering price determined by the
Board, this valuation range equates to an offering of 19,125,000 shares at the
minimum to 25,875,000 shares at the maximum. In the event that the appraised
value is subject to an increase, up to 3,881,250 shares may be sold at an issue
price of $10.00 per share, for an aggregate market value of $297,562,500,
without a resolicitation. The Board of Trustees has established a public
offering range such that the public ownership of the Holding Company will
constitute a 46 percent ownership interest prior to the issuance of shares to
the Foundation. Accordingly, the offering range to the public of the minority
stock will be $86,777,470 at the minimum, $102,091,150 at the midpoint,
$117,404,820 at the maximum and $135,015,540 at the supermaximum. Based on the
public offering range, and inclusive of the shares issued to the Foundation, the
public ownership of the shares will represent 46.74 percent of the shares issued
in the reorganization, with the MHC owning the majority of the shares.
Limiting Factors and Considerations
- -----------------------------------
Our valuation is not intended, and must not be construed, as a
recommendation of any kind as to the advisability of purchasing shares of the
common stock. Moreover, because such valuation is necessarily based upon
estimates and projections of a number of matters, all of which are subject to
change from time to time, no assurance can be given that persons who purchase
shares of common stock in the conversion will thereafter be able to buy or sell
such shares at prices related to the foregoing valuation of the pro forma market
value thereof.
RP Financial's valuation was determined based on the financial condition
and operations of the Bank as of September 30, 1997, the date of the financial
data included in the regulatory application and prospectus.
RP Financial is not a seller of securities within the meaning of any
federal and state securities laws and any report prepared by RP Financial shall
not be used as an offer or solicitation with respect to the purchase or sale of
any securities. RP Financial maintains a policy which prohibits the company, its
principals or employees from purchasing stock of its client institutions.
The valuation will be updated as provided for in the conversion
regulations and guidelines. These updates will consider, among other things, any
developments or changes in the Bank's financial performance and condition,
management policies, and current conditions in the equity markets for thrift
shares. These updates may also consider changes in other external factors which
impact value including, but not limited to: various changes
<PAGE>
RP Financial, LC.
Board of Trustees
November 28, 1997
Page 4
in the legislative and regulatory environment, the stock market and the market
for thrift stocks, and interest rates. Should any such new developments or
changes be material, in our opinion, to the valuation of the shares, appropriate
adjustments to the estimated pro forma market value will be made. The reasons
for any such adjustments will be explained in the update at the date of the
release of the update.
Respectfully submitted,
RP FINANCIAL, LC.
/s/ William E. Pommerening
William E. Pommerening
CEO and Managing Director
/s/ James P. Hennessey
James P. Hennessey
Senior Vice President
<PAGE>
RP Financial, LC.
TABLE OF CONTENTS
NIAGARA BANCORP, INC.
LOCKPORT SAVINGS BANK
<TABLE>
<CAPTION>
PAGE
DESCRIPTION NUMBER
----------- ------
<S> <C>
CHAPTER ONE OVERVIEW AND FINANCIAL ANALYSIS
- -----------
Introduction 1.1
Strategic Overview 1.2
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
Local Economy 2.2
Market Area Deposit Characteristics 2.5
CHAPTER THREE PEER GROUP ANALYSIS
- -------------
Peer Group Selection 3.1
Basis of Comparison 3.2
Selection of Peer Group 3.3
Financial Condition 3.6
Income and Expense Components 3.8
Loan Composition 3.11
Credit Risk 3.13
Interest Rate Risk 3.13
Summary 3.16
</TABLE>
<PAGE>
RP Financial, LC.
TABLE OF CONTENTS
NIAGARA BANCORP, INC.
LOCKPORT SAVINGS BANK
(continued)
<TABLE>
<CAPTION>
PAGE
DESCRIPTION NUMBER
----------- ------
<S> <C>
CHAPTER FOUR VALUATION ANALYSIS
- ------------
Introduction 4.1
Appraisal Guidelines 4.1
RP Financial Approach to the Valuation 4.1
Valuation Analysis 4.2
1. Financial Condition 4.2
2. Profitability, Growth and Viability of Earnings 4.3
3. Asset Growth 4.4
4. Primary Market Area 4.4
5. Dividends 4.6
6. Liquidity of the Shares 4.7
7. Marketing of the Issue 4.7
A. The Public Market 4.8
B. The New Issue Market 4.12
C. The Acquisition Market 4.16
8. Management 4.16
9. Effect of Government Regulation and Regulatory Reform 4.17
Summary of Adjustments 4.17
Basis of Valuation. Fully Converted Pricing Ratios 4.17
Valuation Approaches 4.18
1. Price-to-Book ("P/B") 4.21
2. Price-to-Earnings ("P/E") 4.21
3. Price-to-Assets ("P/A") 4.23
Valuation Conclusion 4.23
</TABLE>
<PAGE>
RP Financial, LC.
LIST OF TABLES
LOCKPORT SAVINGS BANK
LOCKPORT, NEW YORK
<TABLE>
<CAPTION>
TABLE
NUMBER DESCRIPTION PAGE
------ ----------- ----
<S> <C> <C>
1.1 Historical Balance Sheets 1.6
1.2 Historical Income Statements 1.9
2.1 Summary Demographic Data 2.3
2.2 Major Employers in Western New York 2.4
2.3 Market Area Unemployment Trends 2.5
2.4 Deposit Summary 2.6
3.1 All MHC Institutions 3.4
3.2 Balance Sheet Composition and Growth Rates 3.7
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 3.14
3.6 Interest Rate Risk Measures and Net Interest Income Volatility 3.15
4.1 Peer Group Market Area Comparative Analysis 4.5
4.2 Conversion Pricing Characteristics 4.13
4.3 Market Pricing Comparatives 4.15
4.4 Calculation of Implied Per Share Data 4.19
4.5 MHC Institutions - Implied Pricing Ratios Full Conversion Basis 4.22
4.6 Public Market Pricing 4.25
</TABLE>
<PAGE>
RP Financial, LC.
Page 1.1
I. OVERVIEW AND FINANCIAL ANALYSIS
Introduction
- ------------
Lockport Savings Bank ("Lockport Savings" or the "Bank") is a New York
chartered mutual savings bank headquartered in Lockport, New York. Lockport
Savings is headquartered in Niagara County, in western New York, which is
approximately 15 miles north of the City of Buffalo. Throughout most of its
history, the Bank has primarily served Lockport and the greater Niagara County
market. Commencing in the 1970s, the Bank started branching from its original
one office location into other areas of Niagara and nearby Erie County. The pace
of branching has accelerated in the 1990s as the Bank added two branches in 1993
and a total of five additional branches since the since the beginning of fiscal
1995. The Bank currently operates a total of 15 offices, including 2 supermarket
branches, in Niagara, Erie, Orleans and Genessee Counties of western New York,
all of which are in the Buffalo metropolitan area. Additionally, the Bank's
growth and expansion is an ongoing strategy and Lockport Savings has authorized
the establishment of three additional de novo offices which it expects to open
in fiscal 1998.
Lockport Savings was organized in 1870 and has a long history of service
to its primary market. Lockport Savings 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 Bank Insurance Fund
("BIF"). The Bank's primary regulators are the New York State Banking Department
(the "Department") and the FDIC. At September 30, 1997, Lockport Savings had
total assets of $1.1 billion, total deposits of $992.2 million, and equity of
$126.7 million, equal to 10.8 percent of total assets. For the twelve months
ended September 30, 1997, the Bank reported net income of $11.2 million, for a
return of 0.99 percent of average assets.
The Board of Trustees recently adopted a plan to reorganize from the mutual
form of organization to the mutual holding company form of organization. As part
of the reorganization, Lockport Savings will become a wholly-owned subsidiary of
Niagara Bancorp, Inc., a Delaware corporation, and Niagara Bancorp, Inc. will
issue a majority of its common stock to Niagara Bancorp, MHC, a New York-
chartered mutual holding company, and sell a minority of its common stock to the
public. Concurrent with the Reorganization, the MHC will retain $100,000 for
initial capitalization while the Holding Company will retain up to 50 percent of
the net conversion proceeds. Immediately after consummation of the
Reorganization, it is not anticipated that the MHC or the Holding Company will
engage in any business activity other than ownership of their respective
subsidiaries.
The assets and liabilities of the stock subsidiaries will be substantially
equivalent to those of Lockport Savings prior to the reorganization. The MHC
will own a controlling interest in the Holding Company of at least
<PAGE>
RP Financial, LC.
Page 1.2
51 percent, and the Holding Company will be the sole subsidiary of the MHC. The
Holding Company will also own 100 percent of the Bank's outstanding stock.
Strategic Overview
- ------------------
Throughout much of its corporate history, Lockport Savings' strategic focus
has been that of a community oriented financial institution, i.e., meeting the
borrowing and savings needs of its local customers in western New York. While
the Bank continues to originate permanent residential mortgage loans consistent
with its historical roots, Lockport Savings has taken steps to diversify its
loan portfolio to include commercial and multi-family mortgage loans and, to a
lesser extent, construction and non-mortgage consumer and commercial loans, a
strategy which has increased the credit risk profile while also enhancing the
yield and earnings potential. The Bank's risk profile is diminished however, by
the large balance of low-risk investments and mortgage-backed securities ("MBS")
comprising the asset base; loans receivable comprised only 53 percent of assets
as of September 30, 1997 while the balance of interest-earning assets was
composed of MBS and, to a lesser extent, investment securities and short-term
investments.
Lockport Savings operations have been enhanced by several other
considerations. First, Lockport Savings has maintained a relatively effective
cost-containment strategy on controllable operating expenses through its focus
on mortgage lending and large average branch size. Second, the Bank has enjoyed
relatively good deposit growth partially due to the attraction of customers from
other institutions following acquisition by large out-of-market institutions and
the implementation of a targeted branching strategy. And third, the Bank's
relatively conservative asset investment philosophy has led to generally
favorable asset quality despite the lackluster performance of the local economy
overall.
Based on financial data as of September 30, 1997, the strategies adopted by
the Board and management have proven to be successful. The Bank maintains an
equity-to-assets ratio of 10.8 percent, has achieved annualized asset growth of
7.5 percent since the end of fiscal 1992, and has generated moderate to strong
operating returns (0.99 percent of average assets for the twelve months ended
September 30, 1997).
Lockport Savings primarily originates permanent mortgage loans secured by
1-4 family properties located within the Bank's primary market area. The Bank
typically ranks as the top residential mortgage originator in Niagara County. It
is the Bank's general policy to originate adjustable rate mortgage loans
("ARMs") and shorter term fixed rate loans for portfolio (i.e., loans with
maturities of fifteen years or less), and originate conforming loans with
maturities in excess of fifteen years for resale to the secondary market (GNMA,
FNMA, and FHLMC). Management believes that the risks of holding shorter term
fixed rate loans are offset by yield and profitability considerations. Lockport
Savings' loan volume reflects growth over the last three fiscal years as the
<PAGE>
RP Financial, LC.
Page 1.3
Bank has added personnel in the lending area and instituted an aggressive
marketing campaign with the objective of expanding the loan portfolio and
increasing the loans/deposits ratio.
Lockport Savings' secondary market strategy has enabled the Bank to more
fully participate in the residential mortgage loan market without accepting the
interest rate risk of holding longer term fixed rate mortgage loans. It is
Lockport Savings' preference to sell loans on a servicing retained basis with
the objective of retaining customer relationships, building off-balance sheet
value through a portfolio of loans serviced for others and enhancing non-
interest revenue. As of September 30, 1997, Lockport Savings serviced
residential loans for others with a principal balance of approximately $139.8
million.
To supplement its lending activities and given the limited growth
characteristics of the Bank's market, Lockport Savings deploys excess liquidity
into various investment vehicles. The portfolio of investments and MBS reflects
growth over the last five fiscal years, notwithstanding growth of the loans-to-
deposits ratio. The Bank's investment securities portfolio is largely comprised
of U.S. Government and federal agency obligations, as well as asset-backed
securities. MBS primarily consist of pass-through securities issued by all the
major secondary market agencies and collateralized mortgage obligations
("CMOs"). As of September 30, 1997, Lockport Savings' cash and investments
portfolio totaled $216.7 million, or 18.4 percent of total assets, while the MBS
portfolio equaled $285.8 million, or 24.3 percent of total assets. Most of the
Bank's investments and MBS are classified as "available for sale".
Retail deposits have consistently served as the primary funding liability
for the Bank, while borrowings have been used to a limited degree, primarily for
asset-liability management purposes. Notwithstanding the relatively strong
deposit growth achieved by the Bank since fiscal 1992, Lockport Savings' cost of
funds is not considered to be extraordinarily high. The Bank attributes a
portion of its growth to customers transferring accounts to the Bank away from
locally-based institutions who have been acquired by out-of-market institutions
over the last few years. Furthermore, Lockport Savings has nearly doubled the
number of branches since the end of fiscal 1992 and significantly expanded its
presence in Erie and Niagara Counties.
Management expects that the future activities of the Bank will continue to
focus on products and services which have facilitated growth of the Bank's
capital and earnings to date. Specifically, the largest segment of Lockport
Savings' business will continue to be traditional, with an orientation towards
retail deposit products and retail banking services, funding one-to-four family
residential mortgage loans and purchasing high quality short-term or adjustable
rate investment and mortgage-backed securities.
A key reason for the conversion is that the Board and management of
Lockport Savings believe that the Bank is uniquely postured among the many other
competing and/or significantly larger financial institutions with
<PAGE>
RP Financial, LC.
Page 1.4
which it competes, particularly those headquartered out of market. Importantly,
management believes that in acquiring many of the locally owned institutions,
the large out-of-market companies have alienated many customers by reducing the
level of service, imposing a less attractive fee structure, or closing
convenient branches. In some cases, branches have changed hands more than one
time over the last five years reducing customer loyalty still further. Against
this backdrop, the Bank has successfully positioned itself as the small,
community-oriented alternative to the large out-of-market banks.
Lockport Savings has firm plans to open three additional branch offices in
targeted areas within the Bank's market area by the end of 1998. Such offices
are projected to require capital expenditures approximating $2.3 million. In
addition, the Bank has tentative plans to open one additional office. All the
proposed offices are in Lockport Savings' current four county market. Management
has plans to evaluate other potential sites for de novo branching in the future
which will likely be in-market.
Management believes that the conversion will support Lockport Savings'
efforts to broaden its product line and pursue long term growth. The near-term
deployment of the net conversion proceeds is as follows:
Niagara Bancorp. Niagara Bancorp is expected to retain up to 50 percent of
---------------
the net conversion proceeds. At present, the Holding Company funds, net of
the loan to the ESOP, are expected to be invested initially into short- and
intermediate-term investment securities with maturities ranging up to two
years. Over time, the Holding Company funds are anticipated to be utilized
for various corporate purposes, possibly including acquisitions, infusing
additional equity into the Bank, repurchases of common stock, and the
payment of regular and/or special cash dividends.
Lockport Savings. At least 50 percent of the net conversion proceeds will
----------------
be infused into the Bank in exchange for all of the Bank's newly issued
stock. The increase in Bank capital will be less, as the amount to be
borrowed by the ESOP to fund an 8 percent stock purchase will be accounted
for as a contra-equity. Cash proceeds (i.e., net proceeds less deposits
withdrawn to fund stock purchases) infused into the Bank are anticipated to
become part of general operating funds, and are expected to initially be
invested in short-term investments, used to repay short-term borrowings
and/or to fund loan commitments or loans in the pipeline.
On a pro forma basis, Lockport Savings will be in an overcapitalized
position. The Board of Trustees has determined to pursue a strategy of
controlled growth in its western New York markets in order to leverage capital.
The Bank also intends to expand by branching (three branches are currently
planned to be opened in 1998) and will consider purchasing branches and branch
deposits should such become available as large competitors restructure their
retail networks. Asset growth is expected to be funded through internal deposit
growth, branching and 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. The Holding Company may also consider various
capital management strategies if appropriate to assist in the long-run objective
of increasing return on equity.
<PAGE>
RP Financial, LC.
Page 1.5
Balance Sheet Trends
- --------------------
Over the last several years, Lockport Savings pursued a growth strategy,
reflecting a combination of retail deposits (including de novo branching) and,
to a lesser extent, borrowed funds. The impact of this strategy is evidenced in
the summary balance sheet data set forth in Table 1.1 which shows that Lockport
Savings' total assets increased from $834.8 million at the end of fiscal 1992 to
$1.176 billion as of September 30, 1997, which reflects a 7.5 percent compounded
annual growth rate. Notwithstanding the increase in total assets, Lockport
Savings' capital ratio increased from 9.1 percent of assets as of the end of
fiscal 1992 to 10.8 percent as of September 30, 1997, as the Bank's strong
earnings levels resulted in a more rapid equity growth pace than total assets.
All of Lockport Savings' capital consisted of tangible capital as of the
September 30, 1997.
With the balance sheet growth realized by Lockport Savings, the mixture of
interest-earning assets has also undergone change. Loans receivable comprise
the largest segment of interest-earning assets, totaling $622.5 million, or 52.9
percent of total assets as of September 30, 1997. The balance of loans
receivable has grown at a faster annual rate than assets, leading to an increase
in the loans/deposits ratio. The comparatively faster loan growth has been
primarily funded through growth of the deposit base as well as through the
utilization of borrowed funds. The composition of the loan portfolio has
remained relatively stable however, with 1-4 family residential mortgage loans
comprising the largest segment of the loan portfolio. While the Bank has been
seeking to expand the loan portfolio and the loans/deposit ratio with the
objective of increasing earnings and franchise value, Lockport Savings still
maintains a large investment portfolio as a result of consumers' preference for
longer term fixed rate loans (which the Bank sells into the secondary market)
and the limited growth trends observed in the Bank's market.
In addition to portfolio loans, Lockport Savings has also been originating
loans for resale into the secondary market (particularly fixed rate mortgages),
generally on a servicing retained basis, providing the Bank with fee income and
the ability to offer a more comprehensive range of products while limiting
interest rate risk. The Bank typically retains adjustable rate and shorter term
fixed rate residential loans (i.e., monthly payment loans and bi-weekly payment
loans with maturities equal to or in excess of 15 years and 20 years,
respectively).
The second largest component of Lockport Savings' balance sheet was MBS,
which equaled $285.8 million, or 24.3 percent of total assets as of September
30, 1997. MBS consist of straight agency pass-through securities and, to a
lesser extent, CMOs collateralized primarily by government agencies although
there are several private issue securities as well. Due to interest rate risk
considerations, the majority of Lockport Savings' MBS are collateralized by
shorter term balloon loans. The entire MBS portfolio was classified as
"available for sale" as of September 30, 1997.
<PAGE>
RP Financial, LC.
Table 1.1
Lockport Savings Bank
Historical Balance Sheets
(Amount and Percent of Assets)
<TABLE>
<CAPTION>
For the Fiscal Year Ended December 31,
-------------------------------------------------------------------------------
1992 1993 1994 1995
------------------ ----------------- ------------------ -------------------
Amount Pct Amount Pct Amount Pct Amount Pct
------ --- ------ --- ------ --- ------ ---
($000) (%) ($000) (%) ($000) (%) ($000) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Total Amount of:
Assets $834,764 100.00% $914,910 100.00% $916,185 100.00% $994,291 100.00%
Loans Receivable (net) 359,442 43.06% 421,061 46.02% 474,191 51.76% 535,971 53.90%
Mortgage-Backed Securities (MBS) -AFS 323,105 38.71% 300,582 32.85% 273,280 29.83% 261,543 26.30%
Investment Securities (Available for Sale)-(AFS) 27,520 3.30% 67,903 7.42% 65,733 7.17% 84,867 8.54%
Investment Securities (Held to Maturity) - (HTM) 33,809 4.05% 51,927 5.68% 43,838 4.78% 46,700 4.70%
Deposits 746,345 89.41% 812,939 88.85% 819,690 89.47% 861,065 86.60%
Borrowed Funds 0 0.00% 0 0.00% 0 0.00% 0 0.00%
Total Equity 75,722 9.07% 87,195 9.53% 81,322 8.88% 107,653 10.83%
Loans/Deposits 48.16% 51.79% 57.85% 62.25%
Average Interest-Earning Assets/
Avergage Interest-Bearing Liabilities 110.27% 109.95% 112.30% 113.92%
Non-Performing Assets/Assets 0.73% 0.85% 0.80% 1.26%
Allowances for Loan Losses as a Percent of:
Loans Receivable, net 0.75% 0.96% 0.88% 0.88%
Non-Performing Loans 102.20% 83.61% 99.29% 119.01%
Full Service Offices 8 10 10 11
<CAPTION>
For the Fiscal Year
Ended December 31, Compounded
---------------------- As of Annual
1996 September 30, 1997 Growth Rate
---------------------- ----------------------- --------------
Amount Pct Amount Pct Pct
------ --- ------ --- ---
($000) (%) ($000) (%) (%)
<S> <C> <C> <C> <C> <C>
Total Amount of:
Assets $1,093,358 100.00% $1,176,451 100.00% 7.49%
Loans Receivable (net) 598,486 54.74% 622,487 52.91% 12.26%
Mortgage-Backed Securities (MBS) -AFS 284,860 26.05% 285,762 24.29% -2.55%
Investment Securities (Available for Sale)-(AFS) 130,269 11.91% 179,211 15.23% 48.36%
Investment Securities (Held to Maturity) - (HTM) 38,000 3.48% 37,500 3.19% 2.21%
Deposits 920,072 84.15% 992,219 84.34% 6.18%
Borrowed Funds 32,008 2.93% 28,740 2.44% N.M.
Total Equity 115,664 10.58% 126,720 10.77% 11.45%
Loans/Deposits 65.05% 62.74%
Average Interest-Earning Assets/
Avergage Interest-Bearing Liabilities 113.93% 113.63%
Non-Performing Assets/Assets 0.74% 0.21%
Allowances for Loan Losses as a Percent of:
Loans Receivable, net 1.09% 1.02%
Non-Performing Loans 138.57% 330.00%
Full Service Offices 13 15
</TABLE>
Source: Lockport Savings Bank's audited and unaudited financial reports.
<PAGE>
RP Financial, LC.
Page 1.7
The balance of the portfolio of investments included short term liquidity
investments, U.S. government and agency obligations, asset-backed securities,
corporate and municipal bonds and money market preferred stock. U.S. Treasury,
asset-backed securities, and money market preferred stock comprise the majority
of the Bank's investment portfolio. The portfolio is comprised primarily of
short- to intermediate-term investments (maturities typically five years or
less). Management anticipates that the investment portfolio will be managed in
a fashion relatively consistent with recent practices although the balance of
investments will likely increase immediately following the conversion. It is
management's current intent to initially deploy the cash received in the
conversion into short-to intermediate-term investment securities with maturities
up to two years and/or short term MBS. Over the longer term, management will be
seeking to redeploy such funds into higher yielding whole loans.
The Bank's assets were funded with a combination of deposits, borrowings
and retained earnings at September 30, 1997. Retail deposits have consistently
met the substantial portion Lockport Savings' funding needs. Since fiscal year-
end 1992, deposits have experienced 6.2 percent compounded annual growth, with
growth concentrated in certificates of deposit ("CDs"). CDs comprised the
largest component of the Bank's deposit base, equaling 52.1 percent of total
deposits as of September 30, 1997. In this regard, Lockport Savings' deposit
mixture has changed somewhat over the last several fiscal years. Whereas CDs
equaled 39.1 percent of total deposits at the end of fiscal 1994, CDs equaled
52.1 percent of total deposits as of September 30, 1997. The increase in CDs has
resulted in a higher cost of funds for the Bank and has been necessitated by
Lockport Savings' growth objectives.
The Bank has not utilized borrowed funds to any significant extent over the
last five fiscal years. As of September 30, 1997, borrowed funds outstanding
totaled $28.7 million and consisted of funds from the Federal Home Loan Bank of
New York ($10.0 million) as well as reverse repurchase agreements ($18.7
million). It is management's preference to rely on deposits to fund operations
however, the Bank has in the past, and expects to continue in the future, to
utilize borrowings under several circumstances as follows: (1) when such funds
are priced attractively relative to deposits; (2) to lengthen the duration of
liabilities; (3) to enhance earnings when attractive arbitrage opportunities
arise (i.e, the Bank is considering employing borrowings to fund the purchase of
investments at a spread); and (4) to generate additional liquid funds, if
required.
Positive earnings over the last four and three quarter years translated
into compounded annual capital growth of 11.5 percent. Capital growth has
slightly outpaced asset growth, and Lockport Savings' equity-to-assets ratio has
increased from 9.1 percent of assets at September 30, 1992 to 10.8 percent as of
September 30, 1997. All of the Bank's capital is tangible capital, and Lockport
Savings maintains capital surpluses relative to all of its minimum regulatory
requirements (see the table below). The addition of the net proceeds of the
stock offering will serve to strengthen the Bank's financial condition, support
planned expansion including the additional capital investment in new office
facilities and targeted growth.
15
<PAGE>
RP Financial, LC.
Page 1.8
<TABLE>
<CAPTION>
Capital
Over
Required Actual Required
Capital Capital Amount
--------- --------- ---------
($000) ($000) ($000)
<S> <C> <C> <C>
Tier I Leverage Capital Ratio $34,991 $125,383 $ 90,392
Risk-Based Capital: Tier I 24,235 125,383 101,148
Risk-Based Capital: Total 48,470 131,736 83,267
Source: Prospectus.
</TABLE>
The Bank's ratio of average interest-bearing assets ("IEA") as a percent of
average interest-bearing liabilities ("IBL") has steadily increased in line with
the growth in equity. On a post-conversion basis, the increased capitalization
should lead to IEA/IBL ratio improvement.
Income and Expense Trends
- -------------------------
The Bank has reported a generally favorable earnings trend since fiscal
1994 on a reported basis, but recent earnings are below the record levels
reported in 1992 and 1993 (See Table 1.2 for details). Specifically, net
earnings before the impact of accounting adjustments equaled $11.2 million and
$11.3 million in fiscal 1992 and fiscal 1993, respectively, and declined to $9.7
million in fiscal 1994. In this regard, the Bank actively managed the portfolio
in 1992 and 1993 to take advantage of a declining interest rate environment to
produce capital gains. Since fiscal 1994, reported earnings levels have
generally been rising and equaled $11.2 million, or 0.99 percent of average
assets for the twelve months ended September 30, 1997. Trends with respect to
core earnings reflect a somewhat different pattern with core earnings increasing
over the period from 1992 to 1994 and fluctuating in a range of $9.4 million to
$10.3 million, thereafter. The generally favorable trend in core earnings from
fiscal 1990 to fiscal 1994 is attributable to a number of factors including
consistent asset growth and a generally favorable interest rate environment,
which, in turn, have fueled growth of the Bank's net interest income. Since
1994, core earnings growth has been restrained by growth in the Bank's operating
expense ratio as Lockport Savings' has incurred significant expenditures related
to its branching strategy which have not yet provided offsetting benefits to the
Bank's core profitability.
The Bank's net interest income reflects steady growth from fiscal 1992 to
the twelve months ended September 30, 1997 in absolute dollar terms ($26.8
million to $36.9 million, respectively), although net interest income peaked in
fiscal 1992 when measured as a percent of average assets. The growth in the
level of net interest income observed over the last five fiscal years is
attributable to balance sheet growth achieved by the Bank. Furthermore, the
ratio of net interest income to average assets reflects only a modest decline
which is
<PAGE>
RP Financial, LC.
Table 1.2
Lockport Savings Bank
Historical Income Statements
(Amount and Percent of Assets)(1)
<TABLE>
<CAPTION>
For the Fiscal Year Ended December 31,
-----------------------------------------------------------------------
1992 1993 1994
-------------------- ---------------------- ------------------------
Amount Pct Amount Pct Amount Pct
------ --- ------ --- ------ ---
($000) (%) ($000) (%) ($000) (%)
<S> <C> <C> <C> <C> <C> <C>
Interest Income $61,096 8.00% $61,681 7.04% $63,144 6.82%
Interest Expense (34,281) -4.49% (32,597) -3.72% (31,754) -3.43%
-------- ------ -------- ------ -------- ------
Net Interest Income $26,815 3.51% $29,084 3.32% $31,390 3.39%
Provision for Loan Losses (1,398) -0.18% (1,522) -0.17% (948) -0.10%
------- ------ ------- ------ ----- ------
Net Interest Income after Provisions $25,417 3.33% $27,562 3.15% $30,442 3.29%
Other Income $1,946 0.25% $3,442 0.39% $3,235 0.35%
Operating Expense (15,689) -2.06% (16,666) -1.90% (18,399) -1.99%
-------- ------ -------- ------ -------- ------
Net Operating Income $11,674 1.53% $14,338 1.64% $15,278 1.65%
Net Gain(Loss) on Sale of AFS Securities $5,732 0.75% $3,601 0.41% ($849) -0.09%
Provision for Loss on Nationar Deposit 0 0.00% 0 0.00% 0 0.00%
- ----- - ----- - -----
Total Non-Operating Income/(Expense) $5,732 0.75% $3,601 0.41% ($849) -0.09%
Net Income Before Tax $17,406 2.28% $17,939 2.05% $14,429 1.56%
Income Taxes (6,184) -0.81% (6,595) -0.75% (4,704) -0.51%
------- ------ ------- ------ ------- ------
Net Inc(Loss) Before Extraordinary Items $11,222 1.47% $11,344 1.30% $9,725 1.05%
Cumulative Effect of Change in
Accounting For Income Taxes $0 0.00% $129 0.01% ($924) -0.10%
-- ----- ---- ----- ------ ------
Net Income (Loss) $11,222 1.47% $11,473 1.31% $8,801 0.95%
Estimated Core Earnings
- -----------------------
Net Income $11,222 1.47% $11,344 1.30% $9,725 1.05%
Addback(Deduct): Non-Recurring (Inc)/Exp (5,732) -0.75% (3,601) -0.41% 849 0.09%
Tax Effect 2,036 0.27% 1,324 0.15% (277) -0.03%
----- ----- ----- ----- ----- ------
Estimated Core Income $7,526 0.99% $9,067 1.04% $10,297 1.11%
Memo:
Expense Coverage Ratio (2) 170.92% 174.51% 170.61%
Efficiency Ratio (3) 57.34% 53.75% 54.63%
Effective Tax Rate 35.53% 36.76% 32.60%
<CAPTION>
For the Fiscal Year Ended December 31,
------------------------------------------ Twelve Months Ended
1995 1996 September 30, 1997
---------------------- --------------------- ------------------------
Amount Pct Amount Pct Amount Pct
------ --- ------ --- ------ ---
($000) (%) ($000) (%) ($000) (%)
<S> <C> <C> <C> <C> <C> <C>
Interest Income $69,856 7.32% $75,062 7.18% $80,914 7.20%
Interest Expense (39,034) -4.09% (40,655) -3.89% (43,966) -3.91%
-------- ------ -------- ------ -------- ------
Net Interest Income $30,822 3.23% $34,407 3.29% $36,948 3.29%
Provision for Loan Losses (1,016) -0.11% (2,187) -0.21% (1,301) -0.12%
------- ------ ------- ------ ------- ------
Net Interest Income after Provisions $29,806 3.12% $32,220 3.08% $35,647 3.17%
Other Income $3,929 0.41% $5,176 0.50% $5,470 0.49%
Operating Expense (19,543) -2.05% (21,526) -2.06% (24,943) -2.22%
-------- ------ -------- ------ -------- ------
Net Operating Income $14,192 1.49% $15,870 1.52% $16,174 1.44%
Net Gain(Loss) on Sale of AFS Securities $1,477 0.15% $576 0.06% $919 0.08%
Provision for Loss on Nationar Deposit (600) -0.06% 600 0.06% 600 0.05%
----- ------ --- ----- --- -----
Total Non-Operating Income/(Expense) $877 0.09% $1,176 0.11% $1,519 0.14%
Net Income Before Tax $15,069 1.58% $17,046 1.63% $17,693 1.57%
Income Taxes (5,144) -0.54% (6,278) -0.60% (6,516) -0.58%
------- ------ ------- ------ ------- ------
Net Inc(Loss) Before Extraordinary Items $9,925 1.04% $10,768 1.03% $11,177 0.99%
Cumulative Effect of Change in
Accounting For Income Taxes $0 0.00% 0 0.00% 0 0.00%
-- ----- - ----- - -----
Net Income (Loss) $9,925 1.04% $10,768 1.03% $11,177 0.99%
Estimated Core Earnings
- -----------------------
Net Income $9,925 1.04% $10,768 1.03% $11,177 0.99%
Addback(Deduct): Non-Recurring (Inc)/Exp (877) -0.09% (1,176) -0.11% (1,519) -0.14%
Tax Effect 299 0.03% 433 0.04% 559 0.05%
--- ----- --- ----- --- -----
Estimated Core Income $9,347 0.98% $10,025 0.96% $10,217 0.91%
Memo:
Expense Coverage Ratio (2) 157.71% 159.84% 148.13%
Efficiency Ratio (3) 57.93% 57.56% 60.66%
Effective Tax Rate 34.14% 36.83% 36.83%
</TABLE>
(1) Ratios are as a percent of average assets.
(2) Net interest income divided by operating expenses.
(3) Operating expenses as a percent of the sum of net interest income and other
income (excluding gains on sale).
Source: Lockport Savings Bank's audited and unaudited financial statements.
<PAGE>
RP Financial, LC.
Page 1.10
attributable to the large base of core deposits and management's focus on
maintaining the asset base on a relatively short repricing structure in
comparison to many savings institutions.
Exhibit I-5, which shows changes in Lockport Savings' yields and costs over
time, indicates that while the Bank's net spread diminished from 3.07 percent in
fiscal 1994 to 2.88 percent in fiscal 1995, spreads have subsequently been
maintained at relatively stable levels. For the nine months ended September 30,
1997, Lockport Savings' interest rate spread equaled 2.83 percent.
The Bank's deposit structure, which is heavily weighted toward savings and
transaction accounts, coupled with the Bank's secondary market activities which
provide Lockport Savings with loan servicing income and gains on the sale of
loans have all contributed to a moderate level of non-interest fee income
("other income"). Overall, Lockport Savings posted other income of 0.48 percent
of average assets for twelve months ended September 30, 1997, which is
consistent with the level reported in fiscal 1996 but modestly above the level
reported in previous years. In the future, Lockport Savings will be seeking to
diversify its product line with a view toward increasing other income. In
particular, management is currently analyzing the feasibility and profit
potential of increasing the Bank's insurance offerings and may consider
acquiring insurance agencies or investment companies in the future.
Additionally, Lockport Savings will be seeking to build more comprehensive full-
service relationships with its customers in the future which may also enhance
the level of other income.
The Bank's operating expenses have generally been maintained at relatively
moderate levels approximating 2.00 percent of average assets. In this regard,
operating expenses increased from $15.7 million in fiscal 1992 to $21.5 million
in fiscal 1996 although the operating expense ratio fluctuated in a relatively
narrow range from 1.90 percent of average assets to 2.06 percent of average
assets due to asset growth. The Bank's operating expense ratio was at
relatively moderate levels over this period owing to the relatively limited
operational diversification undertaken by the Bank, the high level of
investments and MBS which entail minimal costs to acquire and service and due to
the Bank's relatively large average branch size, which limits the number of
required staff.
The Bank's operating expenses increased during the twelve months ended
September 30, 1997, to equal $24.9 million, or 2.20 percent of average assets.
The increase in the operating expense ratio was due, in part, to several one-
time items including a $200,000 charge-off for outdated equipment and software,
a $325,000 expense relating to tax planning services, and a $150,000 reserve
established for litigation in connection with escrow reserves. The management of
Lockport Savings believes that the Bank's operating expenses may be subject to
upward pressure in the future due to several factors. First, the Bank recently
constructed a building in Lockport (completed in October 1997), New York, which
is currently housing the Bank's administrative offices. The cost to acquire the
Lockport property was approximately $278,000 and the additional cost of
construction, furniture,
<PAGE>
RP Financial, LC.
Page 1.11
fixtures and equipment totaled approximately $10.7 million. In addition, the
Bank plans to open three additional offices in Erie County in fiscal 1998 and
may open one additional office in 1998 or 1999.
Management has estimated the total incremental operating costs of the
administrative office to be approximately $1.0 million and the three planned
branch offices to be in the range of $1.9 million in the first year of operation
(none of these expenses are reflected in the historical earnings figures). In
addition to the foregoing branch sites which have been identified, management's
long range plan is to open additional offices in its market on as yet,
unidentified sites. In addition to the foregoing, the incremental expense of
operating as a stock institution, as well as the costs of the stock based
benefit plans, can be expected to result in moderately higher operating expenses
for the Bank. At the same time, balance sheet growth targeted by management may
partially diminish growth of Lockport Savings' operating expense ratio resulting
from these upward pressures.
The Bank's efficiency ratio (excluding gains and losses) has been in the
range of roughly 54 to 61 percent over the last several years.
Loan loss provisions recorded by Lockport Savings have been at relatively
moderate levels for the twelve months ended September 30, 1997, and the loss
provisions established were attributable to growth of the loan portfolio and a
modest level of chargeoffs. During the twelve months ended September 30, 1997,
the Bank recorded loan loss provisions equal to $1.301 million, or 0.11 percent
of average assets. Although management believes that the current balance of
allowances for loan losses is adequate, management continually evaluates the
adequacy of allowances for loan losses to ensure consistency with the Board
approved policies and procedures.
Gains on the sale of investments have been limited as most of the Bank's
investments, although classified as available for sale, are held to generate
interest income. However, the Bank occasionally sells it AFS investments in
conjunction with its assessment of interest rate and market conditions. For the
twelve months ended September 30, 1997, gains on the sale of investments totaled
$919,000, equal to 0.08 percent of average assets. The Bank's trailing twelve
month earnings also reflect a $600,000 recovery of loss reserves related to a
Nationar, Inc. deposit established in fiscal 1995.
The Bank's tax rate has ranged from approximately 32.6 percent to 36.8
percent over the last 5 years. During fiscal 1997, the Bank engaged in a tax
planning strategy to reduce state income taxes. The Bank's tax planning strategy
is being accomplished through two wholly-owned subsidiaries: (1) LSB Funding;
and (2) LSB Securities. LSB Funding, a wholly-owned real estate investment trust
("REIT") owns approximately $212.1 million of Lockport Savings' mortgage loans
exchanged for 100 percent common stock ownership. Under current tax laws, REIT
income is subject to a 60 percent dividend exclusion. While additional loans may
be transferred to the REIT in the future, the amount is limited by the Qualified
Thrift Lender ("QTL") test as REIT loans do not
<PAGE>
RP Financial, LC.
Page 1.12
count towards the QTL computation. Additionally, LSB Securities holds
approximately $49.9 million of U.S. Treasury securities which are now subject to
the 60 percent dividend exclusion for state tax purposes. The foregoing tax
strategies have reduced the Bank's effective state and federal tax rate from the
prior 37 percent to approximately 35 percent currently. The Bank recognizes that
a change in tax laws may eliminate such tax benefits, although no change in the
relevant tax laws is known to be underway at this time.
Interest Rate Risk Management
- -----------------------------
Lockport Savings manages interest rate risk primarily from the asset side
of the balance sheet. To control interest rate risk, Lockport Savings has
implemented several strategies, including: (1) diversifying the loan portfolio
into shorter-term or adjustable rate loans; (2) selling long-term residential
mortgages originated into the secondary market on a servicing retained basis;
(3) striving to fund operations through comparatively lower cost retail
deposits; and (4) maintaining strong capital levels.
These strategies have generally served to increase the sensitivity of the
Bank's assets to changes in interest rates and lengthen the duration of
liabilities. Furthermore, the sale of fixed rate loans into the secondary market
enhances the Bank's non-interest revenues, thereby reducing the reliance on net
interest income for overall earnings. The gap analysis set forth in Exhibit I-6
reflects the impact of the foregoing strategies on the Bank's repricing
structure. The gap measures indicate a liability sensitive position with a
cumulative gap-to-assets ratio equal to negative 22.16 percent in the one year
or less bucket and negative 8.04 percent in the three year or less period.
Similarly, a rate shock analysis (see Exhibit I-7) also reflects a liability
sensitive position with increases in net interest income and market value
generally reflected under lower rate scenarios.
Overall, the data suggests the Bank's earnings would be negatively impacted
by rising interest rates although the Bank has been somewhat successful in
reducing its exposure to interest rate risk. At the same time, there are
numerous limitations inherent in such analyses, such as the credit risk of the
Bank's loans and the impact to secondary market loan sales under a higher
interest rate environment.
Lending Activities and Strategy
- -------------------------------
Lockport Savings' lending strategy has been developed to take advantage of
the Bank's historical strengths in the areas of permanent residential mortgage
and the recent trend toward consolidation of the banking sector in its market
which has alienated some local customers. Additionally, the Bank has sought to
diversify its portfolio to include higher yielding multi-family and commercial
mortgage loans as well as non-mortgage loans as a means of enhancing yields and
the interest sensitivity of the asset base.
<PAGE>
RP Financial, LC.
Page 1.13
Lockport Savings' lending operations consist of four major segments as
follows: (1) residential mortgage lending for portfolio; (2) multi-family and
commercial mortgage lending; (3) non-mortgage lending involving primarily
various types of consumer loans; and (4) secondary market operations in which
Lockport Savings originates loans for resale generally on a servicing retained
basis. Such lending strategy is consistent with Lockport Saving's community bank
orientation, as evidenced in the Bank's loan portfolio composition (see Exhibits
I-8). As of September 30, 1997, permanent mortgage loans secured by 1-4 family
properties totaled $386.5 million, or 61.8 percent of total loans and
construction loans (many of which are residential construction loans) totaled
$14.0 million, or 2.2 percent of total loans. Additionally, home equity loans
equaled $13.0 million, or 2.1 percent of total loans.
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 $72.8
million and $69.6 million, respectively, as of September 30, 1997. Non-mortgage
loans totaled $69.6 million, or 11.1 percent of total loans as of September 30,
1997. In the future, Lockport Savings will seek to maintain a relatively
diversified loan portfolio consistent with community bank operations, and may
seek to build the level of commercial business lending, primarily to small local
businesses.
The Bank originates both fixed rate and adjustable rate 1-4 family loans.
The general practice is to retain adjustable rate mortgage loans ("ARMs") for
portfolio and sell longer term fixed rate loans (i.e., loans with maturities in
excess of 15 years) in the secondary market on a servicing retained basis.
Shorter term fixed rate loans with maturities of 15 years or less (20 years or
less for bi-weekly payment loans) are typically retained for portfolio as a
means of leveraging capital and as a yield enhancement measure. Management
believes that the incremental interest rate risk exposure of holding fixed rate
loans is moderated by their comparatively high rate of amortization and low
default rates. ARM loans are made with 1, 3, 5 and 7 year adjustment frequencies
with the rate indexed to the U.S. Treasury yield of corresponding maturity at a
margin ranging from 275 basis points to 325 basis points.
The Bank originates 1-4 family loans up to a loan-to-value ("LTV") ratio of
95.0 percent, with private mortgage insurance ("PMI") being required for loans
in excess of a 80.0 percent LTV ratio. To support home ownership for low-to-
moderate income first-time home buyers, the Bank actively participates in
residential mortgage programs sponsored by FNMA, FHLMC and the State of New York
Mortgage Agency ("SONYMA"). Substantially all of the loans in the Bank's
portfolio are secured by properties in Lockport Savings' primary market.
The Bank also originates loans for the purpose of constructing and/or
developing single family houses and, to a lesser extent, multi-family and
commercial properties. As of September 30, 1997, construction loans
<PAGE>
RP Financial, LC.
Page 1.14
totaled $14.0 million, equal to 2.23 percent of gross loans receivable. Single-
family construction loans are originated to builders on both a "spec" and pre-
sold basis. Additionally, the Bank originates construction/permanent loans to
homeowners which are construction loans which convert to permanent loans at the
end of the construction phase. Additionally, the Bank will also finance the
construction of various other properties located in its market but is generally
highly selective in extending such credits.
As a complement to the 1-4 family permanent mortgage lending activities,
the Bank also originates home equity loans and second mortgage loans. Home
equity loans are amortizing loans with maximum terms of 30 years. Home equity
lines are typically variable rate, and reprice based on the Prime Rate. Such
loans are subject to a loan-to-value ratio of up to 80 percent. Given the Bank's
expertise in home lending, management anticipates modestly intensifying efforts
to make home equity loans in the future.
The balance of the mortgage loan portfolio consists of commercial real
estate and multi-family loans, which are generally collateralized by properties
in the Bank's normal lending territory. Commercial real estate loans are
generally extended up to a 75 percent LTV ratio and require a debt-coverage
ratio of at least 1.2 times. Apartment loans may be extended with up to an 80
percent LTV ratio. Furthermore, the Bank generally requires personal guarantees
of the loan principal prior to making commercial and multi-family mortgage
loans. The Bank's commercial loan terms also typically provide for amortization
periods of up to 20 years while multi-family loans may be originated for terms
of up to 25 years. Properties securing the commercial real estate/multi-family
loan portfolio include small office buildings and apartments, churches,
warehouses, and retail outlets.
To date, commercial business lending has been a relatively minor area of
lending diversification for the Bank, consisting primarily of real estate
secured loans to small businesses in the local market. Commercial business loans
offered by the Bank are generally extended as lines of credit or short term
floating rate loans indexed to the Wall Street Journal prime rate plus a margin
or short-term fixed rate loans with terms of less than seven years. Management
has indicated that it is its intention to expand the commercial loan portfolio
moderately in the future.
Diversification into consumer lending consists primarily of mobile home
loans, personal installment loans and student loans with a variety of other loan
types comprising the balance of the loan portfolio. Management expects that the
level of consumer loans may continue to increase in the future at a moderate
pace.
Exhibit I-11, which shows the Bank's loan originations, repayments and
sales over the past three fiscal years, highlights Lockport Savings' emphasis on
originating 1-4 family permanent mortgage loans. Unlike many institutions which
have observed falling or flat loan origination volumes following the refinancing
boom from 1992 through 1994, Lockport Savings' loan volume has been subject to
modest increase since fiscal 1994. In this
<PAGE>
RP Financial, LC.
Page 1.15
regard, overall loan originations totaled $141.2 million in fiscal 1994 and
increased to $177 million in fiscal 1996. Origination levels have, however,
diminished somewhat over the first nine months of fiscal 1997 ($122.0 million
versus $130.1 million for the same period last year). One-to-four family
mortgage loans comprises the largest segment of the Bank's loan volume, equaling
$110.9 million in fiscal 1996, which is modestly above the annualized rate for
1997. The balance of the Bank's loan volume consists of various other types of
loans including multi-family and commercial mortgages and consumer loans.
Residential loans are originated primarily in three ways: (1) through loan
applications taken by branch managers; (2) by seven in-house loan originators
compensated through a base salary and a commission structure; and (3) via three
correspondents which provide a complete loan application to the Bank for review,
approval by the Bank's underwriters and officers (comprises approximately 55
percent of residential loan volume). Additionally, the Bank will occasionally
purchase participations in loans (primarily commercial and multi-family mortgage
loans) originated by other lenders, without recourse to the seller except in
cases of fraud.
Loan sales by the Bank have been at relatively moderate levels and have
primarily consisted of fixed rate residential loans (both conforming and non-
conforming loans). During fiscal 1996 and the nine months ended September 30,
1997, loan sales totaled $30.9 million and $27.3 million, respectively. The
portfolio of residential loans serviced for others approximated $139.8 million
at September 30, 1997.
Asset Quality
- -------------
Lockport Savings asset quality has been strong over the last five fiscal
years, notwithstanding the growth of the Bank's loan portfolio, including growth
in higher risk-weight loans. Specifically, as reflected in Exhibit I-12, the
balance of NPAs in Lockport Savings portfolio increased to 1.26 percent of
assets in fiscal 1995, largely due to the Nationar, Inc. insolvency but has
subsequently diminished and equaled $2.5 million, or 0.21 percent of assets, as
of September 30, 1997. As of September 30, 1997, Lockport Savings NPAs consisted
primarily of non-accrual loans, as well as a small amount of accruing loans 90
days or more past due and other real estate owned ("OREO") properties. At that
date, the Bank's loan loss reserves equaled $6.353 million, or 1.02 percent of
the net loan portfolio and reserve coverage as a percent of NPAs was 254
percent. These credit quality ratios, coupled with the Bank's conservative
nature historically, reflect relatively good credit quality and low risk of
credit losses at the Bank. At the same time, the growth of the loan portfolio
coupled with the lackluster performance of the local economy tends to increase
the credit risk exposure relative to other savings institutions operating in
areas with more dynamic economies.
<PAGE>
RP Financial, LC.
Page 1.16
Funding Composition and Strategy
- --------------------------------
Deposits have consistently been the Bank's primary source of funds, and as
of September 30, 1997, totaled $992.2 million, equal to 84.3 percent of assets.
Deposits have grown at a compounded annual rate of 6.2 percent since the end of
fiscal 1992. As discussed previously, Lockport Savings has been seeking to grow
and expand assets and deposits with the objective of building the franchise and
leveraging capital. Growth and entry into new markets has been facilitated by
the opening of seven new offices since the end of fiscal 1992 which increased
the number of retail branches to a total of fifteen.
Exhibit I-14 sets forth the Bank's average deposit composition and Exhibit
I-15 provides the interest rate and maturity composition of the CD portfolio at
September 30, 1997. The Bank's deposit composition has consistently reflected a
relatively large concentration in transaction and savings accounts, amounting to
$475.4 million, or 47.9 percent of total deposits at September 30, 1997. From
fiscal year end 1994 to 1997, the Bank's concentration of transaction and
savings accounts decreased from 60.9 percent of the portfolio to 47.9 percent,
which reflects depositors shifting funds to CDs in response to higher market
interest rate levels.
The remainder of the Bank's deposit base consists of CDs, with Lockport
Savings' current CD composition reflecting a higher concentration of short-term
CDs (maturities of less than one year). As of September 30, 1997, the CD
portfolio totaled $516.9 million, or 52.1 percent of total deposits, with 70.5
percent of those CDs having maturities of less than one year. Jumbo CDs (CD
accounts with balances of $100,000 or more) amounted to $90.4 million, or 17.5
percent of CDs and 9.1 percent of total deposits. Lockport Savings typically
pays a modest premium for jumbo CDs (in the range of 10 basis points).
Borrowings typically have not been a prominent funding source for the Bank
as it is management's preference to rely on deposits to fund operations.
However, the Bank has in the past, and expects to continue in the future, to
utilize borrowings under several circumstances as follows: (1) when such funds
are priced attractively relative to deposits; (2) to lengthen the duration of
liabilities; (3) to enhance earnings when attractive arbitrage opportunities
arise (i.e, the Bank is considering employing borrowings to fund the purchase of
investments at a spread); and (4) to generate additional liquid funds, if
required. Exhibit I-16 shows the Bank's use of borrowed funds in fiscal 1996 and
fiscal 1997. Borrowings held by the Bank consist primarily of FHLB advances and
reverse repurchase agreements.
Subsidiary
- ----------
As of September 30, 1997, Lockport Savings maintained four wholly-owned
subsidiaries. LSB Funding, Inc. is a REIT and LSB securities, Inc., is a New
York State 9A company which is primarily involved in
<PAGE>
RP Financial, LC.
Page 1.17
investment in U.S. Treasury obligations. Both of the foregoing subsidiaries were
formed for the purpose of minimizing the Bank's state tax liability.
LSB Associates, Inc. is engaged in the sale of non-traditional products
offered in the Bank's retail offices. LSB Realty, Inc. was formed in 1984 for
the purpose of investing in and developing real estate projects. The Bank is in
the process of winding down the last of the real estate development projects and
expects this subsidiary will be inactive following their completion.
Legal Proceedings
- -----------------
Other than the routine legal proceedings that occur in the Bank's ordinary
course of business, the Bank is not involved in litigation which is expected to
have a material impact on the Bank's financial condition or operations.
<PAGE>
RP Financial, LC.
Page 2.1
II. MARKET AREA
Introduction
- ------------
Established in 1870, Lockport Savings has always been operated pursuant to a
strategy of strong community service, and its dedication to being a community-
oriented financial institution has led to strong customer loyalty. Lockport
Savings is based in Lockport, New York, and serves the Buffalo metropolitan area
through a total of fifteen full service branches, which includes two supermarket
branches. The Bank considers its primary market to principally consist of the
four counties in western New York where the Bank operates branch offices
including Niagara County (5 branches), Erie County (8 branches), Genessee County
(1 branch) and Orleans County (1 branch). The Bank also considers outlying
portions of western New York to be part of its market, particularly with regard
to the Bank's lending operations. There are no present plans to expand beyond
the primary market area as the primary market area is believed to be a large
enough area to facilitate the Bank's ability to fully implement its business
plan. However, as discussed previously, Lockport Savings will be opening three
to four additional offices in the next year in various sections of Erie County.
The economy in Lockport Savings' market area has traditionally been based on
manufacturing and trade, based on western New York's proximity to the Midwest
and the Great Lakes as well as the Erie Canal, and Canada. Over the last
several decades, the Bank's markets have become gradually more diversified
through the development of the services sector but the manufacturing and trade
sectors continue to count for more than 40 percent of the total economy. In
this regard, the auto industry continues to rank as the largest private employer
in the western New York region, although the medical/dental/pharmaceutical
industry represents one of the largest and most rapidly growing industries.
Additionally, there is a significant chemical industry as companies such as
DuPont, Carborundum, Occidental and Goodyear have been attracted to the region
due in part, to the availability of inexpensive hydroelectric power.
The local economy was hard hit by the recessionary economic conditions in the
1970s, from which it was very slow to recover. The recession of the early 1990s
again created significant economic difficulties in the Bank's markets, and the
real estate markets were particularly impacted. While the Bank's markets have
largely recovered from these periods of economic weakness, growth in terms of
population and the general economy remain relatively weak in comparison to many
areas of the country where economic and demographic growth is more robust.
At the same time, the Bank continues to enjoy a solid reputation as a strong,
local community oriented institution which has enabled Lockport Savings to
retain its position as one of the top residential mortgage lenders in Niagara
and Erie Counties. Management believes Lockport Savings' relatively unique
position as a mid-sized
<PAGE>
RP Financial, LC.
Page 2.2
independent financial institution headquartered in the western New York market,
coupled with the capital and visibility provided by the mutual holding company
reorganization and stock offering will enhance the Bank's ability to remain
competitive and expand market share in the face of consolidation trends within
the industry.
Future growth opportunities for Lockport Savings in part depend on the future
growth in the Bank's local markets, which have been measured by indicators such
as demographic growth trends, the health and stability of the regional and local
economy, and the nature and intensity of the competitive environment for
financial institutions. These factors have been briefly examined with the
objective of ascertaining the current risk exposure of the Bank, earnings
quality and earnings growth potential, all of which are important factors in the
determination of the appropriate pro forma value for Lockport Savings.
Market Area Demographics
- ------------------------
Demographic growth in the Bank's market area has been measured by changes
in population, number of households, median household income and per capita
income, with trends in those areas summarized by the demographic data presented
in Table 2.1. Since 1990, Niagara and Erie Counties where the Bank operates
thirteen of its fifteen offices have shown flat or shrinking levels of
population and households, which are well below the trends exhibited by the
State of New York and the U.S. At the same time, Niagara and Erie Counties
represent relatively large markets with a total population of 1.2 million, which
present an opportunity for growth for the Bank albeit at the expense of other
institutions. Outlying areas of Lockport Savings market including Genessee and
Orleans County are comparatively rural although they are exhibiting more
favorable demographic growth trends. Forecasts of growth in the market area
through 2002 indicate that population and household growth will continue at a
pace approximating recent historic levels.
Median household and per capita income levels throughout the Bank's market
were well below the levels reported at the state level and nationally. The
modest income levels observed in Lockport Savings' market are attributable to
the nature of the economy (i.e., the preponderance of blue collar jobs) as well
as to weak growth trends). Importantly, residents benefit from the area's low
cost of living; the average selling price of a single family home was $88,500 in
1996.
Local Economy
- -------------
Lockport Savings' markets have provided a relatively lackluster performance
as new job creation over the last several years has been limited in comparison
to the national average. The major private employers in the Bank's market area
are automotive related and include Delphi-Harrison Thermal Systems and the
Powertrain
<PAGE>
RP Financial, LC.
Page 2.3
Table 2.1
Lockport SB
Summary Demographic Data
<TABLE>
<CAPTION>
Year
--------------------------------------- Growth Rate Growth Rate
Population (000) 1990 1997 2002 1990-97 1997-2002
- ---------------- ---- ---- ---- ------- ---------
<S> <C> <C> <C> <C> <C>
United States 248,710 267,805 281,209 1.1% 1.0%
New York 17,990 18,191 18,332 0.2% 0.2%
Erie County 969 949 936 -0.3% -0.3%
Genessee County 60 61 62 0.3% 0.3%
Niagara County 221 221 221 0.0% 0.0%
Orleans County 42 45 47 1.1% 1.0%
Households (000)
- ----------------
United States 91,947 99,020 104,001 1.1% 1.0%
New York 6,693 6,700 6,744 0.0% 0.1%
Erie County 377 369 364 -0.3% -0.3%
Genessee County 22 22 22 0.3% 0.3%
Niagara County 85 85 85 0.0% 0.0%
Orleans County 14 15 16 0.8% 1.1%
Median Household Income ($)
- ---------------------------
United States $29,199 $36,961 $42,042 3.4% 2.6%
New York 31,044 36,341 38,815 2.3% 1.3%
Erie County 30,019 28,644 28,786 -0.7% 0.1%
Genessee County 31,027 32,281 35,575 0.6% 2.0%
Niagara County 30,487 28,460 28,703 -1.0% 0.2%
Orleans County 30,341 27,741 28,969 -1.3% 0.9%
Per Capita Income - ($)
- -----------------------
United States $13,179 $18,100 ---- 4.6% N/A
New York 14,413 18,504 ---- 3.6% N/A
Erie County 13,529 14,307 ---- 0.8% N/A
Genessee County 12,701 13,681 ---- 1.1% N/A
Niagara County 13,165 13,239 ---- 0.1% N/A
Orleans County 11,715 11,705 ---- -0.0% N/A
<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
New York 20.6 13.0 32.3 20.9 13.2 35.3
Erie County 20.3 12.8 30.5 20.4 15.9 36.4
Genessee County 22.8 12.8 30.4 20.4 13.6 35.0
Niagara County 21.4 13.0 29.5 20.6 15.6 36.2
Orleans County 22.3 13.2 31.6 20.6 12.3 34.8
<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
New York 20.2 13.9 31.3 25.9 5.5 3.2
Erie County 25.7 17.3 34.3 19.3 2.3 1.1
Genessee County 18.9 17.5 39.4 21.8 1.6 0.6
Niagara County 24.6 17.9 37.4 18.3 1.3 0.5
Orleans County 21.9 21.1 40.1 15.4 0.9 0.6
</TABLE>
Source: CACI.
<PAGE>
RP Financial, LC.
Page 2.4
Group of General Motors which together, have over 11,000 employees. Other major
employers include the state and U.S. governments as well as various local
entities.
Table 2.2
Lockport Savings Bank
Major Employers in Western New York
<TABLE>
<CAPTION>
Employer Activity Employees
- -------- -------- ---------
<S> <C> <C>
New York State Government 18,643
U.S. Government Government 13,000
Delphi-Harrison Thermal Systems Automotive Heating/Cooling Sys. 6,800
Erie County Government 6,799
Buffalo School District Education 6,550
Buffalo General Health Care Health Care 5,375
SUNY Buffalo Education 5,270
U.S. Postal Service Government 4,775
Powertrain Group of General Motors Auto Transmissions 4,300
Marine Midland Bank Banking 4,262
</TABLE>
Notwithstanding limited population and economic growth experienced in
western New York over the last several years, the economy has gradually improved
and unemployment rates have diminished. The unemployment rates in Niagara and
Erie Counties were 5.9 percent and 4.9 percent, respectively, in September 1997,
which reflects a modest increase from the same period a year earlier.
Comparatively, data for the U.S. and the State reflects that the national
unemployment is more favorable than the level in Niagara and Erie Counties while
the state average was above the level for the Bank's market.
<PAGE>
RP Financial, LC.
Page 2.5
Table 2.3
Lockport Savings Bank
Market Area Unemployment Trends(1)
<TABLE>
<CAPTION>
Unemployment
Region Sept. 1996 Sept. 1997
------ ----------- -----------
<S> <C> <C>
United States 5.0% 4.7%
New York 5.9 6.1
Niagara County 5.3 5.9
Erie County 4.4 4.9
Genessee County 4.1 4.3
Orleans County 4.2 5.8
</TABLE>
(1) Unemployment rates are not seasonally adjusted.
Source: U.S. Department of Labor.
Market Area Deposit Characteristics
- -----------------------------------
Competition for deposits in the Bank's primary market area is intense, which is
the result of a number of factors including the relatively large size of the
Buffalo metropolitan area coupled with the large number of competitors and its
limited growth characteristics. Commercial banks maintain a dominant market
share in all the areas served by the Bank's offices. The historical deposit
data in Table 2.4 indicates that, savings institutions gained market share in
Niagara, Erie and Orleans Counties and that Lockport Savings gained market share
in Niagara and Erie Counties.
In contrast to the trend prevailing for many savings institutions nationally,
Lockport Savings' locally-owned status coupled with its strong capital position
and niche strategy has supported the Bank's ability to grow. Specifically, from
1994 to 1996, Lockport Savings' deposits increased at a 4.3 percent annual rate,
and the rate of growth has increased subsequently. The Bank maintains a
particularly strong market share in the Niagara County market (24.6 percent of
total deposits and 100 percent of savings institution deposits). Given the
relatively large size of the Erie County market and the Bank's small market
share there, Lockport Savings has focused its recent and near term future
expansion on Erie County (three to four branches are targeted to be opened by
the end of 1998). Future branch locations will be located on sites to fill in
perceived gaps in the current office network. The Bank expects that its ability
to undertake new growth will be fostered by customer loyalty, the Bank's
efforts to provide quality and convenient service, as well as by the Bank's
status as a locally-owned and headquartered institution. The Bank is targeting
to pursue growth in the future through branching and the capital provided by the
conversion proceeds will enhance its ability to achieve sustained growth.
Furthermore, the Bank believes that,
<PAGE>
Table 2.4
Lockport Savings 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>
State of New York $350,825,532 100.0% 4,816 $358,397,019 100.0% 4,707 1.1%
- -----------------
Commercial Banks 250,024,848 71.3% 3,615 268,779,750 75.0% 3,622 3.7%
Savings Institutions 100,800,684 28.7% 1,201 89,617,269 25.0% 1,085 -5.7%
Erie County $11,760,356 100.0% 227 $13,011,446 100.0% 235 5.2%
- -----------
Commercial Banks 10,490,364 89.2% 202 11,470,589 88.2% 203 4.6%
Savings Institutions 1,269,992 10.8% 25 1,540,857 11.8% 32 10.1%
Lockport SB (1) 220,277 17.3% 3 260,780 16.9% 4 8.8%
Lockport SB (2) 1.9% 2.0%
Genessee County $511,118 100.0% 18 $869,315 100.0% 18 30.4%
- ---------------
Commercial Banks 415,378 81.3% 16 776,072 89.3% 16 36.7%
Savings Institutions 95,740 18.7% 2 93,243 10.7% 2 -1.3%
Lockport SB (1) 52,152 54.5% 1 52,476 56.3% 1 0.3%
Lockport SB (2) 10.2% 6.0%
Niagara County $2,256,387 100.0% 51 $2,247,871 100.0% 49 -0.2%
- --------------
Commercial Banks 1,736,910 77.0% 46 1,695,103 75.4% 44 -1.2%
Savings Institutions 519,477 23.0% 5 552,768 24.6% 5 3.2%
Lockport SB (1) 519,477 100.0% 5 552,768 100.0% 5 3.2%
Lockport SB (2) 23.0% 24.6%
Orleans County $295,142 100.0% 10 $307,239 100.0% 11 2.0%
- --------------
Commercial Banks 194,048 65.7% 7 200,424 65.2% 7 1.6%
Savings Institutions 101,094 34.3% 3 106,815 34.8% 4 2.8%
Lockport SB (1) 45,507 45.0% 1 44,862 42.0% 1 -0.7%
Lockport SB (2) 15.4% 14.6%
</TABLE>
(1) Percent of thrift deposits.
(2) Percent of total deposits.
Source: FDIC; OTS.
<PAGE>
RP Financial, LC.
Page 2.7
through local stock ownership, its current customers and non-customers who
acquire the Bank's stock will seek to enhance the financial success of the Bank
through consolidation of their banking business with the Bank and increased
referrals to the Bank. More specifically, the Bank believes that this local
ownership, combined with quality products and services already offered, will
promote shareholder loyalty to Lockport Savings and encourage the local
shareholders to conduct more business with the Bank and promote the Bank's
products and services to other local residents, thereby further contributing to
the Bank's loan, deposit growth and earnings growth.
<PAGE>
RP Financial, LC.
Page 3.1
III. PEER GROUP ANALYSIS
This chapter presents an analysis of Lockport Savings' operations versus a
group of comparable public companies (the "Peer Group") selected from the
universe of all publicly-traded savings institutions. The primary basis of the
pro forma market valuation of Lockport Savings is provided by these public
companies. Factors affecting the Bank's pro forma market value such as financial
condition, credit risk, interest rate risk, and recent operating results can be
readily assessed in relation to the Peer Group. Current market pricing of the
Peer Group, subject to appropriate adjustments to account for differences
between Lockport Savings and the Peer Group, will then be used as a basis for
the valuation of Lockport Savings' to-be-issued common stock.
Peer Group Selection
- --------------------
The mutual holding company form of ownership has been in existence in its
present form since 1991. As of the date of this appraisal, there were 23
publicly-traded institutions ("public MHC institutions") operating as
subsidiaries of MHCs. The shares outstanding of the public MHC institutions
represent a minority ownership interest in the subsidiary institution of the
MHC.
We believe there are a number of characteristics of MHC shares that make
them different from the shares of fully converted companies. These factors
include: (1) lower aftermarket liquidity in the MHC shares since less than 50
percent of the shares are available for trading; (2) guaranteed minority
ownership interest, with no opportunity of exercising voting control of the
institution in the MHC form of organization, thus limited acquisition
speculation in the stock prices; (3) the potential impact of "second step"
conversions on the pricing of public MHC institutions; (4) the policy adopted by
the FDIC regarding the dividend waiver by MHC institutions; and (5) certain MHCs
have formed or are forming middle-tier holding companies, facilitating the
ability for stock repurchases, thus improving the liquidity of the stock on an
interim basis. We believe that each of these factors has an impact on the
pricing of the shares of MHC institutions, and that such factors are not
reflected in the pricing of fully converted public companies.
Since it is anticipated that Lockport Savings will be a public MHC
institution whose stock price will be affected by the unique characteristic of
the MHC form of ownership, RP Financial concluded that the appropriate Peer
Group for Lockport Savings' valuation should be comprised of the subsidiary
institutions of mutual holding companies. The Peer Group is consistent with the
regulatory guidelines, provided orally by the FDIC and other recently completed
MHC transactions. Further, the Peer Group should be comprised of only those MHC
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 MHC institutions are
<PAGE>
RP Financial LC.
Page 3.2
inappropriate for the Peer Group since the trading activity for thinly-traded
stocks is typically highly irregular in terms of frequency and price and may not
be a reliable indicator of market value. We have excluded from the Peer Group
those public MHC institutions that are currently pursuing a "second step"
conversion and/or companies whose market prices appear to be distorted by
speculative factors or unusual operating conditions. The universe of all
publicly-traded institutions is included as Exhibit IV-1. Institutions excluded
from the calculation of averages are denoted with a footnote (8).
Basis of Comparison
- -------------------
This appraisal includes two sets of financial data and ratios for each
public MHC institution. The first set of financial data reflects the actual book
value, earnings, assets and operating results reported by the public MHC
institution in its public filings inclusive of the minority ownership interest
outstanding to the public. The second set of financial data, discussed at length
in the following chapter, places all of the public MHC institutions on equal
footing by restating their financial data and pricing ratios on a "fully
converted" basis assuming the sale of the majority shares held by the MHC in a
public offering based on their respective current prices and standard
assumptions. Throughout the appraisal the adjusted figures will be specifically
identified and denoted with the parenthetical "(fully converted basis)". Unless
so noted, the figures referred to in the appraisal will be actual financial data
reported by the public MHC institutions.
Both sets of financial data have their specific use and applicability to
the appraisal. The actual financial data, as reported by the public MHC
institutions and reflective of the minority interest outstanding, will be used
primarily in this Chapter III to make financial comparisons between the Peer
Group and Lockport Savings. The differences between the Peer Group's reported
financial data and the financial data of Lockport Savings as a mutual
institution are not significant enough to distort the conclusions of the
comparison (in fact, such differences are greater in a standard conversion
appraisal). The adjusted financial data (fully converted basis) will be more
fully described and quantified in the pricing analysis discussed in Chapter IV
of the appraisal. The fully converted pricing ratios are considered critical to
the valuation analysis in Chapter IV, because they place each public MHC
institution on a fully converted basis (making their pricing ratios comparable
to the pro forma valuation conclusion reached herein), eliminate distortion in
pricing ratios between public MHC institutions that have sold different
percentage ownership interests to the public, and reflect the actual pricing
ratios (fully converted basis) being placed on public MHC institutions in the
market today to reflect the unique trading characteristics of public MHC
institutions.
<PAGE>
RP Financial,LC.
Page 3.3
Selection of Peer Group
- -----------------------
Under ideal circumstances, the Peer Group would be comprised of ten large
publicly-traded western New York-based MHC institutions with capital, earnings,
credit quality and interest rate risk comparable to Lockport Savings. However,
the universe of 23 public MHC institutions contains only 2 public MHC
institutions headquartered in New York, which includes Oswego City Savings Bank
and the Savings Bank of the Finger Lakes, both of which are headquartered to the
east of the Bank's market in central New York. Excluded from the group of 23
public MHCs are six companies who have announced second-step conversions (FSLA-
First Savings Bank, SLA, HARB-Harbor FSB, GFED-Guaranty FS&LA, PFSL-Pocahontas
Federal, PERT-Perpetual SB and TSBS-Trenton Savings), since their pricing ratios
may have become distorted in anticipation of the second-step appraisal.
Unlike the universe of public companies, which includes approximately 360
public companies, the universe of public MHC institutions is small, thereby
limiting the prospects of a relatively comparable Peer Group. Nonetheless,
because the trading characteristics of public MHC institution shares are
significantly different from those of fully converted companies, the universe of
23 public MHC institutions was the most appropriate group for this valuation.
Relying solely on full stock public companies for the Peer Group would not
capture the difference in current market pricing for public MHC institutions and
thus could lead to distorted valuation conclusions. The federal regulatory
agencies have previously concurred with this selection procedure of the Peer
Group for MHC valuations.
Potential shortcomings to using all 23 publicly-traded MHCs this approach
include the variations in asset sizes, operating strategies, market areas (both
regional and local), and financial measures among the 23 public MHC
institutions. Although we considered these potential shortcomings in our
analysis, RP Financial's ultimate conclusion was that the size of the Peer Group
was statistically meaningful (i.e., there were enough institutions included to
support meaningful conclusions), the differences in financial and other
characteristics among the Peer Group members would, on average, be offsetting
(i.e., the pricing reflected in the exceptionally strong market in Washington
state would be offset by the weaker market pricing of an institution operating
in Baltimore), and importantly the pricing characteristics were more relevant
than fully converted institutions. To account for differences between Lockport
Savings and the MHC Peer Group in reaching a valuation conclusion, it will be
necessary to make certain valuation adjustments. The following discussion
addresses financial similarities and differences.
Table 3.1 on the following page lists key general characteristics of the
Peer Group companies. Although there are differences among several of the Peer
Group members, by and large they are well-capitalized and profitable
institutions and their decision to reorganize in MHC form itself suggests a
commonality of operating
<PAGE>
RP FINANCIAL, LC.
------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 3.1
All MHC Institutions
December 4, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ------ -------
($) ($Mil)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PBCT Peoples Bank, MHC of CT (40.1) (3) OTC Southwestern CT Div. 7,731 97 12-31 07/88 33.69 2,059
HARS Harris SB, MHC of PA (24.3) OTC Southeast PA Thrift 2,110 31 12-31 01/94 19.00 642
NWSB Northwest SB, MHC of PA (30.7) OTC Pennsylvania Thrift 2,101 53 06-30 11/94 14.00 655
HARB Harbor FSB, MHC of FL (46.6) OTC Eastern FL Thrift 1,131 23 09-30 01/94 65.00 323
FSLA First SB SLA MHC of NJ (47.5) OTC Eastern NJ Thrift 1,045 16 12-31 07/92 40.37 323
FFFL Fidelity FSB, MHC of FL (47.7) OTC Southeast FL Thrift 999 J 20 12-31 01/94 27.87 189
CMSV Commty. Svgs, MHC of FL (48.5) OTC Southeast FL Thrift 709 19 12-31 10/94 35.00 178
TSBS Peoples Bcrp, MHC of NJ (35.9) OTC Central NJ Thrift 639 14 12-31 08/95 34.75 314
FFSX First FS&LA. MHC of IA (46.1) OTC Western IA Thrift 457 13 06-30 07/92 31.87 90
PFSL Pocahnts Fed, MHC of AR (47.0) OTC Northeast AR Thrift 383 6 09-30 04/94 34.00 55
LFED Leeds FSB, MHC of MD (36.3) OTC Baltimore MD Thrift 285 1 06-30 05/94 21.50 111
PERT Perpetual of SC, MHC (46.8) OTC Northwest SC Thrift 256 J 6 09-30 10/93 51.00 77
WAYN Wayne S&L Co. MHC of OH (47.8) OTC Central OH Thrift 250 6 03-31 06/93 31.00 70
GDVS Greater DV SB,MHC of PA (19.9) (3) OTC Southeast PA Thrift 249 7 12-31 03/95 31.00 101
SBFL SB Fngr Lakes MHC of NY (33.1) OTC Western NY Thrift 228 4 04-30 11/94 29.25 52
GFED Guarnty FS&LA,MHC of MO (31.0) OTC Southwest MO Thrift 210 4 06-30 04/95 23.75 74
PHSB Ppls Home SB, MHC of PA (45.0) OTC Western PA Thrift 206 9 12-31 07/97 18.62 51
PBHC OswegoCity SB, MHC of NY (46.) (3) OTC NY Thrift 193 5 12-31 11/95 28.50 55
PULB Pulaski SB, MHC of MO (29.8) OTC St. Louis MO Thrift 180 J 5 09-30 05/94 30.50 64
PLSK Pulaski SB, MHC of NJ (46.0) OTC New Jersey Thrift 179 6 12-31 04/97 18.75 39
JXSB Jcksnville SB,MHC of IL (45.6) OTC Central IL Thrift 164 4 12-31 04/95 26.75 34
SKBO First Carnegie,MHC of PA(45.0) OTC Western PA Thrift 147 J 3 03-31 04/97 18.62 43
WCFB Wbstr Cty FSB MHC of IA (45.2) OTC Central IA Thrift 94 1 12-31 08/94 20.25 43
</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: 12/04/97
<PAGE>
RP Financial, LC.
Page 3.5
philosophy. Importantly, the trading prices of the Peer Group companies reflect
the unique operating and other characteristics of public MHC institutions.
While the Peer Group is not exactly comparable to Lockport Savings, we believe
such companies form a good basis for the valuation of Lockport Savings, subject
to certain valuation adjustments.
In aggregate, the Peer Group companies maintain comparable capitalization
relative to the universe of all public thrifts (12.0 percent of assets versus
13.0 percent for the all publicly-traded average), generate slightly lower core
earnings (0.80 percent ROA versus 0.92 percent average for the all publicly
traded average), and generate lower core ROEs of 7.30 percent versus 8.32
percent. Please note that RP Financial has used core earnings in this
discussion to eliminate the effect of non-operating items.
The summary table below underscores the key differences, particularly in
the average pricing ratios between full stock and MHC institutions (both as
reported and on a fully-converted basis).
<TABLE>
<CAPTION>
Publicly-Traded MHCs
(Excluding Announced
Second Steps)
------------
Fully
All MHC Converted
Publicly-Traded Reported Basis
(Excluding MHCs) Basis (Pro Forma)
<S> <C> <C> <C>
Financial Characteristics (Averages)
- ------------------------------------
Assets ($Mil) $1,226 $958 $1,101
Equity/Assets (%) 13.00% 11.97% 23.32%
Return on Assets (%) 0.92 0.80 1.10
Return on Equity (%) 8.32 7.30 4.81
Pricing Ratios (Averages) @ November 28, 1997
- ----------------------------------------------
Price/Earnings (x) 19.63x 27.71x 22.95x
Price/Tangible Book (%) 165.37% 238.05% 107.71%
Price/Assets (%) 19.32 28.69 24.71
Note: Earnings data is based on core earnings.
</TABLE>
The following sections present a comparison of Lockport Savings' financial
condition, income and expense trends, loan composition, interest rate risk and
credit risk versus the figures reported by the Peer Group. The conclusions drawn
from the comparative analysis are then factored into the valuation analysis
discussed in the final chapter.
<PAGE>
RP Financial, LC.
Page 3.6
Financial Condition
- -------------------
Table 3.2 shows comparative balance sheet measures for Lockport Savings and
the Peer Group. Lockport Savings' ratios reflect balances as of September 30,
1997, while the Peer Group's ratios are as of the most recent date for which
information is publicly available. Lockport Savings' net worth base of 10.8
percent was below the Peer Group's average net worth ratio of 12.0 percent. All
of Lockport Savings' capital is tangible capital, while the substantial majority
of the Peer Group's capital is tangible capital. Lockport Savings and all of the
Peer Group companies were in compliance with all fully phased in regulatory
capital requirements. With the addition of proceeds pursuant to a minority stock
offering, Lockport Savings' pro forma capital position would be expected to
modestly exceed the Peer Group average.
The asset composition analysis reveals the impact of the limited growth
observed in the Bank's market area and management's desire to enhance earnings
through leverage, both of which have resulted in a lower loans/assets ratio than
the Peer Group, 52.9 and 62.6 percent respectively. As a result of limited local
mortgage demand and strong deposit growth achieved over the past several years,
the Bank has purchased a large amount of MBS, resulting in a higher proportion
of MBS to assets than the Peer Group, approximately 24.3 and 11.7 percent,
respectively. Combined, the Bank's total loans and MBS accounted for 77.2
percent of total assets, similar to the Peer Group average of 74.3 percent. The
Bank's cash and investments to assets ratio was also comparable to the Peer
Group average (19.9 percent for Lockport Savings versus 22.1 percent for the
Peer Group). As discussed in a section to follow, Lockport Savings maintains a
relatively greater level of diversification into high risk-weight loans in its
loan portfolio, while also investing in a greater level of low-risk MBS.
Following the stock offering, Lockport Savings' ratio of cash and investments is
anticipated to increase above current levels as the proceeds are initially
reinvested into investment securities. Overall, Lockport Savings' interest-
earning assets ("IEA") totaled 97.1 percent of assets which was somewhat higher
than the Peer Group's ratio of 96.4 percent, and the Bank's IEA ratio should
increase on a post-offering basis.
Lockport Savings' funding liabilities reflect a funding strategy that is
generally similar to that of the Peer Group. The Bank's deposits equaled 84.3
percent of assets, higher than the Peer Group average of 76.7 percent,
reflecting the Peer Group's higher utilization of borrowings. It appears that
both the Bank and the Peer Group, on average, have ample borrowing capacity.
Total interest-bearing liabilities ("IBL") maintained by the Bank and the Peer
Group equaled 86.7 percent and 86.6 percent, respectively. The Bank's ratio
should improve on a post-conversion basis and the resulting capital infusion.
<PAGE>
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 3.2
Balance Sheet Composition and Growth Rates
Comparable Institution Analysis
As of September 30, 1997
<TABLE>
<CAPTION>
Balance Sheet as a Percent of Assets
----------------------------------------------------------------------------------------
Cash and Borrowed Subd. Net Goodwill Tng Net MEMO:
Investments Loans MBS Deposits Funds Debt Worth & Intang Worth Pref.Stock
----------- ------ ------ -------- -------- ------- -------- -------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Lockport Savings Bank
- ---------------------
September 30, 1997 19.9 52.9 24.3 84.3 2.4 0.0 10.8 0.0 10.8 0.0
SAIF-Insured Thrifts 17.5 68.2 11.1 70.1 15.2 0.2 12.9 0.2 12.7 0.0
All Public Companies 18.4 67.2 11.2 70.6 14.7 0.2 12.9 0.3 12.7 0.0
Special Selection Grouping(4) 22.1 62.6 11.7 76.7 9.9 0.1 12.0 0.2 11.8 0.0
State of NY 23.3 55.3 18.0 72.7 12.9 0.0 11.6 0.6 10.9 0.1
Comparable Group
- ----------------
Special Comparative Group(4)
- ----------------------------
CMSV Commty. Svgs, MHC of FL (48.5) 35.1 59.0 1.9 76.7 9.5 0.0 11.3 0.0 11.3 0.0
FFFL Fidelity FSB, MHC of FL (47.7)(1) 5.8 73.6 17.2 78.0 11.5 0.0 8.4 0.1 8.3 0.0
SKBO First Carnegie, MHC of PA(45.0)(1)(3) 15.3 42.1 39.6 53.0 28.8 0.0 16.4 0.0 16.4 0.0
FFSX First FS&LA. MHC of IA (46.1) 11.8 75.6 9.2 71.0 18.9 0.0 8.7 0.1 8.7 0.0
FSLA First SB SLA MHC of NJ (47.5)(2) 14.6 54.3 27.6 77.5 11.9 0.0 9.5 0.9 8.6 0.0
GDVS Greater DV SB, MHC of PA (19.9) 34.7 60.3 1.5 77.5 10.5 0.0 11.6 0.0 11.6 0.0
GFED Guarnty FS&LA, MHC of MO (31.0)(2) 8.3 79.9 7.1 70.0 15.3 0.0 13.0 0.0 13.0 0.0
HARB Harbor FSB, MHC of FL (46.6)(2) 8.2 73.8 15.6 80.6 8.9 0.0 8.6 0.3 8.3 0.0
HARS Harris SB, MHC of PA (24.3) 53.7 42.3 0.4 53.5 37.3 0.0 8.2 0.9 7.3 0.0
JXSB Jcksnville SB, MHC of IL (45.6) 8.7 79.0 8.1 87.5 0.2 0.0 10.6 0.0 10.6 0.0
LFED Leeds FSB, MHC of MD (36.3) 29.2 62.6 6.7 81.9 0.2 0.0 16.6 0.0 16.6 0.0
NWSB Northwest SB, MHC of PA (30.7) 19.2 75.2 2.9 80.4 8.8 0.0 9.6 0.5 9.1 0.0
PBHC OswegoCity SB, MHC of NY (46.) 21.4 59.3 12.4 80.9 6.4 0.0 11.9 1.9 10.0 0.0
PBCT Peoples Bank, MHC of CT (40.1) 27.7 65.5 0.0 72.6 14.6 1.9 9.0 0.0 9.0 0.0
TSBS Peoples Bcrp, MHC of NJ (35.9)(2) 27.5 62.3 6.2 77.2 4.7 0.0 16.9 1.7 15.2 0.0
PERT Perpetual of SC, MHC (46.8)(1)(2) 23.6 67.7 4.6 75.4 10.9 0.0 11.8 0.0 11.8 0.0
PFSL Pocahnts Fed, MHC of AR (47.0)(2) 47.6 41.6 8.1 37.4 55.1 0.0 6.3 0.0 6.3 0.0
PHSB Ppls Home SB, MHC of PA (45.0)(3) 19.8 48.4 28.6 84.2 1.5 0.0 13.7 0.0 13.7 0.0
PULB Pulaski SB, MHC of MO (29.8)(1) 15.2 79.3 3.1 83.3 1.2 0.0 13.0 0.0 13.0 0.0
PLSK Pulaski SB, MHC of NJ (46.0) 14.7 56.1 26.3 84.2 3.2 0.0 12.0 0.0 12.0 0.0
SBFL SB Fngr Lakes MHC of NY (33.1) 25.6 46.1 24.6 80.6 9.1 0.0 9.3 0.0 9.3 0.0
WAYN Wayne S&L Co. MHC of OH (47.8) 13.5 83.0 0.1 84.2 5.6 0.0 9.5 0.0 9.5 0.0
WCFB Wbstr Cty FSB MHC of IA (45.2) 24.1 57.3 17.1 75.1 0.3 0.0 23.4 0.0 23.4 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>
Lockport Savings Bank
- ---------------------
September 30, 1997 10.13 35.58 3.76 10.46 -13.61 12.75 12.75 10.75 10.75 21.74
SAIF-Insured Thrifts 11.55 5.04 13.21 7.77 14.39 3.12 2.42 11.07 11.12 22.80
All Public Companies 11.64 4.91 13.11 7.79 15.21 3.83 3.19 11.18 11.21 22.84
Special Selection Grouping(4) 8.25 8.40 6.73 5.35 0.69 7.75 6.90 11.44 11.31 23.73
State of NY 11.11 -5.62 13.61 7.42 14.05 1.91 1.81 10.04 9.81 23.92
Comparable Group
- ----------------
Special Comparative Group(4)
- ----------------------------
CMSV Commty. Svgs, MHC of FL (48.5) 9.06 5.98 10.10 9.09 20.12 7.18 7.18 11.40 11.40 23.10
FFFL Fidelity FSB, MHC of FL (47.7)(1) 22.33 38.81 22.26 25.69 24.47 3.85 4.27 8.10 8.10 16.30
SKBO First Carnegie, MHC of PA(45.0)(1)(3) 10.74 12.77 12.88 -3.78 12.06 NM NM NM NM NM
FFSX First FS&LA. MHC of IA (46.1) -0.28 -25.28 4.84 -2.08 6.13 9.22 9.39 8.62 8.62 17.10
FSLA First SB SLA MHC of NJ (47.5)(2) 7.15 25.45 4.53 1.13 77.53 9.96 14.08 8.68 8.68 22.38
GDVS Greater DV SB, MHC of PA (19.9) 7.12 5.25 8.90 2.77 68.30 6.65 6.65 NM 11.73 27.04
GFED Guarnty FS&LA, MHC of MO (31.0)(2) 14.74 11.45 17.04 0.19 NM 3.10 3.10 12.20 12.20 21.30
HARB Harbor FSB, MHC of FL (46.6)(2) 6.96 -14.82 10.12 7.01 5.02 14.11 15.40 7.29 7.29 15.15
HARS Harris SB, MHC of PA (24.3) 22.43 NM -19.53 -4.12 NM 17.32 23.01 6.95 6.95 14.34
JXSB Jcksnville SB, MHC of IL (45.6) 14.28 NM 8.97 15.69 -42.42 4.69 4.96 10.30 10.30 15.10
LFED Leeds FSB, MHC of MD (36.3) 3.91 -3.88 7.17 3.60 -13.33 7.34 7.34 16.27 16.27 35.34
NWSB Northwest SB, MHC of PA (30.7) 10.48 8.18 11.45 10.18 23.77 8.16 7.35 NM 8.97 18.32
PBHC OswegoCity SB, MHC of NY (46.) 4.10 -9.24 10.02 -2.34 NM 10.27 -7.36 9.84 9.84 16.90
PBCT Peoples Bank, MHC of CT (40.1) 6.83 3.90 7.09 10.67 -12.22 16.62 16.64 8.40 8.40 13.90
TSBS Peoples Bcrp, MHC of NJ (35.9)(2) 21.93 35.43 14.83 18.27 NM 6.59 -2.04 15.48 15.48 26.48
PERT Perpetual of SC, MHC (46.8)(1)(2) 33.01 29.66 32.81 22.72 NM NM NM 10.90 10.90 19.00
PFSL Pocahnts Fed, MHC of AR (47.0)(2) 0.49 -5.64 7.79 23.28 -11.05 6.86 6.86 6.32 6.32 16.22
PHSB Ppls Home SB, MHC of PA (45.0)(3) 1.01 -6.95 5.70 -4.02 NM NM NM 13.20 13.20 28.00
PULB Pulaski SB, MHC of MO (29.8)(1) 0.43 7.54 -1.17 0.24 -26.67 2.73 2.73 13.00 13.00 30.20
PLSK Pulaski SB, MHC of NJ (46.0) 12.69 78.08 6.16 6.34 NM NM NM 11.98 11.98 29.17
SBFL SB Fngr Lakes MHC of NY (33.1) 15.46 -3.32 24.25 22.65 -16.84 6.31 6.31 9.22 9.22 23.73
WAYN Wayne S&L Co. MHC of OH (47.8) -0.25 -1.55 -0.67 0.51 -12.95 5.96 5.96 9.53 9.53 17.69
WCFB Wbstr Cty FSB MHC of IA (45.2) -0.01 15.72 -3.94 -0.06 -21.41 2.12 2.12 23.38 23.38 53.48
</TABLE>
(1) Financial information is for the quarter ending June 30, 1997.
(2) Excluded from averages due to announced or pending acquisition.
(3) Growth rates have been annualized from available financial information.
(4) Includes MHC Institutions;
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.
<PAGE>
RP Financial, LC.
Page 3.8
Taken together, the comparative IEA/IBL ratios demonstrate a key component
of earning power. In this regard, the Bank's ratio of 112.1 percent was slightly
higher than the Peer Group's ratio. On a post-offering basis, the Bank's
advantage will be increased.
The growth rate section of Table 3.2 shows annualized growth rates for key
balance sheet items for the first nine months of fiscal 1997 for the Bank and
the most recent twelve month period for the Peer Group. The asset growth rates
for the Bank, equal to 10.1 percent, was modestly above the Peer Group average
of 8.3 percent. The Bank's asset growth measures reflect modest growth in loans
while MBS remained substantially unchanged while more significant growth levels
were posted in the area of cash and investments. The composition of the Peer
Group's asset growth was more evenly distributed between investments and loans.
Funding of Lockport Savings' asset growth was primarily provided by expansion of
the deposit base as the level of borrowed funds declined slightly. The Peer
Group's assets were funded primarily by growth of deposits as the level of
borrowings was static.
Lockport Savings posted a stronger rate of capital growth than the Peer
Group based on the latest publicly available information (12.8 percent increase
for the Bank versus an average increase of 7.8 percent for the Peer Group). The
factors leading to Lockport Savings' superior rate of capital growth are related
both to its stronger ROA and lower equity level. Furthermore, the Peer Group
companies, which are in mutual holding company form, have implemented dividend
policies which have limited the rate of capital growth. Following the increase
in capital realized from conversion proceeds, the Bank's capital growth rate
will be depressed by (1) a higher pro forma capital position and comparatively
lower marginal returns and (2) the implementation of a dividend policy.
Income and Expense Components
- -----------------------------
Reported profitability for the past 12 months for the Bank and the Peer
Group approximated 0.99 percent and 0.84 percent, respectively (see Table 3.3).
The Bank's modestly stronger earnings performance is attributable to the Bank's
modest advantage in all key areas of core earnings (i.e., net interest income,
non-interest operating income, and non-interest operating expense).
Additionally, Lockport Savings' earnings were supported by non-operating income
to a greater degree than the Peer Group.
Net interest income was the primary component of the Bank's and the Peer
Group's earnings. Lockport Savings' net interest income was modestly more
favorable than that recorded by the Peer Group (3.29 percent and 3.25 percent of
average assets, respectively), notwithstanding the Bank's modestly lower capital
level. In this regard, the Bank reported slightly lower interest income which
was more than offset by its lower interest expense as a percent of average
assets, notwithstanding a lower yield-cost spread. Assuming the completion of a
mutual
<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 September 30, 1997
<TABLE>
<CAPTION>
Net Interest Income Other Income
----------------------------- --------------------
Loss NII Total
Net Provis. After Loan R.E. Other Other
Income Income Expense NII on IEA Provis. Fees Oper. Income Income
------ ------ ------- ------ ------- ------- ---- ----- ------ ------
Lockport Savings Bank
- ---------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
September 30, 1997 0.99 7.20 3.91 3.29 0.12 3.17 0.10 0.00 0.39 0.49
SAIF-Insured Thrifts 0.89 7.42 4.12 3.30 0.13 3.17 0.11 0.01 0.30 0.42
All Public Companies 0.93 7.43 4.07 3.36 0.13 3.22 0.11 0.01 0.30 0.42
Special Selection Grouping(4) 0.84 7.26 4.01 3.25 0.11 3.13 0.13 0.00 0.31 0.44
State of NY 0.85 7.20 3.76 3.44 0.18 3.26 0.06 -0.03 0.25 0.28
Comparable Group
- ----------------
Special Comparative Group(4)
- ----------------------------
CMSV Commty. Svgs, MHC of FL (48.5) 0.80 7.27 3.93 3.34 0.07 3.27 0.03 0.01 0.53 0.58
FFFL Fidelity FSB, MHC of FL (47.7)(1) 0.38 7.25 4.00 3.25 0.02 3.23 0.06 0.00 0.36 0.42
SKBO First Carnegie, MHC of PA(45.0)(1)(3) 0.65 7.07 4.23 2.84 0.04 2.80 0.00 0.00 0.06 0.06
FFSX First FS&LA. MHC of IA (46.1) 0.73 7.38 4.46 2.92 0.06 2.86 0.05 0.00 0.48 0.53
FSLA First SB SLA MHC of NJ (47.5)(2) 0.90 7.13 3.97 3.16 0.11 3.05 0.04 -0.01 0.17 0.21
GDVS Greater DV SB, MHC of PA (19.9) 0.92 7.04 3.69 3.35 0.04 3.31 0.00 0.04 0.25 0.29
GFED Guarnty FS&LA, MHC of MO (31.0)(2) 0.98 7.73 4.35 3.38 0.02 3.36 0.03 -0.04 0.25 0.24
HARB Harbor FSB, MHC of FL (46.6)(2) 1.22 7.75 4.13 3.62 0.07 3.55 0.07 0.01 0.28 0.37
HARS Harris SB, MHC of PA (24.3) 0.92 7.03 4.53 2.50 0.05 2.44 0.10 0.03 0.24 0.37
JXSB Jcksnville SB, MHC of IL (45.6) 0.66 7.81 4.33 3.47 0.17 3.30 0.20 0.00 0.33 0.53
LFED Leeds FSB, MHC of MD (36.3) 1.19 7.05 4.16 2.89 0.05 2.85 0.00 0.00 0.10 0.10
NWSB Northwest SB, MHC of PA (30.7) 0.97 7.87 4.20 3.67 0.15 3.53 0.09 0.01 0.21 0.32
PBHC OswegoCity SB, MHC of NY (46.) 1.06 7.32 3.57 3.75 0.15 3.60 0.02 -0.03 0.53 0.53
PBCT Peoples Bank, MHC of CT (40.1) 1.15 6.87 3.51 3.35 0.59 2.77 1.59 -0.06 0.76 2.28
TSBS Peoples Bcrp, MHC of NJ (35.9)(2) 1.30 7.07 3.52 3.55 0.25 3.30 0.00 0.00 0.30 0.30
PERT Perpetual of SC, MHC (46.8)(1)(2) 0.78 7.80 3.86 3.94 0.17 3.77 0.19 0.01 0.87 1.08
PFSL Pocahnts Fed, MHC of AR (47.0)(2) 0.63 6.90 4.95 1.96 0.02 1.94 0.02 0.00 0.33 0.35
PHSB Ppls Home SB, MHC of PA (45.0)(3) 0.89 7.17 3.65 3.51 0.27 3.25 0.00 0.00 0.45 0.45
PULB Pulaski SB, MHC of MO (29.8)(1) 0.80 7.50 3.91 3.59 0.03 3.56 0.00 0.00 0.27 0.27
PLSK Pulaski SB, MHC of NJ (46.0) 0.64 7.06 4.10 2.96 0.09 2.88 0.04 -0.01 0.05 0.09
SBFL SB Fngr Lakes MHC of NY (33.1) 0.37 7.14 4.09 3.05 0.09 2.96 0.02 -0.06 0.23 0.18
WAYN Wayne S&L Co. MHC of OH (47.8) 0.73 7.53 4.31 3.21 0.02 3.20 0.00 0.00 0.22 0.22
WCFB Wbstr Cty FSB MHC of IA (45.2) 1.42 7.09 3.55 3.54 0.05 3.48 0.00 0.00 0.20 0.21
<CAPTION>
G&A/Other Exp. Non-Op. Items Yields, Costs, and Spreads
---------------- -------------- --------------------------
MEMO: MEMO:
G&A Goodwill Net Extrao. Yield Cost Yld-Cost Assets/ Effective
Expense Amort. Gains Items On Assets Of Funds Spread FTE Emp. Tax Rate
------- ------- ------- ------- --------- -------- ------ ---------- --------
Lockport Savings Bank
- ---------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
September 30, 1997 2.22 0.00 0.14 0.00 7.41 4.58 2.83 3,333 36.83
SAIF-Insured Thrifts 2.20 0.02 0.00 0.00 7.68 4.83 2.85 4,269 36.96
All Public Companies 2.21 0.03 0.01 0.00 7.69 4.77 2.92 4,251 36.77
Special Selection Grouping(4) 2.33 0.02 0.03 0.00 7.51 4.62 2.89 3,505 38.24
State of NY 2.14 0.06 0.02 0.00 7.42 4.36 3.06 4,887 40.08
Comparable Group
- ----------------
Special Comparative Group(4)
- ----------------------------
CMSV Commty. Svgs, MHC of FL (48.5) 2.71 0.00 0.10 0.00 7.54 4.55 2.99 2,598 35.32
FFFL Fidelity FSB, MHC of FL (47.7)(1) 2.62 0.04 -0.33 0.00 7.53 4.52 3.01 3,494 42.64
SKBO First Carnegie, MHC of PA(45.0)(1)(3) 1.62 0.00 -0.01 0.00 6.90 4.92 1.98 3,002 NM
FFSX First FS&LA. MHC of IA (46.1) 2.28 0.01 0.03 0.00 7.63 4.93 2.70 2,855 35.74
FSLA First SB SLA MHC of NJ (47.5)(2) 1.68 0.08 -0.06 0.00 7.38 4.44 2.95 4,998 37.33
GDVS Greater DV SB, MHC of PA (19.9) 2.21 0.00 0.00 0.00 7.31 4.20 3.11 3,606 33.18
GFED Guarnty FS&LA, MHC of MO (31.0)(2) 2.08 0.00 0.04 0.00 8.17 5.12 3.05 3,389 36.89
HARB Harbor FSB, MHC of FL (46.6)(2) 1.91 0.02 0.02 0.00 7.95 4.58 3.37 3,459 39.25
HARS Harris SB, MHC of PA (24.3) 1.62 0.12 0.25 0.00 7.33 5.00 2.33 4,263 29.94
JXSB Jcksnville SB, MHC of IL (45.6) 2.84 0.00 0.01 0.00 8.18 4.96 3.22 2,028 43.63
LFED Leeds FSB, MHC of MD (36.3) 1.03 0.00 0.00 0.00 7.15 5.07 2.08 10,571 37.90
NWSB Northwest SB, MHC of PA (30.7) 2.23 0.05 0.02 0.00 8.09 4.72 3.37 2,639 38.87
PBHC OswegoCity SB, MHC of NY (46.) 2.72 0.04 0.17 0.00 7.82 4.04 3.78 2,573 28.84
PBCT Peoples Bank, MHC of CT (40.1) 3.86 0.02 0.62 0.00 7.32 3.91 3.41 2,492 35.39
TSBS Peoples Bcrp, MHC of NJ (35.9)(2) 2.02 0.15 0.59 0.00 7.34 4.32 3.01 4,437 36.08
PERT Perpetual of SC, MHC (46.8)(1)(2) 3.11 0.00 -0.41 0.00 8.20 4.50 3.70 2,267 31.11
PFSL Pocahnts Fed, MHC of AR (47.0)(2) 1.31 0.00 0.01 0.00 7.11 5.35 1.76 6,390 36.13
PHSB Ppls Home SB, MHC of PA (45.0)(3) 2.85 0.00 0.01 0.00 7.39 4.28 3.11 2,752 NM
PULB Pulaski SB, MHC of MO (29.8)(1) 2.48 0.00 -0.38 0.00 7.75 4.59 3.16 2,120 30.50
PLSK Pulaski SB, MHC of NJ (46.0) 1.95 0.00 0.00 0.00 7.34 4.74 2.60 4,262 36.86
SBFL SB Fngr Lakes MHC of NY (33.1) 2.73 0.00 -0.09 0.00 7.40 4.59 2.81 3,081 73.49
WAYN Wayne S&L Co. MHC of OH (47.8) 2.38 0.00 0.06 0.00 7.76 4.79 2.97 2,750 34.02
WCFB Wbstr Cty FSB MHC of IA (45.2) 1.43 0.00 0.00 0.00 7.19 4.71 2.49 4,499 37.31
</TABLE>
(1) Financial information is for the quarter ending June 30, 1997.
(2) Excluded from averages due to announced or pending acquisition.
(3) Income and expense information has been annualized from available financial
information.
(4) Includes MHC Institutions;
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.
<PAGE>
RP Financial, LC.
Page 3.10
holding company and minority stock issuance, Lockport Savings' net interest
margin could be expected to improve relative to the Peer Group as the net
proceeds from the stock offering were invested into interest-earning assets.
Non-interest income made a slightly greater contribution to the Bank's
earnings relative to the Peer Group's (0.49 percent of average assets versus
0.44 percent for the Peer Group), reflecting the Bank's modestly more
diversified operations which includes gains on the sale of loans, loan servicing
income, and high proportion of transaction accounts in the deposit base. No
significant changes in non-interest income are anticipated on a post-offering
basis.
Lockport Savings' operating expense ratio was modestly below the Peer Group
average ratio (2.22 percent of average assets versus 2.33 percent for the Peer
Group). As discussed in Section I, Lockport Savings' moderate operating expense
ratio is an important factor in the Bank's ability to maintain core earnings
strength. Contributing to Lockport Savings' moderate expense levels are the
Bank's conservative management, high level of investments and MBS which require
minimal costs to acquire and service, relatively lean staffing levels and
comparatively large average branch size, all of which provide for effective
expense control. Likewise, the Peer Group has been effective in cost
containment. Management anticipates that the Bank's overhead costs will be
subject to upward pressures over the next several years owing to (1) the planned
opening of three to four new branches in 1998 and as a result of the opening of
the new administrative office in October 1997, all of which will entail
additional depreciation, compensation and other operating costs, (2) the
incremental expense of operating as a stock institution, and (3) the costs of
the stock based benefit plans. While expected asset growth may diminish growth
of Lockport Savings' operating expense ratio resulting from these upward
pressures to an extent, we expect that Lockport Savings' operating expense
comparability may decline.
When viewed together, net interest income before provisions, non-interest
income (excluding non-operating items) and operating expenses provide an insight
into an institution's earnings strength. In this regard, as measured by their
efficiency ratios, Lockport Savings' ratio of 60.7 percent is more favorable
than the Peer Group's ratio of 63.1 percent. The Bank's more favorable
efficiency ratio is attributable to its modest advantage in all key areas of
core earnings. We anticipate that the Bank's efficiency ratio would initially
improve following a mutual holding company reorganization and minority stock
offering as the net proceeds were invested in interest-earning assets. At the
same time, additional expenses related to recent expansion and the opening of
new offices will likely serve to diminish any improvement in the efficiency
ratio resulting from the conversion and mutual holding company reorganization.
Loss provisions were low for both Lockport Savings and the Peer Group with
Lockport Savings reporting provisions equal to 0.12 percent of average assets
while the Peer Group reported loan loss provisions
<PAGE>
RP Financial, LC.
Page 3.11
equal to 0.11 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 Lockport Savings'
operating results and had a nominal impact on earnings for the Peer Group on
average. Specifically, net non-operating income was comprised of net gains on
the sale of investments and a recovery of the provision related to a deposit at
the Nationar, Inc. for the Bank. Overall, the Bank reported net non-operating
income equal to 0.14 percent of average assets versus an average of 0.03 percent
reported by the Peer Group. The valuation analysis included in the following
section will adjust for the non-recurring nature of these items. Specifically,
the valuation will incorporate an estimated core earnings base, excluding the
impact of non-operating items.
The Bank's effective tax rate is 36.8 percent versus the Peer Group average
of 33.8 percent. The Bank has engaged in tax planning strategies which should
reduce its effective tax rate in comparison to the Peer Group.
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 Lockport Savings and the
Peer Group is apparent as mortgage loans (including MBS and construction loans),
comprised 92.6 percent and 90.8 percent of loans for the Bank and the Peer
Group, respectively. One-to-four family mortgage loans and MBS comprised 75.5
percent of loans for Lockport Savings as compared to 80.2 percent for the Peer
Group.
Lockport Savings' 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 and consumer loans. The Peer Group
on the other hand is more heavily invested in commercial business loans. Based
on the most recent available data, Lockport Savings' multi-family/commercial
mortgage portfolio equaled approximately 15.6 percent of loans and MBS which is
well in excess of the Peer Group average of 7.5 percent while consumer loans
equalled 7.2 percent and 2.5 percent of loans and MBS, respectively. Commercial
loans equaled less than 1 percent of loans and MBS for the Bank versus an
average of 7.8 percent for the Peer Group. As a result of the foregoing,
Lockport Savings' risk weighted assets to total assets ratio of 51.5 percent
compared closely to the Peer Group average 50.5 percent.
The extent of the Bank's and the Peer Group's secondary market operations
are evidenced in the level of loan serviced for others and loan servicing
assets. In this regard, Lockport Savings maintained a portfolio of residential
loans serviced for others equal to $139.8 million versus an average of $214.4
million for the Peer Group. However, the Peer Group average was skewed upward by
two large servicers: (1) Harris Savings Bank;
<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 September 30, 1997
<TABLE>
<CAPTION>
Portfolio Composition as a Percent of MBS and Loans
---------------------------------------------------------
1-4 Constr. 5+Unit Commerc. RWA/ Serviced Servicing
Institution MBS Family & Land Comm RE Business Consumer Assets For Others Assets
- ----------- ------ ------ ------ ------ ------ -------- ------ ---------- ------
(%) (%) (%) (%) (%) (%) (%) ($000) ($000)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Lockport Savings Bank 31.46 43.99 1.54 15.64 0.47 7.20 51.51 139,800 0
SAIF-Insured Thrifts 14.95 62.12 5.31 11.80 6.30 1.67 52.69 401,107 3,385
All Public Companies 14.85 61.16 4.92 12.95 5.97 1.99 53.13 398,188 3,392
Special Selection Grouping(4) 11.49 68.71 3.07 7.51 7.75 2.52 50.54 214,642 1,280
State of NY 26.16 49.08 1.34 16.56 5.74 1.55 46.86 641,643 6,271
Comparable Group
- ----------------
Special Comparative Group(4)
- ----------------------------
CMSV Commty. Svgs, MHC of FL (48.5) 4.23 74.30 13.30 10.73 1.66 1.53 49.73 19,614 0
FFFL Fidelity FSB, MHC of FL (47.7)(1) 17.25 66.22 8.91 5.23 4.66 2.20 50.74 43,474 186
SKBO First Carnegie, MHC of PA(45.0)(1) NA NA NA NA NA NA 20.66 0 0
FFSX First FS&LA. MHC of IA (46.1) 12.75 70.45 1.76 5.13 9.74 0.79 52.74 27,413 0
FSLA First SB SLA MHC of NJ (47.5)(2) 39.02 55.36 3.91 3.27 0.43 0.19 40.77 94,476 101
GDVS Greater DV SB, MHC of PA (19.9) 3.71 78.68 1.70 11.00 3.69 0.00 45.18 880 0
GFED Guarnty FS&LA, MHC of MO (31.0)(2) 11.91 62.61 15.12 12.55 2.13 0.15 60.01 16,293 72
HARB Harbor FSB, MHC of FL (46.6)(2) 16.51 62.81 8.35 6.07 8.63 0.88 52.35 59,872 0
HARS Harris SB, MHC of PA (24.3) 14.86 68.71 2.01 5.73 8.53 0.04 50.70 1,054,960 12,014
JXSB Jcksnville SB, MHC of IL (45.6) 10.91 57.54 0.98 9.10 16.55 4.96 71.23 81,067 261
LFED Leeds FSB, MHC of MD (36.3) 13.79 83.08 1.20 0.88 2.09 0.00 46.19 0 0
NWSB Northwest SB, MHC of PA (30.7) 4.40 73.72 3.56 2.88 12.06 4.62 52.83 99,736 0
PBHC OswegoCity SB, MHC of NY (46.) 15.44 63.13 1.51 11.73 2.76 5.74 59.57 0 0
PBCT Peoples Bank, MHC of CT (40.1) 0.01 46.87 4.02 13.79 22.51 12.16 83.74 2,249,421 9,300
TSBS Peoples Bcrp, MHC of NJ (35.9)(2) 11.76 71.17 0.60 8.48 6.82 1.11 59.34 0 0
PERT Perpetual of SC, MHC (46.8)(1)(2) 5.24 57.98 21.06 7.08 11.06 3.64 60.26 62,500 0
PFSL Pocahnts Fed, MHC of AR (47.0)(2) 22.55 62.20 4.84 7.99 1.57 3.21 41.66 0 0
PHSB Ppls Home SB, MHC of PA (45.0) NA NA NA NA NA NA 49.70 0 0
PULB Pulaski SB, MHC of MO (29.8)(1) 4.04 91.96 0.00 3.29 1.09 0.01 44.09 26,489 0
PLSK Pulaski SB, MHC of NJ (46.0) NA NA NA NA NA NA 42.69 0 0
SBFL SB Fngr Lakes MHC of NY (33.1) 32.74 43.28 0.89 8.61 12.10 2.70 40.96 6,825 0
WAYN Wayne S&L Co. MHC of OH (47.8) 0.19 86.35 3.11 6.60 5.46 0.59 53.93 39,033 0
WCFB Wbstr Cty FSB MHC of IA (45.2) 26.50 57.70 0.07 10.43 5.61 0.00 44.44 0 0
</TABLE>
(1) Financial information is for the quarter ending June 30, 1997.
(2) Excluded from averages due to announced or pending acquisition.
(3) Includes MHC Institutions;
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.
<PAGE>
RP Financial, LC.
Page 3.13
and (2) Peoples Savings Bank - the median servicing portfolio size was much
lower. The Bank did not have any servicing intangibles while servicing
intangibles averaged $1.3 million for the Peer Group.
Credit Risk
- -----------
Table 3.5 reflects the relative credit risk factors of Lockport Savings
and the Peer Group companies. In the financial analysis of the Bank included in
Section One, we noted that Lockport Savings' 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 1992. 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 0.19 percent of assets, versus a
comparative ratio of 0.60 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 0.36 percent and 0.58 percent of loans, respectively. The Bank
maintains higher reserve ratios as the ratio of valuation allowances to total
loans equaled 1.02 percent and 0.78 percent for the Bank and the Peer Group,
respectively. Valuation allowances as a percent of NPAs equaled 253.6 percent
and 130.1 percent for the Bank and the Peer Group, respectively.
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 comparable to the Peer Group's. In particular, Bank's maintains
a relatively comparable capital position and a higher IEA/IBL ratio.
Furthermore, the Bank maintains a lower level of non-interest earning assets in
comparison to the Peer Group. On a pro forma basis, the infusion of stock
proceeds should serve to further strengthen the Bank's relative position in
these areas.
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. Lockport
Savings' net interest income reflects a relatively stable trend over the last
six quarters, which was only slightly less variable than the Peer Group average.
On balance, we believe the Bank and the Peer Group have a comparable level of
interest rate risk exposure.
<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 September 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>
Lockport Savings Bank 0.02 0.19 0.36 1.02 284.00 253.61 1,266 0.20
SAIF-Insured Thrifts 0.26 0.78 0.85 0.78 159.80 122.06 310 0.09
All Public Companies 0.25 0.79 0.88 0.88 165.42 126.77 325 0.10
Special Selection Grouping(4) 0.18 0.60 0.58 0.78 157.71 130.13 168 0.35
State of NY 0.15 0.86 1.19 1.05 111.19 92.48 630 0.12
Comparable Group
----------------
Special Comparative Group(4)
----------------------------
CMSV Commty. Svgs, MHC of FL (48.5) 0.08 0.41 0.55 0.62 113.79 90.57 108 0.10
FFFL Fidelity FSB, MHC of FL (47.7)(1) 0.06 0.34 0.38 0.29 75.03 62.82 42 0.02
SKBO First Carnegie, MHC of PA(45.0)(1) 0.01 NA NA 0.83 NA NA 1 -0.51
FFSX First FS&LA. MHC of IA (46.1) 0.00 0.22 0.20 0.53 260.79 185.09 17 0.02
FSLA First SB SLA MHC of NJ (47.5)(2) 0.13 0.54 0.67 1.04 154.73 105.63 154 0.11
GDVS Greater DV SB, MHC of PA (19.9) 1.37 1.82 0.29 1.00 351.50 33.64 1,444 3.82
GFED Guarnty FS&LA, MHC of MO (31.0)(2) 0.10 0.64 0.67 1.29 192.44 162.46 20 0.00
HARB Harbor FSB, MHC of FL (46.6)(2) 0.21 0.43 0.30 1.38 453.14 238.88 43 0.02
HARS Harris SB, MHC of PA (24.3) 0.36 0.68 0.66 0.96 145.38 60.65 41 0.02
JXSB Jcksnville SB, MHC of IL (45.6) 0.07 0.79 0.91 0.56 61.70 56.34 100 0.31
LFED Leeds FSB, MHC of MD (36.3) 0.00 0.06 0.09 0.30 315.29 315.29 0 0.00
NWSB Northwest SB, MHC of PA (30.7) 0.22 0.77 0.72 0.87 120.38 85.90 443 0.11
PBHC OswegoCity SB, MHC of NY (46.) 0.29 0.91 1.03 0.67 64.65 43.96 317 1.11
PBCT Peoples Bank, MHC of CT (40.1) 0.12 0.76 1.07 1.66 154.97 146.25 NM NM
TSBS Peoples Bcrp, MHC of NJ (35.9)(2) 0.02 0.91 1.16 0.80 68.57 55.06 661 0.67
PERT Perpetual of SC, MHC (46.8)(1)(2) 0.83 0.12 0.15 0.87 570.30 502.32 237 0.56
PFSL Pocahnts Fed, MHC of AR (47.0)(2) 0.00 0.16 0.28 1.07 380.57 274.52 10 0.03
PHSB Ppls Home SB, MHC of PA (45.0) 0.01 0.45 0.80 1.37 172.12 148.08 156 0.62
PULB Pulaski SB, MHC of MO (29.8)(1) 0.03 0.64 0.22 0.33 150.32 41.41 0 0.00
PLSK Pulaski SB, MHC of NJ (46.0) 0.00 0.65 1.14 0.95 83.38 83.38 0 -0.07
SBFL SB Fngr Lakes MHC of NY (33.1) 0.08 0.50 0.90 1.10 121.93 103.35 15 0.06
WAYN Wayne S&L Co. MHC of OH (47.8) 0.36 0.58 0.26 0.46 174.36 65.29 7 0.01
WCFB Wbstr Cty FSB MHC of IA (45.2) 0.06 0.07 0.02 0.72 NA 560.00 1 -0.01
</TABLE>
(1) Financial information is for the quarter ending June 30, 1997.
(2) Excluded from averages due to announced or pending acquisition.
(3) Includes MHC Institutions;
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.
<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 September 30, 1997 or Most Recent Date Available
<TABLE>
<CAPTION>
Balance Sheet Measures
-------------------------- Quarterly Change in Net Interest Income
Non-Earn. ----------------------------------------------------------
Equity/ IEA/ Assets/
Institution Assets IBL Assets 09/30/97 06/30/97 03/31/97 12/31/96 09/30/96 06/30/96
- ----------- ------ ------ ------ -------- -------- -------- -------- -------- --------
(%) (%) (%) (change in net interest income is annualized in basis points)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Lockport Savings Bank 10.8 112.0 2.9 -5 -6 5 -1 -1 10
SAIF-Insured Thrifts 12.7 114.0 3.2 -3 1 0 0 -1 11
All Public Companies 12.6 114.1 3.2 -4 1 0 1 -1 11
Special Selection Grouping(4) 11.8 111.5 3.5 1 -0 6 -1 -6 13
State of NY 10.9 113.7 3.4 -7 -5 1 4 1 13
Market Interest Rates
- ---------------------
1 Year Treasury Bill -- -- -- -84 -74 127 47 103 85
30 Year Treasury Bond -- -- -- -80 -45 6 31 42 75
Comparable Group
- ----------------
Special Comparative Group(4)
- ----------------------------
CMSV Commty. Svgs, MHC of FL (48.5) 11.3 111.5 3.9 0 -1 -5 -31 28 30
FFFL Fidelity FSB, MHC of FL (47.7)(1) 8.3 108.0 3.3 NA -13 -3 -13 -13 13
SKBO First Carnegie, MHC of PA(45.0)(1) 16.4 118.6 3.0 NA 14 30 NA NA NA
FFSX First FS&LA, MHC of IA (46.1) 8.7 107.5 3.3 -9 1 12 -5 1 11
FSLA First SB SLA MHC of NJ (47.5)(2) 8.6 108.0 3.4 0 -6 -6 7 -2 3
GDVS Greater DV SB, MHC of PA (19.9) 11.6 109.6 3.5 -2 11 11 4 32 4
GFED Guarnty FS&LA, MHC of MO (31.0)(2) 13.0 111.8 4.7 3 13 -19 13 17 26
HARB Harbor FSB, MHC of FL (46.6)(2) 8.3 109.1 2.4 0 5 -3 -1 -0 -11
HARS Harris SB, MHC of PA (24.3) 7.3 106.3 3.6 -8 1 -12 15 -65 41
JXSB Jcksnville SB, MHC of IL (45.6) 10.6 109.3 4.2 11 -30 7 3 11 14
LFED Leeds FSB, MHC of MD (36.3) 16.6 120.0 1.5 -11 4 11 5 -5 -8
NWSB Northwest SB, MHC of PA (30.7) 9.1 109.2 2.7 -19 7 7 -5 -23 19
PBHC OswegoCity SB, MHC of NY (46.) 10.0 106.6 7.0 5 4 20 NA NA NA
PBCT Peoples Bank, MHC of CT (40.1) 9.0 104.6 6.8 23 -30 11 35 -29 -6
TSBS Peoples Bcrp, MHC of NJ (35.9)(2) 15.2 117.1 4.1 -8 4 -21 13 -3 7
PERT Perpetual of SC, MHC (46.8)(1)(2) 11.8 111.1 4.2 NA -41 6 8 -8 -1
PFSL Pocahnts Fed, MHC of AR (47.0)(2) 6.3 105.2 2.7 -8 5 -2 -2 13 21
PHSB Ppls Home SB, MHC of PA (45.0) 13.7 113.0 3.2 28 0 NA NA NA NA
PULB Pulaski SB, MHC of MO (29.8)(1) 13.0 115.4 2.5 NA 12 0 -5 13 4
PLSK Pulaski SB, MHC of NJ (46.0) 12.0 111.1 3.0 9 19 -12 -6 NA NA
SBFL SB Fngr Lakes MHC of NY (33.1) 9.3 107.4 3.7 -5 -3 -13 5 -29 16
WAYN Wayne S&L Co. MHC of OH (47.8) 9.5 107.6 3.4 4 6 -5 -4 -9 17
WCFB Wbstr Cty FSB MHC of IA (45.2) 23.4 130.6 1.5 -9 -9 31 -9 7 12
</TABLE>
(1) Financial information is for the quarter ending June 30, 1997.
(2) Excluded from averages due to announced or pending acquisition.
(3) Includes MHC Institutions;
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, RP Financial concluded that the Peer Group
forms a reasonable basis for determining the pro forma market value of Lockport
Savings. Due to the limited number of publicly-traded MHCs used in the Peer
Group, there are some significant differences between the Bank and certain Peer
Group members. Those areas where substantial differences exist, such as
disparate asset sizes, different market areas, market capitalization and other
variations will be addressed in the form of valuation adjustments to the extent
necessary. For these reasons, and because the Peer Group members all share the
unique characteristics of mutual holding company ownership, RP Financial
concluded that the Peer Group pricing (full conversion basis) will serve as a
sound basis in deriving a pro forma market value for Lockport Savings.
<PAGE>
RP Financial, LC.
Page 4.1
IV. VALUATION ANALYSIS
Introduction
- ------------
This chapter presents the valuation analysis and methodology used to determine
Lockport Savings' estimated pro forma market value for purposes of pricing the
minority stock. The valuation incorporates the appraisal methodology
promulgated by the OTS and adopted in practice by the FDIC and New York State
Department of Banking (the "Department") for standard conversions and mutual
holding company offerings, particularly regarding selection of the Peer Group,
fundamental analysis on both the Bank and the Peer Group, and determination of
the Bank's pro forma market value utilizing the market value approach.
Appraisal Guidelines
- --------------------
The OTS written appraisal guidelines, originally released in October
1983 and updated in late 1994, specify the market value methodology for
estimating the pro forma market value of an institution. The FDIC, state banking
agencies (including the Department) and other Federal agencies have endorsed the
OTS appraisal guidelines as the appropriate guidelines involving mutual-to-stock
conversions. As previously noted, the appraisal guidelines for MHC offerings is
somewhat different, particularly in the Peer Group selection process.
Specifically, the regulatory agencies have indicated that the Peer Group should
be based on the pro forma fully-converted pricing characteristics of publicly-
traded MHCs rather than on publicly-traded stock thrifts given the unique
differences in stock pricing of publicly-traded MHCs and stock thrifts.
RP Financial Approach to the Valuation
- --------------------------------------
The valuation analysis herein complies with such regulatory approval
guidelines. Accordingly, the valuation incorporates a detailed analysis based on
the Peer Group, discussed in Chapter III, which constitutes "fundamental
analysis" techniques. The valuation incorporates a "technical analysis" of
recently completed stock offerings of comparable MHCs, given the significant
weight in the valuation process of limiting the after-market increase in the
stock. The pricing characteristics of recent MHC transactions serves as a proxy
for near-term aftermarket trading activity of the stock. In this regard, there
has been limited new MHC activity, so this analysis is rather limited. It should
be noted that these valuation analyses, based on either the Peer Group or the
recent MHC transactions, cannot possibly fully account for all the market forces
which impact trading activity and pricing characteristics of a stock on a given
day.
The pro forma market value determined herein is a preliminary value for
the Bank's to-be-issued stock. Throughout the MHC process, RP Financial will:
(1) review changes in the Bank's operations and financial
<PAGE>
RP Financial, LC.
Page 4.2
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 MHC offerings, and to a
lesser extent, conversion offerings, both regionally and nationally. Updated
valuation reports are prepared in the event material changes should occur prior
to closing the offering and/or at the closing of the offering to determine if
the prepared valuation analysis and resulting 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 Lockport Savings, or the market value of the stocks of public
MHC institutions, or Lockport Savings' 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
the key 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 shares, marketing
of the issue, management, and the effect of government regulations and/or
regulatory reform. We have also considered the market for thrift stocks, in
particular new issues, to assess the impact on value of Lockport Savings coming
to market at this time.
1. Financial Condition
-------------------
The financial condition of an institution is an important determinant in
pro forma market value, because investors typically look to such factors as
liquidity, capital, asset composition and quality, and funding sources in
assessing investment attractiveness. The similarities and differences in the
Bank's financial strength are noted as follows:
o Overall Asset/Liability ("A/L") Composition. One-to-four family
-------------------------------------------
mortgage loans comprised the largest segment of the loan portfolios
of both Lockport Savings and the Peer Group. The primary difference
with respect to the asset composition is the Bank's modestly lower
level of
<PAGE>
RP Financial, LC.
Page 4.3
loans, which is offset by the Bank's higher ratio of MBS. The Bank's
portfolio reflects a slightly greater level of diversification into
high risk-weight loans. Both have funded their balance sheets primarily
with retail deposits although the Peer Group has utilized borrowed
funds to a greater extent. The Bank's pro forma IEA/IBL ratio should
provide a comparative advantage in terms of earnings power on a pro
forma basis.
o Credit Risk. The Peer Group maintains a comparable risk-weighted assets
-----------
to total assets ratio. Additionally, Lockport Savings reported more
favorable asset quality figures in terms of the level of non-performing
assets and the reserve coverage as a percent of NPAs. At the same time,
the credit risk exposure at the majority of the Peer Group companies is
believed to be relatively low.
o Balance Sheet Liquidity. The Bank and the Peer Group operated with a
-----------------------
nearly equal levels of cash and investment securities but the Bank
maintains a higher level of MBS. Furthermore, the majority of
Lockport Savings' investments securities and all MBS are classified as
AFS, which facilitates the Bank's ability to generate liquid funds, if
required. Both Lockport Savings and the Peer Group appear to have
adequate borrowing capacity to cover liquidity shortfalls. The Bank's
liquidity should initially increase following the stock offering.
o Capitalization. The Bank operates with a lower pre-conversion tangible
--------------
capital level than the Peer Group, but this disadvantage will be
addressed as a result of the stock offering as Lockport Savings' pro
forma capital position is expected to exceed the Peer Group average.
On balance, we believe the Bank, on a pro forma basis, has modestly
superior financial condition characteristics relative to the Peer Group.
Therefore, we concluded that a slight upward adjustment is warranted for this
factor.
2. Profitability, Growth and Viability of Earnings
-----------------------------------------------
Earnings are a key factor in determining pro forma market value, as the
level and risk characteristics of an institution's earnings stream and the
prospects and ability to generate future earnings heavily influence the multiple
the investment community will pay for earnings. The major factors considered in
the valuation are described below.
o Reported Profitability. The Bank's reported earnings were above the
----------------------
Peer Group average, which is primarily due to its comparative
advantage in all key areas of core operations. Additionally, Lockport
Savings' earnings were supported by non-operating items to a greater
degree than the Peer Group.
o Core Profitability. As noted previously, the Bank's core profitability
------------------
is slightly higher than the Peer Group owing to its more favorable
efficiency ratio. On a pro forma basis, the Bank's efficiency ratio
could be expected to improve as the net proceeds are invested in
interest-earning assets. At the same time, additional expenses related
to recent expansion and the opening of new offices will likely serve
to diminish any improvement in the efficiency ratio resulting from the
conversion and mutual holding company reorganization.
<PAGE>
RP Financial, LC.
Page 4.4
o Interest Rate Risk. The Bank and the Peer Group appear to share a
------------------
similar level of interest rate risk. The use of proceeds for both the
Bank and the Peer Group could be expected to further limit their
respective interest rate risk levels.
o Credit Quality. Lockport Savings reported comparable loan loss
--------------
provisions and lower net loan chargeoffs as a percent of loans over the
most recent trailing twelve month period. In terms of future exposure
to credit quality related losses, the Bank maintains a lower ratio of
non-performing assets and a higher reserve coverage ratio as a percent
of NPAs.
o Earnings Growth Potential. Earnings growth at the Bank will be
-------------------------
constrained by a number of factors, including slow growth in the blue
collar market area and intense competition. 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.
Overall, RP Financial concluded that Lockport Savings' advantage in core
profitability and limited credit risk exposure were offset by the Bank's near
term earnings growth potential including the impact of the anticipated expenses
related to the Bank's new administrative office and planned branches.
Accordingly, no adjustment is warranted for this factor.
3. Asset Growth
------------
Recent growth trends are slightly more favorable for the Bank than for the
Peer Group companies, on average. The Bank's capacity to grow will be enhanced
with the additional capital raised through conversion, coupled with the
investment in new branches. Offsetting these positive factors, Lockport Savings'
growth will be constrained by unfavorable growth trends within its market and
steep competition from other financial institutions, particularly in Erie
County. Based on the foregoing, we applied no adjustment for this factor.
4. Primary Market Area
-------------------
The general condition of a financial institution's primary market area has
a significant impact on value, as future success is in part dependent upon
opportunities for profitable activities in the local market. Lockport Savings'
primary market area in Niagara County is an aging, blue collar market that has
been relatively slow to recover from the economic recession of the 1980s. While
a large proportion of the manufacturing jobs that were lost have been replaced,
many of these are in services, which is typically a lower wage employment sector
than manufacturing.
The primary market served by Lockport Savings is more limited, on average,
than the Peer Group companies, implying more favorable opportunities for deposit
and lending growth for the Peer Group, on average. As shown in Table 4.1,
historical and projected population growth is lower for the Bank's primary
market area
<PAGE>
Table 4.1
Peer Group Market Area Comparative Analysis
<TABLE>
<CAPTION>
Population Proj.
---------------- Pop. 1990-97 1997-2002
Institution County 1990 1997 2002 % Change % Change
- ----------- ------ ---- ---- ---- -------- --------
(000) (000)
<S> <C> <C> <C> <C> <C> <C>
Community Svgs MHC of FL Palm Beach 864 1,012 1,115 17.2% 10.1%
Fidelity FSB, MHC of FL Palm Beach 864 1,012 1,115 17.2% 10.1%
First Carnegie MHC of PA Allegheny 1,336 1,286 1,252 -3.8% -2.6%
First FS&LA MHC of IA Woodbury 98 103 106 4.9% 3.2%
Greater Del Val SB MHC of PA Delaware 548 547 547 -0.1% -0.1%
Harris SB MHC of PA Dauphin 238 248 255 4.2% 2.8%
Jacksonville SB MHC of IL Morgan 36 36 36 -0.4% -0.3%
Leeds FSB MHC of MD Baltimore City 736 663 642 -9.9% -3.1%
Northwest SB MHC of PA Warren 45 44 44 -1.2% -0.9%
Oswego City SB MHC of NY Oswego 122 126 128 3.1% 2.1%
Peoples Bank MHC of CT Fairfield 828 836 842 1.1% 0.7%
People Home SB MHC of PA Beaver 186 187 187 0.3% 0.2%
Pulaski SB MHC of MO St Louis City 397 344 329 -13.3% -4.3%
Pulaski SB MHC of NJ Union 494 498 501 0.9% 0.6%
SB of Finger Lakes MHC of NY Ontario 95 100 104 5.3% 3.5%
Wayne S&L Co MHC of OH Wayne 101 110 115 8.2% 5.2%
Webster City FSB MHC of IA Hamilton 16 16 16 0.4% 0.0%
-- -- -- ---- ----
Averages: 412 422 431 2.0% 1.6%
Medians: 238 248 255 0.9% 0.6%
Lockport Savings Bank Niagara 221 221 221 0.1% 0.1%
Erie 969 949 936 -2.0% -1.4%
<CAPTION>
Per Capita Income
------------------- Deposit
% State Market Unempl.
Institution County Median Age Amount Average Share(1) Rate (2)
- ----------- ------ ---------- ------ ------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Community Svgs MHC of FL Palm Beach 40.9 21,754 126.2% 1.9% 7.2%
Fidelity FSB, MHC of FL Palm Beach 40.9 21,754 126.2% 3.2% 7.2%
First Carnegie MHC of PA Allegheny 38.8 18,708 103.9% 0.2% 4.4%
First FS&LA MHC of IA Woodbury 34.3 16,764 102.1% 15.3% 2.7%
Greater Del Val SB MHC of PA Delaware 36.6 22,326 123.9% 2.7% 4.6%
Harris SB MHC of PA Dauphin 37.4 18,993 105.4% 7.2% 3.5%
Jacksonville SB MHC of IL Morgan 36.1 16,672 84.5% 19.2% 4.1%
Leeds FSB MHC of MD Baltimore City 34.5 14,868 70.0% 2.5% 8.2%
Northwest SB MHC of PA Warren 38.3 15,543 86.3% 28.5% 4.8%
Oswego City SB MHC of NY Oswego 32.1 12,294 66.4% 18.1% 5.6%
Peoples Bank MHC of CT Fairfield 37.4 27,087 129.1% 23.3% 4.1%
People Home SB MHC of PA Beaver 39.2 13,741 76.3% 7.8% 5.1%
Pulaski SB MHC of MO St Louis City 34.8 16,601 94.0% 0.5% 7.1%
Pulaski SB MHC of NJ Union 37.2 24,441 101.0% 0.4% 5.4%
SB of Finger Lakes MHC of NY Ontario 35.7 15,101 81.6% 13.9% 2.9%
Wayne S&L Co MHC of OH Wayne 34.1 16,017 92.9% 10.9% 3.5%
Webster City FSB MHC of IA Hamilton 39.1 16,204 98.7% 25.7% 2.3%
---- ------ ----- ----- ----
Averages: 36.9 18,169 98.2% 10.7% 4.9%
Medians: 37.2 16,672 98.7% 7.8% 4.6%
Lockport Savings Bank Niagara 36.2 13,239 100.6% 24.1% 6.1%
36.4 14,307 77.3% 2.0% 5.0%
</TABLE>
(1) Total institution deposits in headquarters county as percent of total
county deposits.
(2) Unemployment rates as of August 1997, not seasonally adjusted
Sources: CACI, Inc, SNL Securities
<PAGE>
RP Financial, LC.
Page 4.6
than in the markets for the Peer Group (i.e., flat growth projected through 2002
for Niagara County and shrinkage in Erie County versus 1.6 percent growth
projected on average for the Peer Group). Income levels in Erie and Niagara
Counties (the Bank's primary market) were also lower than the Peer Group
average.
These measures all point to a distinct disadvantage of the Bank's market
area relative to the average market area for the Peer Group. Considering all of
the factors listed above, we concluded with a moderate downward adjustment for
market area.
5. Dividends
---------
The Bank has indicated its intention to pay an annual cash dividend of
$0.12 per share payable quarterly. 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 but
one of the Peer Group institutions pay regular cash dividends, with implied
dividend yields ranging from 0.98 percent to 3.61 percent. The average dividend
yield on the stocks of the Peer Group institutions was 1.88 percent as of
November 28, 1997, representing an average earnings payout ratio of 14.52
percent (see Table 4.5). As of November 28, 1997, approximately 85 percent of
all publicly-traded thrifts (non MHC institutions) have adopted cash dividend
policies (see Exhibit IV-1) exhibiting an average yield of 1.86 percent and an
average payout ratio of 35.43 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. Lockport Savings has stated its intention to pay
an annual dividend of $0.12 per share, which represents a yield of 1.2 percent
based on the IPO price of $10.00 per share.
Our valuation adjustment for dividends for Lockport Savings as an MHC also
considered the FDIC and Federal Reserve policy with regard to waiver of
dividends by the MHC. The policy, anticipated to be applied to Lockport Savings
as it has been in several recent mutual holding company reorganizations reviewed
by the FDIC and Federal Reserve, requires: (1) that any dividends waived by the
MHC be accounted for separately, (2) places restrictions on dividend payments
out of the cumulative waived dividend account, and (3) requires the minority
stockholders' ownership interest to be reduced in a "second step" conversion to
reflect the cumulative waived dividend account. Currently, those institutions
in the Peer Group who are not subject to FDIC oversight and formed their MHCs
prior to the announcement of the dividend waiver policy by the FDIC in November
1995 will not be subjected directly to the dividend waiver issue in a second
step conversion (i.e. they are "grandfathered"), except in the case of special
dividends or regular dividends that are deemed "excessive" and were waived by
the MHC. Approximately seven of the Peer Group are believed to be immune to the
dividend waiver issue. The practice of the majority of public MHC institutions
in the Peer Group has been for the MHC to waive its right to the dividend.
Lockport Savings has indicated that, in the case of Mutual Holding Company, the
MHC does not
--------
<PAGE>
RP Financial, LC.
Page 4.7
expect to waive its right to the dividend. Lockport Savings will be subject to
the FDIC policy with regard to dividend waivers, while the majority of the Peer
Group members are not currently subject to such a policy (due to
grandfathering).
On a pro forma basis, the Bank appears to have the ability to match the
dividend payments of the Peer Group. However, we concluded that a slight
downward adjustment was warranted for purposes of dividends relative to the Peer
Group because of the dividend waiver issue.
6. Liquidity of the Shares
-----------------------
The Peer Group is by definition composed of companies that are traded in
the public markets, and all of the Peer Group members trade on the NASDAQ
system. Typically, the number of shares outstanding and market capitalization
provides an indication of how much liquidity there will be in a particular
stock. The market capitalization of the Peer Group companies, based on the
shares issued and outstanding to public shareholders (i.e., excluding the
majority ownership interest owned by the respective MHCs) ranged from $15.5
million to $823.8 million as of November 28, 1997, with average and median
market values of $97.0 and $25.1 million, respectively. The public shares issued
and outstanding to the public shareholders of the Peer Group members ranged from
approximately 580,000 to 24.5 million, with average and median shares
outstanding of approximately 3.8 and 1.1 million, respectively. As a result of
the Bank's substantially larger asset base, capital and earnings in comparison
to the Peer Group, the Bank will have a comparatively greater number of shares
outstanding and market capitalization. Additionally, it is expected that
Lockport Savings will qualify for NASDAQ listing immediately following the
conversion.
The higher public market capitalization and a greater amount of public
shares available for trading will result in more attractive liquidity
characteristics than the stocks of the Peer Group companies, on average. Thus,
we have applied a moderate upward adjustment for the liquidity of the shares.
7. Marketing of the Issue
----------------------
Three separate markets exist for thrift stocks: (1) the after-market for
public companies, both all stock and MHCs, in which trading activity is regular
and investment decisions are made based upon financial condition, earnings,
capital, ROE, dividends and future prospects; (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 prior operations as a publicly-held company
and stock trading history; (3) the thrift acquisition market. 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
A. The Public Market
-----------------
In terms of assessing general stock market conditions, the stock
market has generally trended higher over the past year. The Federal Reserve's
decision not to raise interest rates at its September 1996 meeting, and
generally positive third quarter earnings results sustained the upward momentum
in the stock market during the beginning of the fourth quarter of 1996.
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,
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
<PAGE>
RP Financial, LC.
Page 4.9
rise in core producer prices for March, with the DJIA closing at 6391.69 on
April 11, 1997, or 9.8 percent below its all-time high recorded a month ago.
Some favorable first quarter earnings reports and news of a possible
settlement by tobacco companies to resolve the threat of liability lawsuits
provided for a modest recovery in the stock market in mid-April 1997. In late-
April, the release of economic data which indicated mild inflationary pressures
furthered the rally in bond and stock prices. News of a budget agreement and a
favorable ruling for tobacco companies sent the stock market soaring to record
highs in early-May. Mixed economic data and the Federal Reserve's decision to
leave its target for the federal funds rate unchanged at its May meeting
sustained a positive trend in the stock market through the end of May. Profit
worries caused a sell-off in high technology stocks in early-June, while
declining interest rates served to stabilize the broader market. Technology
stocks rallied the stock market to new highs in mid-July, as a number of
technology companies posted favorable second quarter earnings. Favorable
inflation data, including second quarter GDP growth slowing to an annual rate of
2.2 percent versus 4.9 percent in the first quarter, and comments by the Federal
Reserve Chairman which indicated that an increase in interest rates was not
imminent, spurred bond and stock prices strongly higher during the second half
of July.
A decline in the July 1997 unemployment rate reversed the positive
bond and stock market trends in early-August, as inflation concerns became more
prominent. A declining dollar against the yen and mark sharpened the decline in
bond prices, with the 30-year U.S. Treasury bond increasing from 6.32 percent at
the end of July to 6.66 percent as of August 8, 1997. The sell-off pulled stock
prices lower as well. While bond prices firmed in mid-August, notable
volatility was evident in the stock market. The DJIA moved at least 100 points
for five consecutive days from August 18, 1997 through August 21, 1997, which
set a record for volatility. Profit worries among some of the large blue chip
companies and mixed inflation readings were factors contributing to the roller-
coaster performance of the stock market. Despite strengthening bond prices,
stocks traded lower through the end of August. Bond prices moved higher on
inflation data which showed that prices stayed low during the second quarter,
even though second quarter GDP growth was revised upward to an annual rate of
3.6 percent compared to an original estimate of 2.2 percent.
Volatility returned to the stock market in early-September, with the
DJIA posting a record breaking point increase of 257.36 on September 2, 1997.
The rally was sparked by economic data that indicated manufacturing growth
slowed in August, thereby easing investors' inflation worries. However, the
rally was not sustained, as the DJIA pulled back following the one day rally.
The pull back was largely attributed to profit worries, which more than offset
favorable inflation news indicated by a slight increase in the national
unemployment rate for August (4.9 percent in August versus 4.8 percent in July).
Stocks fluctuated in a narrow trading range in mid-September, in anticipation of
third quarter earnings and August economic data. The low inflation reading
indicated by the August consumer price index sent stock and bond prices sharply
higher on
<PAGE>
RP Financial, LC.
Page 4.10
September 16, 1997, with the DJIA posting a 175 point increase and the
yield on the 30-year U.S. Treasury bond posting its second largest decline in
the 1990s. Uncertainty over third quarter earnings provided for a mixed stock
market performance towards the end of September, while generally favorable
inflation readings pushed interest rates to their lowest level in two years.
The release of September employment data on October 3, 1997 caused bond and
stock prices to soar in early trading activity, as the September unemployment
rate was unchanged at 4.9 percent and fewer jobs than expected were added to the
economy during September. However, most of the initial gains were erased by
news of rising tensions between Iraq and Iran. On October 3, 1997, the DJIA
closed at 8038.58.
Lower interest rates provided for a positive stock market environment
in the beginning of October 1997. However, congressional testimony by the
Federal Reserve Chairman, in which he indicated that it would be difficult to
maintain the current balance between tight labor markets and low inflation,
caused stock and bond prices to skid in mid-October. Disappointing third
quarter earnings in the technology sector sharpened the sell-off in the stock
market, with the Dow Jones Industrial Average ("DJIA") posting consecutive
losses of more than 1.0 percent on October 16 and 17.
Stocks bounced back in early-week trading the following week,
reflecting positive third quarter earnings surprises posted by some of the blue
chip stocks. However, the recovery was abbreviated by global selling pressure
led by the decline in the Hong Kong stock market, as the DJIA posted a two-day
loss approximating 320 points on October 23 and 24. The sell-off in the world
financial markets turned into a rout on the following Monday, with a 5.8 percent
decline in the Hong Kong stock market fueling the largest ever point decline in
the DJIA. On October 24, the DJIA declined 554 points or 7.2 percent. While
the selling was broad based, technology stocks sensitive to Asian demand
experienced some of the sharpest declines. The turmoil in the stock market
provided for a sharp rally in U.S. Treasury bonds, reflecting a flight to
quality by skittish investors. The stock market recovered strongly the day
after the record breaking point decline, as the DJIA surged a record breaking
337 points on October 28. Comparatively, bond prices declined sharply on
October 28, as investors pulled out of the Treasury market to reinvest into the
stock market. Market conditions remained uneven through the week ended October
31, which was followed by a soaring stock market on November 3. The DJIA posted
a 232 point increase on November 3, which was supported by a resurgence in the
Hong Kong market.
Following the one day rally, volatility returned to the stock market
through mid- and late-November. The market's uneven performance was largely
attributable to the ongoing influence of the international markets, particularly
the Asian and Latin American markets. Bond prices benefitted from the turbulent
stock market environment, despite renewed inflationary pressures indicated by
the October unemployment rate dropping to a 24-year low of 4.7 percent. In mid-
November, the yield on the 30-year
<PAGE>
RP Financial, LC.
Page 4.11
bellwether Treasury issue approached 6.0 percent its lowest level since February
1996. On November 28, 1997, the DJIA closed at 7823.10, an increase of 20.0
percent from one year earlier.
Similar to the overall stock market, the market for thrift stocks has
generally been favorable during the past twelve months. 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 1996. 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. Ahmanson's unsolicited offer to acquire Great Western Financial sent the
SNL Index soaring in mid-February. Stable interest rates and acquisition
activity supported higher thrift prices in early-March; however, like the stock
market in general, the peak in thrift prices was followed by a sharp sell-off in
mid-March. In fact, interest-rate sensitive issues were among the sectors
hardest hit by the revised January retail sales report, as the 30-year bond
approached 7.0 percent. Interest-rate sensitive issues continued to experience
selling pressure in late-March and early-April, as signs of a strengthening
economy pushed interest rates higher. The sell-off in thrift stocks culminated
on April 11, 1997, as interest rates increased sharply on news of the higher
than expected rise in core producer prices for March. Thrift prices edged
modestly higher in mid-April, reflecting generally favorable first quarter
earnings and a slight decline in interest rates following the release of
economic data which showed that inflation was low. Favorable inflation data and
the budget agreement provided for a more substantial rally in thrift stocks in
late-April and early-May, as interest-rate sensitive issues were bolstered by
declining interest rates.
Thrift stocks continued to trend higher through June and early-July
1997, based on the improved interest rate outlook and an overall positive
outlook for the economy. Generally favorable second quarter earnings and the
30-year U.S. Treasury bond yield declining below 6.50 percent served to further
boost thrift prices in mid-July, with the declining interest rate environment
serving to sustain the rally in thrift prices through the end of July. Thrift
prices generally declined during the first half of August, due to higher
interest rates and profit taking. From July 31, 1997 to August 15, 1997, the
SNL Index declined by 3.7 percent. Thrift prices recovered modestly during the
second half of August, as the Federal Reserve left short-term interest rates
<PAGE>
RP Financial, LC.
Page 4.12
unchanged at its August meeting. Thrift stocks participated in the one day
stock market rally on September 2, 1997, as evidenced by a 1.95 percent increase
in the SNL Index. News of NationsBank's proposed acquisition of Barnett Banks
for more than four times its book value appears to have further contributed to
the one day run-up in thrift prices. In contrast to the overall stock market,
thrift prices continued to move higher following the one day rally in the DJIA.
Stable interest rates and acquisition news sustained the positive market for
thrift issues. The decline in interest rates following the release of the
August consumer price index in mid-September served to further the rally in
thrift prices. During late-September and early-October, interest-rate sensitive
issues in general benefited from the declining interest rate environment and
expectations of strong third quarter earnings. Prices of thrift and bank stocks
also continued to be positively influenced by industry consolidation and rising
acquisition multiples being paid for thrift and bank franchises. The SNL Index
for all publicly-traded thrifts closed at 746.3 on October 3, 1997
Declining interest rates supported an advance in thrift prices in
early-October; however, the upward trend in thrift prices stalled in mid-
October, as interest rates moved higher following warnings by the Federal
Reserve Chairman of inflation creeping back into the economy due to the tight
labor markets. Thrift stocks gyrated in conjunction with the overall market in
late-October, with the SNL index declining by 5.2 percent on October 27 and
increasing by 2.4 percent on October 28. Thrift prices further recovered on
October 29, which was supported by a rally in the bond market. Aided by the
favorable interest rate climate, thrift stocks posted further gains in early-
November and then retreated modestly in mid-November. Thrift and bank issues
retreated on concerns that a slowing U.S. economy could lead to weaker loan
demand and higher delinquency rates. However, led by the strengthening bond
market, thrift and bank issues moved higher during the last half of November.
On November 28, 1997, the SNL Index for all publicly-traded thrifts closed at
767.4, an increase of 58.0 percent from one year earlier.
B. The New Issue Market
--------------------
In addition to thrift stock market conditions in general, the new
issue market for converting thrifts is also an important consideration in
determining the Bank's pro forma market value. There was generally strong
interest in converting issues during the second half of 1996, as most offerings
experienced oversubscriptions. Fewer offerings, more attractive pricing, lower
interest rates, and the general positive trend in thrift prices were among the
most prominent factors contributing to the investor interest shown for
converting thrift issues. The favorable market environment for converting
thrift issues has generally been sustained during the first three quarters of
1997 and there has been an increase in the number of conversion offerings
completed during the past three months in comparison to previous periods. As
shown in Table 4.2, the median one week change in price for offerings completed
during the latest three months equaled positive 53.1 percent.
<PAGE>
RP Financial, LC.
November 28, 1997
- -------------------------------------------------------------------------------
Table 4.2
Recent Conversions (Last Three Months)
Conversion Pricing Characteristics: Sorted Chronologically
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Institutional Information Pre-Conversion Data Offering
--------------------------------
Financial Info. Asset Quality Information
- --------------------------------------------------------------------------------------------------------------------
Conversion Equity/ NPAs/ Res. Gross % of Exp./
Institution State Date Ticker Assets Assets Assets Cov. Proc. Mid. Proc.
- ----------- ----- ---- ------ ------ ------ ------ ---- ----- ---- -----
($Mil) (%) (%)(2) (%) ($Mil) (%) (%)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
First Security Fed Fin., Inc IL 10/31/97 FSFF 260 11.52% 0.87% 74% 64.1 132% 1.7%
Oregon Trail Financial Corp. OR 10/06/97 OTFC 220 10.08% 0.12% 280% $46.9 132% 2.3%
Riverview Bancorp, Inc. (8) WA * 10/01/97 RVSB 230 11.24% 0.14% 245% 35.7 132% 2.8%
SHS Bancorp, Inc. PA 10/01/97 SHSB 83 5.52% 1.41% 36% 8.2 132% 5.7%
Ohio State Financial Serv OH * 09/29/97 P.Sheet 34 14.45% 0.47% 86% 6.3 94% 5.7%
Citizens Bancorp IN 09/19/97 P.Sheet 46 12.28% 0.45% 84% 10.6 132% 4.6%
Averages: $146 10.85% 0.58% 134% 28.6 126% 3.8%
Medians: 152 11.38% 0.46% 85% 23.2 132% 3.7%
Averages, Excluding 2nd Steps $129 10.77% 0.66% 140% $27.2 125% 4.0%
Medians, Excluding 2nd Steps $83 11.52% 0.47% 84% $10.6 132% 4.6%
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Institutional Information Insider Purchases Pro Forma Data
------------------------------------------------
Pricing Ratios(4) Fin. Characteristics
- ------------------------------------------------------------------------------------------------------------------------------------
Benefit Plans
-------------
Conversion Recog. Mgmt.
Institution State Date Ticker ESOP Plans & Dirs. P/TB P/E(5) P/A ROA TE/A ROE
- ----------- ----- ---- ------ ---------------------- ---- ------ --- --- ---- ---
(%) (%) (%)(3) (%) (x) (%) (%) (%) (%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
First Security Fed Fin., Inc IL 10/31/97 FSFF 8.0% 4.0% 4.4% 78.1% 16.5 21.1% 1.3% 27.0% 4.7%
Oregon Trail Financial Corp. OR 10/06/97 OTFC 8.0% 4.0% 3.9% 75.3% 13.6 18.1% 1.0% 20.7% 5.1%
Riverview Bancorp, Inc. (8) WA * 10/01/97 RVSB 8.0% 4.0% 2.9% 109.0% 17.7 23.6% 1.3% 21.6% 6.2%
SHS Bancorp, Inc. PA 10/01/97 SHSB 8.0% 4.0% 5.2% 72.3% 24.5 9.1% 0.4% 12.6% 3.0%
Ohio State Financial Serv OH * 09/29/97 P.Sheet 8.0% 4.0% 8.3% 62.3% 13.4 16.0% 1.2% 25.7% 4.6%
Citizens Bancorp IN 09/19/97 P.Sheet 8.0% 4.0% 16.1% 72.9% 14.8 14.8% 1.1% 46.3% 2.4%
Averages: 8.0% 4.0% 6.8% 78.3% 16.7 17.1% 1.1% 25.7% 4.3%
Medians: 8.0% 4.0% 4.8% 74.1% 15.6 17.0% 1.2% 23.7% 4.7%
Averages, Excluding 2nd Steps 8.0% 4.0% 7.6% 72.2% 16.5 15.8% 1.0% 26.5% 4.0%
Medians, Excluding 2nd Steps 8.0% 4.0% 5.2% 72.9% 14.8 16.0% 1.1% 25.7% 4.6%
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
Institutional Information Post-IPO Pricing Trends
---------------------------------------------------------
Closing Price:
- -------------------------------------------------------- ---------------------------------------------------------
First After After
Conversion IPO Trading % First % First %
Institution State Date Ticker Price Day Chg. Week(6) Chg. Month(7) Chg.
- ----------- ----- ---- ------ ----- --- ---- ------ ---- -------- ----
($) ($) (%) ($) (%) ($) (%)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
First Security Fed Fin., Inc IL 10/31/97 FSFF $10.00 $15.06 50.6% $15.13 51.3% $16.06 60.6%
Oregon Trail Financial Corp. OR 10/06/97 OTFC 10.00 16.75 67.5% 16.75 67.5% 15.88 58.8%
Riverview Bancorp, Inc. (8) WA * 10/01/97 RVSB 10.00 13.25 32.5% 13.63 36.3% 13.25 32.5%
SHS Bancorp, Inc. PA 10/01/97 SHSB 10.00 14.75 47.5% 16.25 62.5% 16.00 60.0%
Ohio State Financial Serv OH * 09/29/97 P.Sheet 10.00 15.50 55.0% 15.50 55.0% 14.88 48.8%
Citizens Bancorp IN 09/19/97 P.Sheet 10.00 14.00 40.0% 14.00 40.0% 15.38 53.8%
Averages: $10.00 $14.89 48.9% $15.21 52.1% $15.24 52.4%
Medians: $10.00 $14.91 49.1% $15.31 53.1% $15.63 56.3%
Averages, Excluding 2nd Steps $10.00 $15.21 52.1% $15.53 55.3% $15.64 56.4%
Medians, Excluding 2nd Steps $10.00 $15.06 50.6% $15.50 55.0% $15.88 58.8%
Note: * - Appraisal performed by RP Financial; "NT" - Not Traded; "NA" - Not Applicable, Not Available.
(1) Non-OTS regulated thrifts. November 28, 1997
(2) As reported in summary pages of prospectus.
(3) As reported in prospectus.
(4) Does not take into account the adoption of SOP 93-6.
(5) Excludes impact of special SAIF assessment on earnings
(6) Latest price if offering less than one week old.
(7) Latest price if offering more than one week but less than one month old.
(8) Second-step conversions.
(9) Simultaneously converted to commercial bank charter.
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
RP Financial, LC.
Page 4.14
In examining the current pricing characteristics of institutions
completing their conversions during the last three months (see Table 4.3), we
note there exists a considerable difference in pricing ratios compared to the
universe of all publicly-traded thrifts. Specifically, the current average P/B
ratio of the conversions completed in the most recent three month period of
129.61 percent reflects a discount of 16.9 percent from the average P/B ratio of
all publicly-traded savings institutions (equal to 155.97 percent), and the
average core P/E ratio of 26.72 times reflects a premium of 34.1 percent from
the all public average core P/E ratio of 19.93 times. The pricing ratios of the
better capitalized but lower earning recently converted savings institutions
(based on return on equity measures) suggest that the investment community has
determined to discount their stocks on a book basis until the earnings improve
through redeployment and leveraging of the proceeds over the longer term.
Given the unique characteristics of the mutual holding company form of
organization, we believe it is also useful to analyze recent minority stock
offerings by MHCs. In this regard, there have been three offerings during 1997
in conjunction with MHC reorganizations in which the minority stock of the
issuer was publicly traded. Similar to the market for full stock companies, the
market reception for the minority stock issued by mutual holding companies has
been strong. At the same time, the stock of MHC institutions tends to trade at
a discount to the market for full stock companies, even recently converted
companies, as: (1) investors have no voting control in the Bank; (2) there is
no chance for acquisition speculation in the shares; (3) there is still some
uncertainty over potential changes in regulatory policy governing MHCs and
second step transactions.
Price Performance of MHC Offerings Completed in 1997
(Includes Publicly Traded Institutions Only)
<TABLE>
<CAPTION>
IPO IPO 11/28/97 Pct.
Issue Date P/B(1) Price Price Change
---------- --- ----- ----- ------
<S> <C> <C> <C> <C> <C>
PLSK-Pulaski Savings Bank April 1997 64.3% $10.00 $18.75 87.5%
SKBO-First Carnegie Deposit Bank April 1997 67.5 10.00 18.62 86.2
PHSB-Peoples Home Savings Bank July 1997 70.0 10.00 18.62 86.2
</TABLE>
(1) Based on fully converted value.
Source: Public filings and RP Financial calculations.
In determining our valuation adjustment for marketing of the issue, we
considered trends in both the overall thrift market and the new issue market.
The overall market for thrift stocks is considered to be healthy, as the pricing
level of thrift stocks are at or near their historical highs. Investor interest
in the new issue market has been favorable, as most of the recently completed
offerings have been oversubscribed and have
<PAGE>
RP FINANCIAL LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 4.3
Market Pricing Comparatives
Prices As of November 28, 1997
<TABLE>
<CAPTION>
Market Per Share Data
Capitalization -------------- Pricing Ratios(3) Dividends(4)
---------------- Core Book ------------------------------------- ----------------------
Price/ Market 12-Mth Value/ Amount/ Payout
Financial Institution Share(1) Value EPS(2) Share P/E P/B P/A P/TB P/CORE Share Yield Ratio(5)
- --------------------- -------- ------ ------ ------- ----- ------ ----- ------ ------ ------ ----- --------
($) ($Mil) ($) ($) (X) (%) (%) (%) (X) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts 23.65 175.34 1.13 15.30 19.16 155.97 19.07 161.26 19.93 0.37 1.60 30.19
Special Selection Grouping(8) 15.77 70.77 0.52 12.37 26.72 129.61 27.50 131.15 26.72 0.00 0.00 0.00
Comparable Group
- ----------------
Special Comparative Group(8)
- ----------------------------
FSFF First SeucrityFed fin of IL 16.06 102.91 0.61 12.80 26.33 125.47 33.92 125.47 26.33 0.00 0.00 0.00
OTFC Oregon Trail Fin. Corp of OR 16.00 75.12 0.59 13.29 27.12 120.39 28.91 120.39 27.12 0.00 0.00 0.00
RVSB Riverview Bancorp of WA 15.00 91.92 0.45 9.56 NM 156.90 32.57 163.04 NM 0.00 0.00 0.00
SHSB SHS Bancorp, Inc. of PA 16.00 13.12 0.41 13.83 NM 115.69 14.62 115.69 NM 0.00 0.00 0.00
<CAPTION>
Financial Characteristics(6)
----------------------------------------------------
Reported Core
Total Equity/ NPAs/ ----------- ------------
Assets Assets Assets ROA ROE ROA ROE
------ ------ ------ ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
(1Mil) (%) (%) (%) (%) (%) (%)
SAIF-Insured Thrifts 1,196 13.05 0.78 0.88 7.92 0.88 7.81
Special Selection Grouping(8) 234 21.11 0.77 0.99 5.33 0.97 5.23
Comparable Group
- ----------------
Special Comparative Group
- -------------------------
FSFF First SeucrityFed fin of IL 303 27.03 1.44 1.29 4.77 1.29 4.77
OTFC Oregon Trail Fin. Corp of OR 260 24.02 0.07 1.07 4.44 1.07 4.44
RVSB Riverview Bancorp of WA 282 20.76 0.14 1.22 9.14 1.17 8.75
SHSB SHS Bancorp, Inc. of PA 90 12.64 1.43 0.37 2.96 0.37 2.96
</TABLE>
(1) Average of High/Low or Bid/Ask price per share.
(2) EPS (estimate core basis) is based on actual trailing twelve month data,
adjusted to omit non-operating items (including the SAIF assessment) on a
tax effected basis.
(3) P/E = Price to earnings; P/B = Price to book; P/A = Price to assets; P/TB
= Price to tangible book value; and P/CORE = Price to estimated core
earnings.
(4) Indicated twelve month dividend, based on last quarterly dividend declared.
(5) Indicated dividend as a percent of trailing twelve month estimated core
earnings.
(6) ROA (return on assets) and ROE (return on equity) are indicated ratios
based on trailing twelve month earnings and average equity and assets
balances.
(7) Excludes from averages those companies the subject of actual or rumored
acquisition activities or unusual operating characteristics.
(8) Includes Converted Last 3 Mths (no MHC);
Source: Corporate reports, offering circulars, and RP Financial, LC.
calculations. The Information provided in this report has been
obtained from sources we believe are reliable, but we cannot guarantee
the accuracy or completeness of such information.
<PAGE>
RP Financial, LC.
Page 4.16
recorded healthy price increases in initial post-conversion trading activity.
Likewise, the new issue market for MHC shares is also strong as the three
transactions completed in 1997 are all trading well above their IPO price.
C. The Acquisition Market
----------------------
Also considered in the valuation was the potential impact on Lockport
Savings' stock price of recently completed and pending acquisitions of other
thrifts operating in New York. As shown in Exhibit IV-4, there were 10
completed deals, and 2 pending transactions involving publicly-traded savings
institutions, although most of the acquisition activity was in the New York
metropolitan area, which is relatively distant from the Bank's market.
Under other circumstances, the existence of thrift acquisition
activity in the Bank's market area might warrant an upward adjustment to value
to account for the likelihood of investors placing an acquisition premium on the
stock. However, the acquisition activity in Lockport Savings' market was deemed
to have a minimal valuation impact for two reasons. First, the mutual holding
company form of organization carries an implicit intent to remain independent
(Lockport Savings would have to undertake a second step conversion in order to
sell control). Second, Lockport Savings could not become an acquisition target
for at least one year following a second step conversion, pursuant to current
conversion regulations.
* * * * * * * * * * *
In determining our valuation adjustment for marketing of the issue, we
considered trends in both the overall thrift market, the new issue market
including the new issue market for MHC shares, and the acquisition market (which
we considered to be not applicable to the Bank's valuation). Taking these
factors and trends into account, RP Financial concluded that a moderate upward
adjustment was appropriate in the valuation analysis for purposes of marketing
of the issue.
8. Management
----------
By virtue of its asset size, Lockport Savings' management team benefits
from the greater resources available to the Bank relative to other smaller
institution institutions comprising the Peer Group. Moreover, Lockport Savings'
senior management team appears to have the experience and expertise in all of
the key areas of the Bank's operations. Exhibit IV-5 lists Lockport Savings'
executive management with summary resumes. We believe that the Bank has been
operated capably over the past several years, and that the Bank has a clear
direction for the future. The financial results of the Peer Group companies
indicate that they have been effectively managed, as all of the Peer Group
companies maintained adequate levels of capital and recorded positive earnings,
favorable interest rate risk and favorable credit quality. We have therefore
concluded that, in general, Lockport
<PAGE>
RP Financial, LC.
Page 4.17
Savings appears to have been operated at least as effectively as the Peer Group
companies and moreover, the Bank benefits from its greater size and management
depth. On balance, we have applied a slight upward adjustment for this factor.
9. Effect of Government Regulation and Regulatory Reform
-----------------------------------------------------
As a newly converted institution, Lockport Savings would operate in
substantially the same regulatory environment as the Peer Group members, most of
whom are healthy institutions operating and reporting as public companies. No
material differences were noted between the Bank and the Peer Group in terms of
deposit insurance premiums or securities regulation.
The one difference noted between Lockport Savings and the Peer Group was in
the area of regulatory policy regarding dividend waivers (see the discussion
above for "5. Dividends"). The Bank and five of the Peer Group members are
subject to minority dilution in a second step conversion because of the dividend
waiver. Because a downward adjustment was already applied for this factor in the
"Dividends" section of this appraisal, no further adjustment has been applied
for the effect of government regulation and regulatory reform.
Summary of Adjustments
- ----------------------
Overall, based on the factors discussed above, we concluded that the Bank's
pro forma market value should be discounted relative to the Peer Group as
follows:
<TABLE>
<CAPTION>
Key Valuation Parameters: Valuation Adjustment
------------------------ --------------------
<S> <C>
Financial Condition Slight Upward
Profitability, Growth and Viability of Earnings No Adjustment
Asset Growth No Adjustment
Primary Market Area Moderate Downward
Dividends Slight Downward
Liquidity of the Shares Moderate Upward
Marketing of the Issue Moderate Upward
Management Slight Upward
Effect of Government Regulations and Regulatory Reform No Adjustment
</TABLE>
Basis of Valuation. Fully Converted Pricing Ratios
- ---------------------------------------------------
As indicated in Chapter III, the valuation analysis included in this
section places all of the public MHC institutions on equal footing by restating
their financial data and pricing ratios on a "fully converted" basis. We believe
there are a number of characteristics of MHC shares that make them different
from the shares of fully
<PAGE>
RP Financial, LC.
Page 4.18
converted companies. These factors include: (1) lower aftermarket liquidity in
the MHC shares since less than 50 percent of the shares are available for
trading; (2) guaranteed minority ownership interest, with no chance of
exercising voting control of the institution; (3) no possibility of acquisition
speculation to support stock prices; (4) the impact of "second step" conversions
on the pricing of MHC institutions; and (5) most recently, the policy adopted by
the FDIC regarding the waiver of dividends by MHC institutions. The above
characteristics of MHC shares, three that have existed for some time and two
resulting from recent developments (i.e., "second step" conversions and the
dividend waiver issue), have provided MHC shares with different trading
characteristics versus fully converted companies. To account for the unique
trading characteristics of MHC shares, RP Financial has placed the financial
data and pricing ratios of the Peer Group on a "fully converted" basis to make
them comparable for valuation purposes. Using the per share and pricing
information of the Peer Group on a fully converted basis accomplishes two
things. First, such figures eliminate the distortions resulting when trying to
compare institutions that have a different public ownership interests
outstanding. And second, such an analysis provides ratios that are comparable to
the pricing information of fully converted public companies, and more
importantly, are directly applicable to determining the pro forma market value
range of the 100 percent ownership interest in Lockport Savings as an MHC.
To calculate the fully converted pricing information for MHCs, the reported
financial information for the public MHCs was adjusted as follows: (1) a second
step conversion was assumed, with all shares owned by the MHC assumed to be sold
at the November 28, 1997 trading price; (2) the gross proceeds from such a sale
were adjusted to reflect reasonable offering expenses and standard stock based
benefit plan parameters that would be factored into a "second step" conversion
of MHC institutions; and (3) book value per share and earnings per share figures
for the public MHCs were adjusted by the impact of the assumed second step
conversion, resulting in an estimation of book value per share and earnings per
share figures on a fully converted basis. Because they place the public MHC
institutions on a fully converted basis using the same approach as utilized in
the several second step conversions completed to date, these per share figures
(fully converted basis) are comparable to the per share financial information
reported by fully converted public companies and can form the basis for
estimating the pro forma market value range of a 100 percent ownership interest
in Lockport Savings. Table 4.4 on the following page shows the calculation of
per share financial data (fully converted basis) for each of the 17 public MHC
institutions that form the Peer Group.
Valuation Approaches
- --------------------
In applying the accepted valuation methodology promulgated by the OTS and
adopted by the FDIC and Department, i.e., the pro forma market value approach,
we considered the three key pricing ratios in valuing Lockport Savings' to-be-
issued stock -- price/earnings ("P/E"), price/book ("P/B"), and price/assets
("P/A")
<PAGE>
RP FINANCIAL, LC.
- -------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Calculation of Implied Per Share Data --- Incorporating MHC Second Step Conversion
Comparable Institution Analysis
For the Twelve Months Ended September 30, 1997
Current Ownership Current Per Share Data (MHC Ratios)
------------------------- -------------------------------------------
Total Public MHC Core Book Tangible
Shares Shares Shares EPS EPS Value Book Assets
------ ------ ------ ----- ------ ----- -------- ------
(000) (000) (000) ($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Publicly-Traded MHC Institutions
- --------------------------------
CMSV Commty. Svgs, MHC of FL (48.5) 5,095 2,470 2,625 1.07 0.98 15.79 15.79 139.20
FFFL Fidelity FSB, MHC of FL (47.7) 6,771 3,224 3,547 0.50 0.79 12.36 12.27 147.58
FFSX First FS&LA, MHC of IA (46.1) 2,833 1,303 1,530 1.18 1.15 14.08 13.96 161.26
GDVS Greater DV SB, MHC of PA (19.9) 3,272 650 2,622 0.68 0.68 8.85 8.85 76.04
HARS Harris SB. MHC of PA (24.3) 33,779 8,169 25,610 0.52 0.43 5.12 4.53 62.47
JXSB Jcksnville SB, MHC of IL (45.6) 1,272 580 692 0.80 0.80 13.63 13.63 129.12
LFED Leeds FSB, MHC of MD (36.3) 5,182 1,883 3,299 0.64 0.64 9.16 9.16 55.08
NWSB Northwest SB, MHC of PA (30.7) 46,753 14,352 32,401 0.41 0.41 4.33 4.09 44.93
PBCT Peoples Bank, MHC of CT (40.1) 61,126 24,453 36,673 1.44 0.93 11.41 11.40 126.48
PBHC OswegoCity SB, MHC of NY (46.) 1,917 882 1,035 1.05 0.94 12.02 10.10 100.68
PHSB Ppls Home SB, MHC of PA (45.0) 2,760 1,242 1,518 0.56 0.54 10.22 10.22 74.79
PLSK Pulaski SB, MHC of NJ (46.0) 2,070 952 1,118 0.54 0.54 10.36 10.36 86.47
PULB Pulaski SB, MHC of MO (29.8) 2,094 624 1,470 0.68 0.90 11.23 11.23 86.07
SBFL SB Fngr Lakes MHC of NY (33.1) 1,785 590 1,195 0.44 0.51 11.92 11.92 127.71
SKBO First Carnegie,MHC of PA(45.O) 2,300 1,035 1,265 0.33 0.33 10.52 10.52 63.97
WAYN Wayne S&L Co. MHC of OH (47.8) 2,255 1,075 1,180 0.81 0.76 10.58 10.58 110.97
WCFB Wbstr Cty FSB MHC of IA (45.2) 2,100 950 1,150 0.64 0.64 10.52 10.52 44.99
<CAPTION>
Impact of Second Step Conversion Pro Forma Per Share Data (Fully Converted
------------------------------------------ -------------------------------------------
Share Gross Net Incr. Net Incr. Core Book Tangible
Price Procds(1) Capital(2) Income(3) EPS EPS Value Book Assets
----- ------ ------- ------ ----- ----- ----- -------- ------
($000) ($000) ($000) ($000) ($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Publicly-Traded MHC Institutions
- --------------------------------
CMSV Commty. Svgs, MHC of FL (48.5) 35.00 91,875 79,013 2,419 1.54 1.45 31.30 31.30 154.71
FFFL Fidelity FSB, MHC of FL (47.7) 27.87 98,855 85,015 2,603 0.88 1.17 24.92 24.83 160.14
FFSX First FS&LA, MHC of IA (46.1) 31.87 48,761 41,935 1,284 1.63 1.60 28.88 28.76 176.06
GDVS Greater DV SB, MHC of PA (19.9) 31.00 81,282 69,903 2,140 1.33 1.33 30.21 30.21 97.40
HARS Harris SB. MHC of PA (24.3) 19.00 486,590 418,467 12,814 0.90 0.81 17.51 16.92 74.86
JXSB Jcksnville SB, MHC of IL (45.6) 26.75 18,511 15,919 487 1.18 1.18 26.15 26.15 141.64
LFED Leeds FSB, MHC of MD (36.3) 21.50 70,929 60,999 1,868 1.00 1.00 20.93 20.93 66.85
NWSB Northwest SB, MHC of PA (30.7) 14.00 453,614 390,108 11,945 0.67 0.67 12.67 12.43 53.27
PBCT Peoples Bank, MHC of CT (40.1) 33.69 1,235,513 1,062,541 32,536 1.97 1.46 28.79 28.78 143.86
PBHC OswegoCity SB, MHC of NY (46.) 28.50 29,498 25,368 777 1.46 1.35 2S.25 23.33 113.91
PHSB Ppls Home SB, MHC of PA (45.0) 18.62 28,265 24,308 744 0.83 0.81 19.03 19.03 83.60
PLSK Pulaski SB, MHC of NJ (46.0) 18.75 20,963 18,028 552 0.81 0.81 19.07 19.07 95.18
PULB Pulaski SB, MHC of MO (29.8) 30.50 44,835 38,558 1,181 1.24 1.46 29.64 29.64 104.48
SBFL SB Fngr Lakes MHC of NY (33.1) 29.25 34,954 30,060 920 0.96 1.03 28.76 28.76 144.55
SKBO First Carnegie,MHC of PA(45.O) 18.62 23,554 20,257 620 0.60 0.60 19.33 19.33 72.78
WAYN Wayne S&L Co. MHC of OH (47.8) 31.00 36,580 31,459 963 1.24 1.19 24.53 24.53 124.92
WCFB Wbstr Cty FSB MHC of IA (45.2) 20.25 23,288 20,027 613 0.93 0.93 20.06 20.06 54.53
</TABLE>
(1) Gross proceeds calculated as stock price multiplied by the number of shares
owned by the mutual holding company (i.e., non-public shares).
(2) Net increase in capital reflects gross proceeds less offering expenses,
contra-equity account for leveraged ESOP and deferred compensation account
for restricted stock plan:
Offering expense percent 2.00
ESOP percent purchase 8.00
Recognition plan percent 4.00
(3) Net increase in earnings reflects after-tax reinvestment income (assumes
ESOP and recognition plan do not generate reinvestment income), less
after-tax ESOP amortization and recognition plan vesting:
After-tax reinvestment 4.29
ESOP loan term (years) 10
Recog. plan vesting (yrs) 5
Effective tax rate 34.00
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.
<PAGE>
RP Financial, LC.
Page 4.20
approaches -- all performed on a pro forma basis including the effects of the
conversion proceeds. In computing the pro forma impact of the conversion and
the related pricing ratios, we have incorporated the assumptions disclosed in
Lockport Savings' prospectus for the effective tax rate and stock benefit plan
assumptions as well as other key assumptions (summarized in Exhibits IV-6 and
IV-7). Each of the assumptions are described more fully below.
o Conversion Expenses. Have been assumed to equal 2 percent of the
-------------------
offering amount pursuant to a standard conversion offering. This
assumption approximates the average for large standard conversion
offerings completed in 1997 to date (i.e., offerings in excess of
$40 million of gross proceeds).
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 35 percent
based on the statutory Federal and state tax rate.
o Reinvestment Rate. The pro forma section in the prospectus
-----------------
incorporates a 5.44 percent reinvestment rate, equivalent to the one
year U.S. Treasury rate prevailing as of September 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 to declining interest rate scenario and the
estimated impact of deposit withdrawals to fund stock purchases.
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 Capitalization of the MHC. Pursuant to the proposed transaction
-------------------------
structure, the MHC will be capitalized with $100,000 of cash.
o Funding of the Foundation. The Holding Company intends to donate
-------------------------
to a charitable foundation, immediately following the Conversion,
authorized but unissued shares of the Holding Company stock equal to
3 percent of the number of shares of Conversion Stock issued in the
conversion and cash equal to 2 percent of the amount of stock sold
in the offering. The pro forma after-tax impact of the foundation
structure has been incorporated into RP Financial's pro forma
valuation.
RP Financial's valuation placed emphasis on the following:
o P/E Approach. The P/E approach is generally the best indicator of
------------
long-term value for a stock. Given the similarities between the
Bank's and the Peer Group's earnings composition and overall
financial condition, the P/E approach was carefully considered in
this valuation. Most of the Peer Group members had P/E multiples
(fully converted basis) that appeared to be in line with industry
averages, i.e. not influenced by overcapitalization or by
acquisition speculation. Thus, we believe that the Peer Group's
average P/E multiples (fully converted basis) served as a good
benchmark for valuation.
o P/B Approach. P/B ratios have generally served as a useful
------------
benchmark in the valuation of thrift stock, with the greater
determinant of long term value being earnings. RP Financial
considered
<PAGE>
RP Financial, LC.
Page 4.21
the P/B approach to be a reliable indicator of value given current
market conditions, particularly the market for new conversions
(witness that several recent conversions reported not meaningful P/E
ratios). For this reason, RP Financial also placed weight on pro
forma book value (fully converted basis), with the emphasis on
tangible book value (fully converted basis), in the determination of
Lockport Savings' value.
o P/A Approach. P/A ratios are generally not a highly reliable
------------
indicator of market value, as investors do not place significant
weight on the size of total assets as a determinant of market value.
Investors place significantly greater weight on book value and
earnings, which have received greater weight in our valuation
analysis.
Based on the application of the three valuation approaches, taking into
consideration the valuation adjustments discussed above, RP Financial concluded
that the pro forma market value of a 100 percent interest in the Bank's
conversion stock was $225,000,000 at the midpoint, equal to 22,500,000 shares
issued at a per share value of $10.00 for the public shares. Pursuant to
conversion guidelines, the 15 percent offering range indicates a minimum value
of $191,250,000, and a maximum value of $258,750,000. Based on the $10.00 per
share offering price determined by the Board, this valuation range equates to an
offering of 19,125,000 shares at the minimum to 25,875,000 shares at the
maximum. In the event that the appraised value is subject to an increase, up to
3,881,250 shares may be sold at an issue price of $10.00 per share, for an
aggregate market value of $297,562,500, without a resolicitation.
1. Price-to-Book ("P/B"). The application of the P/B valuation method
---------------------
requires calculating the Bank's pro forma market value by applying a valuation
P/B ratio (fully converted basis) to Lockport Savings' pro forma book value
(fully converted basis). In applying the P/B approach, we also considered
tangible book value (i.e., book value net of goodwill and other intangible
assets) because historically the market has not generally given credit to an
institution for intangible assets.
Since the valuation has been discounted to reflect market area and
dividends, which are the relevant adjustments applicable to the P/B approach,
valuation discounts of 30.3 and 33.4 percent has been applied to the reported
and tangible P/B ratio (fully converted basis) for Lockport Savings at the
midpoint versus the Peer Group median. At the midpoint value, Lockport Savings
exhibited pro forma reported and tangible P/B ratios (fully converted basis)
both equal to 71.67 percent compared to the Peer Group's median reported and
tangible P/B ratios (fully converted basis) of 102.90 (see Table 4.5). RP
Financial considered these discounts to be appropriate in light of the downward
adjustments indicated above and the nature of pro forma conversion pricing.
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 (fully converted basis) to 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
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
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
Lockport Savings Bank and the Comparables
As of November 28, 1997
<TABLE>
<CAPTION>
Fully Converted
Implied Value Per Share (8)
---------------- ----------------
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>
Lockport Savings Bank 10.00 297.56 0.58 12.58 17.25 79.49 20.89 79.49 18.26
- ---------------------
Superrange 10.00 258.75 0.64 13.22 15.72 75.65 18.59 75.65 16.69
Range Maximum 10.00 225.00 0.70 13.95 14.27 71.67 16.50 71.67 15.19
Range Midpoint 10.00 191.25 0.79 14.95 12.68 66.91 14.32 66.91 13.54
Range Minimum
BIF-Insured Thrifts(7)
- ----------------------
Averages 27.26 239.39 1.50 15.73 17.76 180.78 20.55 188.44 18.19
Medians --- --- --- --- 16.85 178.79 17.31 190.87 17.45
All Non-MHC State of NY(7)
- --------------------------
Averages 30.01 721.47 1.24 17.05 21.24 180.19 18.88 194.00 21.29
Medians --- --- --- --- 19.71 150.49 16.75 157.21 20.19
Publicly-Traded MHC Institutions, Full Conversion Basis
- -------------------------------------------------------
Averages 25.66 263.30 1.11 23.94 21.81 106.76 24.71 107.71 22.95
Medians --- --- --- --- 22.10 102.90 24.82 102.90 23.03
Publicly-Traded MHC Institutions, Full Conversion Basis
- -------------------------------------------------------
CMSV Commty. Svgs, MHC of FL (48.5) 35.00 178.33 1.45 31.30 22.73 111.82 22.62 111.82 24.14
FFFL Fidelity FSB, MHC of FL (47.7) 27.87 188.71 1.17 24.92 NM 111.84 17.40 112.24 23.82
SKBO First Carnegie, MHC of PA (45.0) 18.62 42.83 0.60 19.33 NM 96.33 25.58 96.33 NM
FFSX First FS&LA, MHC of IA (46.1) 31.87 90.29 1.60 28.88 19.55 110.35 18.10 110.81 19.92
GDVS Greater DV SB,MHC of PA (19.9) 31.00 101.43 1.33 30.21 23.31 102.62 31.83 102.62 23.31
HARS Harris SB, MHC of PA (24.3) 19.00 641.80 0.81 17.51 21.11 108.51 25.38 112.29 23.46
JXSB Jcksnville SB, MHC of IL (45.6) 26.75 34.03 1.18 26.15 22.67 102.29 18.89 102.29 22.67
LFED Leeds FSB, MHC of MD (36.3) 21.50 111.41 1.00 20.93 21.50 102.72 32.16 102.72 21.50
NWSB Northwest SB, MHC of PA (30.7) 14.00 654.54 0.67 12.67 20.90 110.50 26.28 112.63 20.90
PBHC OswegoCity SB, MHC of NY (46.) 28.50 54.63 1.35 25.25 19.52 112.87 25.02 122.16 21.11
PBCT Peoples Bank, MHC of CT (40.1) 33.69 2059.33 1.46 28.79 17.10 117.02 23.42 117.06 23.08
PHSB Ppls Home SB, MHC of PA (45.0) 18.62 51.39 0.81 19.03 22.43 97.85 22.27 97.85 22.99
PULB Pulaski SB, MHC of MO (29.8) 30.50 63.87 1.46 29.64 24.60 102.90 29.19 102.90 20.89
PLSK Pulaski SB, MHC of NJ (46.0) 18.75 38.81 0.81 19.07 23.15 98.32 19.70 98.32 23.15
SBFL SB Fngr Lakes MHC of NY (33.1) 29.25 52.21 1.03 28.76 NM 101.70 20.24 101.70 28.40
WAYN Wayne S&L Co. MHC of OH (47.8) 31.00 69.91 1.19 24.53 25.00 126.38 24.82 126.38 26.05
WCFB Wbstr Cty FSB MHC of IA (45.2) 20.25 42.53 0.93 20.06 21.77 100.95 37.14 100.95 21.77
<CAPTION>
Dividends (4) Financial Characteristics (6)
----------------------- ------------------------------------------------------------------
Reported Core
Amount/ Payout Total Equity/ NPAs/ ----------------------------------
Share Yield Ratio(5) Assets Assets Assets ROA ROA ROA ROA
-------- ------ ------- -------- ------- ------- ------ ------ ------ -----
($) (%) (%) ($Mil) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Lockport Savings Bank 0.12 1.20 20.70 1,424 26.29 0.15 1.21 4.61 1.14 4.35
- ---------------------
Superrange 0.12 1.20 18.86 1,392 24.57 0.16 1.18 4.81 1.11 4.53
Range Maximum
Range Midpoint 0.12 1.20 17.12 1,364 23.02 0.16 1.16 5.02 1.09 4.72
Range Minimum 0.12 1.20 15.22 1,336 21.40 0.16 1.13 5.28 1.06 4.94
BIF-Insured Thrifts(7)
- ----------------------
Averages 0.49 1.63 31.28 1,407 12.61 0.83 1.15 11.47 1.10 10.85
Medians --- --- --- --- --- --- --- --- --- ---
All Non-MHC State of NY(7)
- --------------------------
Averages 0.51 1.63 35.27 4,080 11.33 0.85 0.79 7.61 0.78 7.32
Medians --- --- --- --- --- --- --- --- --- ---
Publicly-Traded MHC Institutions, Full Conversion Basis
- -------------------------------------------------------
Averages 0.50 1.88 36.13 1,101 23.32 0.60 1.11 4.89 1.10 4.81
Medians --- --- --- --- --- --- --- --- --- ---
Publicly-Traded MHC Institutions, Full Conversion Basis
- -------------------------------------------------------
CMSV Commty. Svgs, MHC of FL (48.5) 0.90 2.57 62.07 788 20.23 0.41 1.03 5.02 0.97 4.72
FFFL Fidelity FSB, MHC of FL (47.7) 0.90 3.23 NM 1,084 15.56 0.34 0.61 3.58 0.81 4.75
SKBO First Carnegie, MHC of PA (45.0) 0.30 1.61 50.00 167 26.56 NA 0.83 4.06 0.83 4.06
FFSX First FS&LA, MHC of IA (46.1) 0.48 1.51 30.00 499 16.40 0.22 0.92 5.77 0.90 5.67
GDVS Greater DV SB,MHC of PA (19.9) 0.36 1.16 27.07 319 31.02 1.82 1.40 4.45 1.40 4.45
HARS Harris SB, MHC of PA (24.3) 0.22 1.16 27.16 2,529 23.39 0.68 1.30 5.27 1.17 4.75
JXSB Jcksnville SB, MHC of IL (45.6) 0.40 1.50 33.90 180 18.46 0.79 0.88 4.57 0.88 4.57
LFED Leeds FSB, MHC of MD (36.3) 0.51 2.37 51.00 346 31.31 0.06 1.51 4.85 1.51 4.85
NWSB Northwest SB, MHC of PA (30.7) 0.16 1.14 23.88 2,491 23.78 0.77 1.31 5.36 1.31 5.36
PBHC OswegoCity SB, MHC of NY (46.) 0.28 0.98 20.74 218 22.17 0.91 1.30 5.93 1.20 5.48
PBCT Peoples Bank, MHC of CT (40.1) 0.76 2.26 52.05 8,794 20.01 0.76 1.39 7.06 1.03 5.23
PHSB Ppls Home SB, MHC of PA (45.0) 0.00 0.00 0.00 231 22.76 0.45 0.98 4.87 0.95 4.75
PULB Pulaski SB, MHC of MO (29.8) 1.10 3.61 NM 219 28.37 0.64 1.20 4.22 1.41 4.97
PLSK Pulaski SB, MHC of NJ (46.0) 0.30 1.60 37.04 197 20.04 0.65 0.87 4.93 0.87 4.93
SBFL SB Fngr Lakes MHC of NY (33.1) 0.40 1.37 38.83 258 19.90 0.50 0.71 3.39 0.76 3.64
WAYN Wayne S&L Co. MHC of OH (47.8) 0.62 2.00 52.10 282 19.64 0.58 0.99 5.12 0.95 4.91
WCFB Wbstr Cty FSB MHC of IA (45.2) 0.80 3.95 NM 115 36.79 0.07 1.71 4.66 1.71 4.66
</TABLE>
(1) Current stock price of minority 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 conversions.
(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 a 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.
<PAGE>
RP Financial, LC.
Page 4.23
benefit of the reinvestment of net conversion proceeds. Lockport Savings'
reported earnings were $11,177,000 for the twelve months ended September 30,
1997. After eliminating all non-recurring items from the Bank's earnings (see
Table 1.1), we arrived at our core earnings figure for valuation purposes of
$10,217,000 million. (Note: similar adjustments were applied to the Peer
Group's earnings in the calculation of core earnings, see Exhibit IV-8).
Based on Lockport Savings' trailing twelve month core earnings, and
incorporating the impact of the pro forma assumptions discussed previously, the
Bank's pro forma P/E multiple (fully converted basis) at the $225,000,000
midpoint value was 15.19 times, which is at a discount of 34.0 percent relative
to the Peer Group median (fully converted basis) of 23.03 times core earnings.
At the supermaximum of the range, the Bank's core P/E multiple is discounted by
20.7 percent relative to the Peer Group median.
3. Price-to-Assets ("P/A"). The P/A valuation methodology determines
-----------------------
market value by applying a valuation P/A ratio (fully converted basis) 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, Lockport Savings' full
conversion value equaled 16.50 percent (fully converted basis) of pro forma
assets. Comparatively, the Peer Group companies exhibited a median P/A ratio
(fully converted basis) of 24.82 percent, which implies a 33.5 percent discount
being applied to the Bank's pro forma P/A ratio (fully converted basis).
* * * * * * * * * *
Valuation Conclusion
- --------------------
Based on the foregoing, it is our opinion that, as of November 28, 1997,
the estimated aggregate pro forma market value of the shares to be issued
immediately following the conversion, both shares issued publicly as well as to
the MHC, was $225,000,000 at the midpoint, equal to 22,500,000 shares offered at
a per share value of $10.00. Pursuant to conversion guidelines, the 15 percent
offering range indicates a minimum value of $191,250,000, and a maximum value of
$258,750,000. Based on the $10.00 per share offering price determined by the
Board, this valuation range equates to an offering of 19,125,000 shares at the
minimum to 25,875,000 shares at the maximum. In the event that the appraised
value is subject to an increase, up to 3,881,250 shares may be sold at an issue
price of $10.00 per share, for an aggregate market value of $297,562,500,
without a resolicitation. The Board of Trustees has established a public
offering range such that the public ownership of the Holding Company will
constitute a 46 percent ownership interest prior to the issuance of shares to
the Foundation. Accordingly, the offering range to the public of the minority
stock will range from $86,777,470 at
<PAGE>
RP Financial, LC.
Page 4.24
the minimum, to $102,091,150 at the midpoint, $117,404,820 at the maximum and
$135,015,540 at the supermaximum of the valuation range. Based on the public
offering range, and inclusive of the shares issued to the Foundation, the public
ownership of the shares will represent 46.74 percent of the shares issued in the
reorganization, with the MHC owning the majority of the shares. The pro forma
valuation calculations relative to the Peer Group (fully converted basis) are
shown in Table 4.5 and are detailed in Exhibit IV-6 and Exhibit IV-7; the pro
forma valuation calculations relative to the Peer Group based on reported
financials are shown in Table 4.6 and are detailed in Exhibits IV-10.
<PAGE>
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 4.6
Public Market Pricing
Lockport Savings Bank and the Comparables
As of November 28, 1997
<TABLE>
<CAPTION>
Market Per Share Data
Capitalization ------------------ Pricing Ratios(3)
----------------- Core Book -----------------------------------------------
Price/ Market 12-Mth Value/
Share(1) Value EPS(2) Share P/E P/B P/A P/TB P/CORE
-------- ------- ------- ------- ------- ------- ------- ------- --------
($) ($Mil) ($) ($) (X) (%) (%) (%) (X)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Lockport Savings Bank
- ---------------------
Superrange 10.00 139.07 0.47 8.18 21.18 122.30 23.01 122.30 22.73
Range Maximum 10.00 120.93 0.53 8.81 18.93 113.51 20.25 113.51 20.36
Range Midpoint 10.00 105.15 0.59 9.54 16.87 104.83 17.79 104.83 18.17
Range Minimum 10.00 89.38 0.68 10.53 14.70 95.00 15.29 95.00 15.87
BIF-Insured Thrifts(7)
- ----------------------
Averages 27.26 239.39 1.50 15.73 17.76 180.78 20.55 188.44 18.19
Medians --- --- --- --- 16.85 178.79 17.31 190.87 17.45
All Non-MHC State of NY(7)
- --------------------------
Averages 30.12 468.19 1.40 18.37 20.21 160.06 18.84 170.47 20.48
Medians --- --- --- --- 19.71 150.49 16.75 157.21 20.19
Comparable Group
- ----------------
Special Comparative Group(8)
- ----------------------------
CMSV Commty. Svgs, MHC of FL (48.5) 35.00 86.45 0.98 15.79 NM 221.66 25.14 221.66 NM
FFFL Fidelity FSB, MHC of FL (47.7) 27.87 89.85 0.79 12.36 NM 225.49 18.88 227.14 NM
SKBO First Carnegie, MHC of PA (45.0) 18.62 19.27 0.33 10.52 NM 177.00 29.11 177.00 NM
FFSX First FS&LA. MHC of IA (46.1) 31.87 41.53 1.15 14.08 27.01 226.35 19.76 228.30 27.71
FSLA First SB SLA MHC of NJ (47.5)(7) 40.37 137.42 1.19 12.39 NM 325.83 30.95 NM NM
GDVS Greater DV SB, MHC of PA (19.9) 31.00 20.15 0.68 8.85 NM NM 40.77 NM NM
GFED Guarnty FS&LA, MHC of MO (31.0)(7) 23.75 23.01 0.60 8.76 NM 271.12 35.32 271.12 NM
HARB Harbor FSB, MHC of FL (46.6)(7) 65.00 150.54 2.66 19.47 24.25 333.85 28.58 344.83 24.44
HARS Harris SB, MHC of PA (24.3) 19.00 155.21 0.43 5.12 NM NM 30.41 NM NM
JXSB Jcksnville SB, MHC of IL (45.6) 26.75 15.52 0.80 13.63 NM 196.26 20.72 196.26 NM
LFED Leeds FSB, MHC of MD (36.3) 21.50 40.48 0.64 9.16 NM 234.72 39.03 234.72 NM
MWSB Northwest SB, MHC of PA (30.7) 14.00 200.93 0.41 4.33 NM 323.33 31.16 342.30 NM
PBHC OswegoCity SB, MHC of NY (46.) 28.50 25.14 0.94 12.02 27.14 237.10 28.31 282.18 NM
PBCT Peoples Bank, MHC of CT (40.1) 33.69 823.82 0.93 11.41 23.40 295.27 26.64 295.53 NM
TSBS Peoples Bcrp, MHC of NJ (35.9)(7) 34.75 112.83 0.61 11.97 NM 290.31 49.20 322.66 NM
PERT Perpetual of SC, MHC (46.8)(7) 51.00 35.96 1.58 20.13 NM 253.35 29.96 253.35 NM
PFSL Pocahnts Fed, MHC of AR (47.0)(7) 34.00 26.15 1.44 14.86 23.29 228.80 14.47 228.80 23.61
PHSB Ppls Home SB, MHC of PA (45.0) 18.62 23.13 0.54 10.22 NM 182.19 24.90 182.19 NM
PULB Pulaski SB, MHC of MO (29.8) 30.50 19.03 0.90 11.23 NM 271.59 35.44 271.59 NM
PLSK Pulaski SB, MHC of NJ (46.0) 18.75 17.85 0.54 10.36 NM 180.98 21.68 180.98 NM
SBFL SB Fngr Lakes MHC of NY (33.1) 29.25 17.26 0.51 11.92 NM 245.39 22.90 245.39 NM
WAYN Wayne S&L Co. MHC of OH (47.8) 31.00 33.33 0.76 10.58 NM 293.01 27.94 293.01 NM
WCFB Wbstr Cty FSB MHC of IA (45.2) 20.25 19.24 0.64 10.52 NM 192.49 45.01 192.49 NM
<CAPTION>
Dividends(4) Financial Characteristics(6)
------------------------------ ------------------------------
Amount/ Payout Total Equity/ NPAs/
Share Yield Ratio(5) Assets Assets Assets
------- ------- ---------- -------- --------- -------
($) (%) (%) ($Mil) (%) (%)
<S> <C> <C> <C> <C> <C> <C>
Lockport Savings Bank
- ---------------------
Superrange 0.12 1.20 25.42 1,293 18.81 0.17
Range Maximum 0.12 1.20 22.71 1,278 17.84 0.17
Range Midpoint 0.12 1.20 20.24 1,264 16.97 0.17
Range Minimum 0.12 1.20 17.64 1,251 16.09 0.18
BIF_Insured Thrifts(7)
- ----------------------
Averages 0.49 1.63 31.28 1,407 12.61 0.83
Medians --- --- --- --- --- ---
All Non-MHC State of NY(7)
- --------------------------
Averages 0.45 1.41 29.68 2,654 12.29 0.87
Medians --- --- --- --- --- ---
Comparable Group
- ----------------
Special Comparative Group(8)
- ----------------------------
CMSV Commty. Svgs, MHC of FL (48.5) 0.90 2.57 NM 709 11.34 0.41
FFFL Fidelity FSB, MHC of FL (47.7) 0.90 3.23 NM 999 8.38 0.34
SKBO First Carnegie, MHC of PA (45.0) 0.30 1.61 NM 147 16.45 NA
FFSX First FS&LA. MHC of IA (46.1) 0.48 1.51 19.20 457 8.73 0.22
FSLA First SB SLA MHC of NJ (47.5)(7) 0.48 1.19 17.15 1,045 9.50 0.54
GDVS Greater DV SB, MHC of PA (19.9) 0.36 1.16 10.52 249 11.64 1.82
GFED Guarnty FS&LA, MHC of MO (31.0)(7) 0.44 1.85 22.74 210 13.03 0.64
HARB Harbor FSB, MHC of FL (46.6)(7) 1.40 2.15 24.51 1,131 8.56 0.43
HARS Harris SB, MHC of PA (24.3) 0.22 1.16 12.37 2,110 8.20 0.68
JXSB Jcksnville SB, MHC of IL (45.6) 0.40 1.50 22.80 164 10.56 0.79
LFED Leeds FSB, MHC of MD (36.3) 0.51 2.37 NM 285 16.63 0.06
MWSB Northwest SB, MHC of PA (30.7) 0.16 1.14 11.98 2,101 9.64 0.77
PBHC OswegoCity SB, MHC of NY (46.) 0.28 0.98 13.70 193 11.94 0.91
PBCT Peoples Bank, MHC of CT (40.1) 0.76 2.26 NM 7,731 9.02 0.76
TSBS Peoples Bcrp, MHC of NJ (35.9)(7) 0.35 1.01 20.60 639 16.95 0.91
PERT Perpetual of SC, MHC (46.8)(7) 1.40 2.75 NM 256 11.82 0.12
PFSL Pocahnts Fed, MHC of AR (47.0)(7) 0.90 2.65 29.45 383 6.33 0.16
PHSB Ppls Home SB, MHC of PA (45.0) 0.00 0.00 0.00 206 13.66 0.45
PULB Pulaski SB, MHC of MO (29.8) 1.10 3.61 NM 180 13.05 0.64
PLSK Pulaski SB, MHC of NJ (46.0) 0.30 1.60 25.55 179 11.98 0.65
SBFL SB Fngr Lakes MHC of NY (33.1) 0.40 1.37 NM 228 9.33 0.50
WAYN Wayne S&L Co. MHC of OH (47.8) 0.62 2.00 NM 250 9.53 0.58
WCFB Wbstr Cty FSB MHC of IA (45.2) 0.80 3.95 NM 94 23.38 0.07
<CAPTION>
Financial Characteristics(6)
-----------------------------------
Reported Core
--------------- --------------
ROA ROE ROA ROE
----- ----- ----- -----
(%) (%) (%) (%)
<S> <C> <C> <C> <C>
Lockport Savings Bank
- ---------------------
Superrange 1.09 5.77 1.01 5.38
Range Maximum 1.07 6.00 0.99 5.58
Range Midpoint 1.06 6.22 0.98 5.77
Range Minimum 1.04 6.46 0.96 5.99
BIF_Insured Thrifts(7)
- ----------------------
Averages 1.15 11.47 1.10 10.85
Medians --- --- --- ---
All Non-MHC State of NY(7)
- --------------------------
Averages 0.86 8.15 0.85 8.03
Medians --- --- --- ---
Comparable Group
- ----------------
Special Comparative Group(8)
- ----------------------------
CMSV Commty. Svgs, MHC of FL (48.5) 0.80 7.04 0.73 6.45
FFFL Fidelity FSB, MHC of FL (47.7) 0.38 4.15 0.60 6.56
SKBO First Carnegie, MHC of PA (45.0) 0.52 5.53 0.52 5.53
FFSX First FS&LA. MHC of IA (46.1) 0.73 8.79 0.71 8.56
FSLA First SB SLA MHC of NJ (47.5)(7) 0.90 9.64 0.94 10.06
GDVS Greater DV SB, MHC of PA (19.9) 0.93 7.97 0.93 7.97
GFED Guarnty FS&LA, MHC of MO (31.0)(7) 0.99 7.17 0.96 6.94
HARB Harbor FSB, MHC of FL (46.6)(7) 1.22 14.68 1.21 14.58
HARS Harris SB, MHC of PA (24.3) 0.92 11.11 0.76 9.19
JXSB Jcksnville SB, MHC of IL (45.6) 0.65 6.02 0.65 6.02
LFED Leeds FSB, MHC of MD (36.3) 1.18 7.24 1.18 7.24
MWSB Northwest SB, MHC of PA (30.7) 0.96 9.86 0.96 9.86
PBHC OswegoCity SB, MHC of NY (46.) 1.06 9.22 0.95 8.25
PBCT Peoples Bank, MHC of CT (40.1) 1.16 13.69 0.75 8.84
TSBS Peoples Bcrp, MHC of NJ (35.9)(7) 1.30 7.51 0.91 5.27
PERT Perpetual of SC, MHC (46.8)(7) 0.78 6.37 1.05 8.60
PFSL Pocahnts Fed, MHC of AR (47.0)(7) 0.63 10.08 0.62 9.94
PHSB Ppls Home SB, MHC of PA (45.0) 0.73 6.80 0.71 6.55
PULB Pulaski SB, MHC of MO (29.8) 0.80 6.20 1.06 8.20
PLSK Pulaski SB, MHC of NJ (46.0) 0.64 6.99 0.64 6.99
SBFL SB Fngr Lakes MHC of NY (33.1) 0.37 3.83 0.43 4.44
WAYN Wayne S&L Co. MHC of OH (47.8) 0.73 7.89 0.68 7.40
WCFB Wbstr Cty FSB MHC of IA (45.2) 1.43 6.14 1.43 6.14
</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; PA = 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
balance.
(7) Excludes from averages those companies the subject of actual or rumored
acquisition activities or unusual operating characteristics.
(8) Includes MHC Institutions;
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.
<PAGE>
EXHIBITS
<PAGE>
RP Financial, LC.
LIST OF EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
I-1 Map of Office Locations
I-2 Lockport Savings' Audited Financial Statements
I-3 Key Operating Ratios
I-4 Investment Portfolio Composition
I-5 Yields and Costs
I-6 Gap Analysis
I-7 Net Portfolio Value Analysis
I-8 Loan Portfolio Composition
I-9 Contractual Maturity by Loan Type
I-10 Fixed Rate and Adjustable Rate Loans
I-11 Loan Originations, Purchases, and Sales
I-12 Non-Performing Assets
I-13 Loan Loss Allowance Activity
I-14 Deposit Composition
I-15 Time Deposit Rate/Maturity
I-16 Borrowed Funds
II-1 List of Branch Offices
II-2 Historical Interest Rates
II-3 Market Area Demographic Data
II-4 Sources of Personal Income/Employment Sectors
</TABLE>
<PAGE>
RP Financial, LC.
LIST OF EXHIBITS(continued)
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
III-1 General Characteristics of Publicly-Traded Institutions
IV-1 Stock Prices: November 28, 1997
IV-2 Historical Stock Price Indices
IV-3 Historical Thrift Stock Indices
IV-4 Market Area Acquisition Activity
IV-5 Management of the Bank
IV-6 Pro Forma Analysis Sheet: Fully Converted Basis
IV-7 Pro Forma Effect of Conversion Proceeds: Fully Converted Basis
IV-8 Peer Group Core Earnings Analysis
IV-9 Pro Forma Regulatory Capital Ratios
IV-10 Pro Forma Analysis Sheet: Minority Stock Offering
IV-11 Pro Forma Effects: Minority Stock Offering
IV V-1 Firm Qualifications Statement
</TABLE>
<PAGE>
EXHIBIT I-1
Lockport Savings Bank
Map of Office Locations
<PAGE>
[MAP SHOWING LOCKPORT SAVINGS BANK BRANCHES APPEARS HERE]
<PAGE>
EXHIBIT I-2
Lockport Savings Bank
Audited Financial Statements
[Incorporated by Reference]
<PAGE>
EXHIBIT I-3
Lockport Savings Bank
Key Operating Ratios
<TABLE>
<CAPTION>
At or For the Nine Months
Ended September 30, At or For the Years Ended December 31,
------------------------- ----------------------------------------------------
1997(1) 1996(1) 1996 1995 1994 1993 1992
----------- ----------- -------- -------- -------- -------- --------
Selected Financial Ratios and Other Data:
- ----------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Performance Ratios:
Return on assets (ratio of net
income to average total assets).......... 1.01% 1.06% 1.03% 1.04% 0.95% 1.31% 1.47%
Return on net worth (ratio
of net income to average net worth)...... 9.58 10.20 9.84 10.25 10.41 14.01 16.02
Interest rate spread information:
Average during period.................... 2.83 2.83 2.82 2.88 3.07 3.10 3.17
End of period............................ 2.84 2.97 3.03 2.83 3.18 3.04 3.25
Net interest margin (2).................... 3.38 3.38 3.38 3.44 3.50 3.49 3.64
Ratio of operating expenses to
average total assets..................... 2.16 1.94 2.01 2.10 1.99 1.92 2.05
Ratio of average interest-earning assets
to average interest-bearing liabilities.. 113.63 113.80 113.93 113.92 112.30 109.95 110.27
Asset Quality Ratios:
Non-performing loans to total loans........ 0.31% 0.91% 0.78% 0.74% 0.89% 1.10% 0.75%
Non-performing assets to total
assets................................... 0.19 0.54 0.48 0.97 0.56 0.69 0.70
Allowance for loan losses to non-
performing loans......................... 330.03 118.58 138.60 119.01 99.29 88.61 102.20
Allowance for loan losses to loans, net.... 1.02 1.08 1.09 0.88 0.88 0.96 0.75
Capital Ratios:
Net worth to total assets.................. 10.77% 10.15% 10.58% 10.92% 8.88% 9.53% 9.07%
Average net worth to
average assets........................... 10.60 10.43 10.49 10.11 9.17 9.37 9.15
Other Data:
Number of full-service offices............. 15 12 13 11 10 10 8
Number of deposit accounts................. 141,088 127,843 129,087 122,464 114,464 107,242 108,146
Loans services for others.................. $145.7 $123.8 $129.0 $110.4 $85.1 $69.5 $35.6
(in millions)
Residential loan originations.............. $77.4 $83.0 $110.9 $107.6 $84.1 $134.5 $110.3
(in millions)
Full time equivalent employees............. 353.0 312.0 325.0 276.5 243.5 238.5 224.0
</TABLE>
- -----------------------------
(1) Ratios for nine month periods have been annualized.
(2) Net interest income divided by average interest earning assets.
(3) Averages presented are monthly averages.
<PAGE>
EXHIBIT I-4
Lockport Savings Bank
Investment Portfolio Composition
<TABLE>
<CAPTION>
At December 31,
At September 30, ----------------------------------------------------------
1997 1996 1995 1994
------------------ ------------------ ------------------ ------------------
Amortized Fair Amortized Fair Amortized Fair Amortized Fair
Cost Value Cost Value Cost Value Cost Value
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Investment Securities:
Debt securities held to maturity:
Money market preferred stock............... $ 37,500 $ 37,500 $ 38,000 $ 38,000 $ 46,700 $ 46,700 $ 28,836 $ 28,836
States and political subdivisions.......... -- -- -- -- -- -- 15,002 15,484
-------- -------- -------- -------- -------- -------- -------- --------
Total debt securities held to maturity... 37,500 37,500 38,000 38,000 46,700 46,700 43,838 44,320
-------- -------- -------- -------- -------- -------- -------- --------
Debt securities available for sale:
U.S. treasury.............................. 84,856 85,531 84,716 85,220 54,839 55,745 49,878 47,877
U.S. government agencies................... 5,008 5,002 5,012 5,004 -- -- -- --
States and political subdivisions.......... 1,761 1,870 1,942 2,041 9,118 9,317 -- --
Corporate bonds............................ 6,927 7,034 999 1,000 6,035 6,035 5,173 5,002
-------- -------- -------- -------- -------- -------- -------- --------
Total debt securities available for sale. 98,552 99,437 92,669 93,265 69,992 71,097 55,051 52,879
-------- -------- -------- -------- -------- -------- -------- --------
Equity securities available for sale:
Common stock............................... 5,391 6,139 3,115 3,612 3,382 3,566 8,486 8,315
FHLB stock................................. 6,392 6,392 5,394 5,394 4,926 4,926 -- --
-------- -------- -------- -------- -------- -------- -------- --------
Total equity securities available for sale 11,783 12,531 8,509 9,006 8,308 8,492 8,486 8,315
-------- -------- -------- -------- -------- -------- -------- --------
Asset-backed securities available for sale... 67,270 67,243 28,090 27,998 5,350 5,278 4,888 4,539
-------- -------- -------- -------- -------- -------- -------- --------
Total investment securities.............. $215,105 $216,711 $167,268 $168,269 $130,350 $131,567 $112,263 $110,053
======== ======== ======== ======== ======== ======== ======== ========
Average remaining life of investment
securities (2)............................. 1.51 years 1.97 years 1.38 years 3.96 years
========== ========== ========== ==========
Mortgage related securities:
Available for sale:
Freddie Mac.............................. $118,469 $118,639 $109,903 $108,832 $ 43,000 $ 43,392 $ 35,157 $ 33,000
GNMA..................................... 33,461 34,542 44,966 45,780 51,104 52,984 61,199 58,462
FNMA..................................... 25,330 25,393 28,487 28,256 33,170 33,575 46,730 43,898
CMOs..................................... 107,744 107,188 104,244 101,992 132,550 131,592 151,000 137,920
-------- -------- -------- -------- -------- -------- -------- --------
Total mortgage related securities
available for sale:................... $285,004 $285,762 $287,600 $284,860 $259,824 $261,543 $294,086 $273,280
======== ======== ======== ======== ======== ======== ======== ========
Average remaining life of
mortgage related securities................ 5.69 years 7.56 years 5.50 years 4.73 years
========== ========== ========== ==========
Net unrealized gains (losses) on
securities available for sale.............. $ 2,364 $ -- $ (1,739) $ -- $ 2,936 $ -- $(23,498) $ --
Total securities............................. $502,473 $502,473 $453,129 $453,129 $393,110 $393,110 $382,851 $383,333
======== ======== ======== ======== ======== ======== ======== ========
Average remaining life of securities......... 3.94 years 5.60 years 4.16 years 4.52 years
========== ========== ========== ==========
</TABLE>
- -----------------
(1) The Bank adopted the provisions set forth in SFAS No. 115 on January 1,
1994, which requires entities to carry securities available for sale at
their fair value.
(2) Average remaining life does not include common stock and FHLB stock.
<PAGE>
EXHIBIT 1-5
Lockport Savings Bank
Yields and Costs
<TABLE>
<CAPTION>
Nine Months Ended September 30,
-------------------------------------------------------------------
At September 30, 1997 1997 1996
--------------------- --------------------------------- --------------------------------
Average Interest Average Interest
Outstanding Yield/ Outstanding Earned/ Yield/ Outstanding Earned/ Yield/
Balance Rate Balance Paid Rate Balance Paid Rate
----------- -------- ----------- -------- ---------- ----------- -------- ---------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Federal funds sold.................... $ 2,200 6.50% $ 19,936 $ 825 5.52% $ 27,420 $ 1,087 5.29%
Investment securities (1)............. 215,068 5.78 185,660 7,816 5.61 142,727 5,695 5.32
Mortgage related securities (1)....... 285,004 6.81 286,991 14,308 6.65 280,241 13,775 6.55
Loans (2)............................. 626,825 8.39 611,517 38,361 8.36 554,199 34,901 8.40
----------- ----------- --------- ----------- --------
Total interest-earning assets....... 1,129,097 7.49 1,104,104 61,310 7.40 1,004,587 55,458 7.36
----------- ----- ----------- --------- ----- ----------- -------- -----
Interest-bearing liabilities:
Savings accounts (3).................. 302,447 3.34 304,106 7,626 3.34 310,040 7,814 3.36
Interest-bearing checking (3)......... 145,579 3.19 120,413 2,436 2.70 104,782 2,147 2.73
Certificates of deposit (3)........... 516,868 5.82 510,124 21,964 5.74 446,521 19,467 5.81
Mortgagor's payments held in escrow... 8,387 1.55 8,116 119 1.95 8,308 123 1.97
Other borrowed funds.................. 28,740 5.85 28,919 1,190 5.49 13,147 473 4.80
----------- ----------- --------- ----------- --------
Total interest-bearing liabilities.. 1,002,021 4.65 971,678 33,335 4.57 882,798 30,024 4.53
----------- ----- ----------- --------- ----- ----------- -------- -----
Net interest income.................... $ 27,975 $ 25,434
========= ========
Net interest rate spread............... 2.84% 2.83% 2.83%
===== ===== =====
Net earning assets..................... $ 127,076 $ 132,426 $ 121,789
=========== =========== ===========
Net interest income as a percentage
of average interest-earning assets.... 3.38% 3.38%
========= ========
Ratio of average interest-earning
assets to average interest-bearing
liabilities........................... 113.63% 113.80%
========= ========
</TABLE>
(Footnotes on next page)
<PAGE>
EXHIBIT I-5 (continued)
Lockport Savings Bank
Yields and Costs
<TABLE>
<CAPTION>
Year ended December 31,
-------------------------------------------------------------------------
1996 1995
------------------------------------ -----------------------------------
Average Interest Average Interest
Outstanding Earned/ Yield/ Outstanding Earned/ Yield/
Balance Paid Rate Balance Paid Rate
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Federal funds sold................... $ 24,683 $ 1,313 5.32% $ 31,357 $ 1,726 5.50%
Investment securities(1)............. 147,220 7,916 5.38 119,100 6,843 5.75
Mortgage related securities(1)....... 281,843 18,547 6.58 275,448 17,939 6.51
Loans(2)............................. 564,049 47,286 8.38 506,600 43,348 8.56
---------- ---------- ----- ---------- --------- -----
Total interest-earning assets...... 1,017,795 75,062 7.37 932,505 69,856 7.49
---------- ---------- ----- ---------- --------- -----
Interest-bearing liabilities:
Savings accounts (3)................. 307,530 10,353 3.37% 326,125 11,154 3.42
Interest-bearing checking(3)......... 105,717 2,871 2.72 96,551 2,909 3.01
Certificates of deposits(3).......... 455,230 26,432 5.81 386,648 23,546 6.09
Mortgagor's payments held
in escrow.......................... 8,174 158 1.93 9,222 174 1.89
Other borrowed funds................. 16,674 841 5.04 - - -
---------- ---------- ----- ---------- --------- -----
Total interest-bearing liabilities. 893,325 40,655 4.55 818,546 37,783 4.61
---------- ---------- ----- ---------- --------- -----
Net interest income.................... $ 34,407 $ 32,073
========== =========
Net interest rate spread............... 2.82% 2.88%
===== =====
Net earning assets..................... $ 124,470 $ 113,959
========== ==========
Net interest income as a percentage of
average interest-bearing assets....... 3.38% 3.44%
==== ====
Ratio of average interest-earning assets
to average interest-bearing liabilities 113.93% 113.92%
====== ======
<CAPTION>
Year ended December 31,
------------------------------------
1994
------------------------------------
Average Interest
Outstanding Earned/ Yield/
Balance Paid Rate
---------- ---------- ----------
<S> <C> <C> <C>
Interest-earning assets:
Federal funds sold................... $ 20,740 $ 849 4.09%
Investment securities(1)............. 124,155 6,317 5.09
Mortgage related securities(1)....... 302,430 18,274 6.04
Loans(2)............................. 448,902 37,704 8.40
---------- ---------- -----
Total interest-earning assets...... 896,227 63,144 7.05
---------- ---------- -----
Interest-bearing liabilities:
Savings accounts (3)................. 415,843 12,869 3.09%
Interest-bearing checking(3)......... 86,057 2,283 2.65
Certificates of deposits(3).......... 287,661 16,443 5.72
Mortgagor's payments held
in escrow.......................... 8,471 159 1.88
Other borrowed funds................. - - -
---------- ---------- -----
Total interest-bearing liabilities. 798,032 31,754 3.98
---------- ---------- -----
Net interest income.................... $ 31,390
==========
Net interest rate spread............... 3.07%
=====
Net earning assets..................... $ 98,195
==========
Net interest income as a percentage of
average interest-bearing assets....... 3.50%
====
Ratio of average interest-earning assets
to average interest-bearing liabilities 112.30%
======
</TABLE>
- ---------------------------
(1) Amounts shown are amortized cost.
(2) Net of deferred loan fees and expenses, loan discounts, loans in process
and non-accruing loans.
(3) Excludes $1.25 million paid for a special interest payment in 1995 which
was approved by the Bank's Board of Trustees and paid on a pro rata basis
on all interest-bearing savings, NOW, money market, and certificate
accounts in recognition of the Bank's 125th anniversary.
<PAGE>
EXHIBIT I-6
Lockport Savings Bank
Gap Analysis
<TABLE>
<CAPTION>
Amounts Maturing or Repricing as of September 30, 1997
------------------------------------------------------------------------------------------
Less Than
Three 3-6 6 Months to Over 10
Three Months Months 1 Year 1-3 Years 3-5 Years 5-10 Years Years Total
------------ --------- ----------- --------- --------- ---------- -------- -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-Earning Assets:
Federal funds sold.................. $ 2,200 - - - - - - $ 2,200
Mortgage related securities (1)..... 10,883 11,538 25,536 117,436 84,516 35,095 - 285,004
Investment securities (1)........... 58,956 6,700 19,092 101,801 21,627 - 6,892 215,068
Loans (2)........................... 80,597 50,228 95,074 156,079 94,751 119,235 30,861 626,825
--------- --------- -------- -------- -------- -------- -------- ---------
Total interest-earning assets..... 152,636 68,466 139,702 375,316 200,894 154,330 37,753 1,129,097
--------- --------- -------- -------- -------- -------- -------- ---------
Interest-Bearing Liabilities:
Savings accounts.................... 32,680 31,273 62,544 36,581 28,975 48,750 61,644 302,447
Interest-bearing checking........... 52,361 17,948 35,897 33,667 1,186 1,996 2,524 145,579
Certificate accounts................ 107,203 92,612 164,641 138,500 11,530 2,382 - 516,868
Mortgagor's payments held in
escrow............................ 269 2,424 2,694 - - - 3,000 8,387
Other borrowed funds................ 9,906 8,935 105 454 5,518 1,637 2,185 28,740
--------- --------- -------- -------- -------- -------- -------- ---------
Total interest-bearing
liabilities..................... 202,419 153,192 265,881 209,202 47,209 54,765 69,353 1,002,021
Interest sensitivity gap.............. ($49,783) ($84,726) ($126,179) $166,114 $153,685 $99,565 ($31,600) $127,076
========= ========= ========= ======== ======== ======== ======== =========
Cumulative interest rate sensitivity
gap................................ ($49,783) ($134,509) ($260,688) ($94,574) $59,111 $158,676 $127,076
========= ========= ========= ======== ======== ======== ========
Ratio of cumulative gap to
total assets....................... (4.23)% (11.43)% (22.16)% (8.04)% 5.02% 13.49% 10.80%
Ratio of interest-earning assets to
interest-bearing liabilities....... 75.41% 44.68% 52.54% 179.40% 425.54% 281.80% 54.44% 112.68%
</TABLE>
- ---------------
(1) Amounts shown are amortized cost.
(2) Amounts shown include principal balance net of deferred loan fees and
expenses, unamortized premiums and discounts, and non-accruing loans.
<PAGE>
EXHIBIT I-7
Lockport Savings Bank
Net Portfolio Value Analysis
<TABLE>
<CAPTION>
Change in Net Portfolio Value
Interest Rates ----------------------------------
In Basis Points Amount $ Change % Change
(Rate Shock) ---------- ---------- --------
- --------------- (Dollars in thousands)
<S> <C> <C> <C>
400 ..................... 105,002 (44,100) (29.6)%
300 ..................... 116,614 (32,488) (21.8)%
200 ..................... 127,969 (21,133) (14.2)%
100 ..................... 139,230 (9,872) (6.6)%
Static ..................... 149,102 -- --
(100) ..................... 156,097 6,995 4.7%
(200) ..................... 157,353 8,251 5.5%
(300) ..................... 162,851 13,749 9.2%
(400) ..................... 174,889 25,787 17.3%
</TABLE>
<PAGE>
EXHIBIT I-8
Lockport Savings Bank
Loan Portfolio Composition
<TABLE>
<CAPTION>
At September 30, At December 31,
--------------------------- -------------------------------------------------------------
1997 1996 1995
--------------------------- --------------------------- ---------------------------
Amount Percent Amount Percent Amount Percent
---------- ----------- ---------- ----------- ---------- -----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Real Estate Loans:
One- to four-family........ $386,494 61.79% $360,573 59.85% $319,340 59.31%
Home equity................ 13,047 2.09 11,337 1.88 10,234 1.90
Multi-family............... 72,843 11.64 71,397 11.85 71,489 13.28
Commercial real estate..... 69,571 11.12 68,601 11.38 62,005 11.52
Construction(1)............ 13,964 2.23 12,493 2.07 7,891 1.47
-------- -------- -------- -------- -------- --------
Total real estate loans.. 555,919 88.87 524,401 87.03 470,959 87.48
-------- -------- -------- -------- -------- --------
Consumer and Other Loans....
Mobile home................ 22,675 3.63 21,406 3.55 20,630 3.83
Vehicle.................... 7,326 1.17 18,747 3.11 12,591 2.34
Personal................... 14,776 2.37 13,596 2.26 11,485 2.13
Home improvement........... 7,725 1.23 6,879 1.14 7,046 1.31
Other consumer............. 1,964 0.31 1,937 0.32 1,698 0.32
Guaranteed student......... 10,907 1.74 10,702 1.78 9,874 1.83
-------- -------- -------- -------- -------- --------
Total consumer and
other loans........... 65,373 10.45 73,267 12.16 63,324 11.76
Commercial business loans... 4,275 0.68 4,895 0.81 4,085 0.76
-------- -------- -------- -------- -------- --------
Total loans.............. 625,567 100.00% 602,563 100.00% 538,368 100.00%
-------- ======== -------- ======== -------- ========
Net deferred costs......... 3,376 2,809 2,349
Unearned discounts......... (103) (347) (39)
Allowance for losses....... (6,353) (6,539) (4,707)
-------- -------- --------
Loans, net................. $622,487 $598,486 $535,971
======== ======== ========
<CAPTION>
At December 31,
-----------------------------------------------------------------------------------------------
1994 1993 1992
--------------------------- --------------------------- ---------------------------
Amount Percent Amount Percent Amount Percent
---------- ----------- ---------- ----------- ---------- -----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Real Estate Loans:
One- to four-family........ $277,010 58.12% $248,324 58.66% $202,230 56.02%
Home equity................ 10,729 2.25 10,832 2.56 11,902 3.30
Multi-family............... 66,972 14.05 59,943 14.16 62,909 17.43
Commercial real estate..... 55,946 11.74 42,326 10.00 30,825 8.54
Construction(1)............ 3,454 0.72 6,910 1.63 3,740 1.04
-------- -------- -------- -------- -------- --------
Total real estate loans.. 414,111 86.88 368,335 87.01 311,606 86.33
-------- -------- -------- -------- -------- --------
Consumer and Other Loans....
Mobile home................ 20,662 4.33 19,785 4.68 15,992 4.43
Vehicle.................... 9,391 1.97 7,275 1.72 7,992 2.21
Personal................... 10,213 2.14 8,402 1.98 7,450 2.06
Home improvement........... 6,517 1.37 6,028 1.42 5,822 1.61
Other consumer............. 1,841 0.39 2,059 0.49 2,163 0.60
Guaranteed student......... 9,951 2.09 8,123 1.92 6,517 1.81
-------- -------- -------- -------- -------- --------
Total consumer and
other loans........... 58,575 12.29 51,672 12.21 45,936 12.72
Commercial business loans... 3,948 0.83 3,321 0.78 3,432 0.95
-------- -------- -------- -------- -------- --------
Total loans.............. 476,634 100.00% 423,328 100.00% 360,974 100.00%
-------- ======== -------- ======== -------- ========
Net deferred costs......... 1,749 1,763 1,157
Unearned discounts......... -- -- --
Allowance for losses....... (4,192) (4,030) (2,689)
-------- -------- --------
Loans, net................. $474,191 $421,061 $359,442
======== ======== ========
</TABLE>
- ----------------------
(1) Includes loans for the construction of one-to-four family residential,
multi-family and commercial real estate properties. At September 30, 1997,
construction loans included $4,046,000 of one-to-four family loans and
$9,918,000 of commercial real estate and multi-family loans.
<PAGE>
EXHIBIT I-9
Lockport Savings Bank
Contractual Maturity by Loan Type
<TABLE>
<CAPTION>
One Three Five Ten
Within Through Through Through Through Beyond
One Three Five Ten Twenty Twenty
Year Years Years Years Years Years Total
---------- ---------- ---------- ---------- ---------- --------- ----------
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Real Estate Loans:
- -----------------
One- to four-family.................... $ 88,513 $ 13,436 $ 6,309 $ 23,558 $ 185,517 $ 69,161 $ 386,494
Home Equity............................ 8,815 146 648 1,987 1,415 -- 13,047
Multi-family........................... 26,785 23,184 21,583 732 559 -- 72,843
Commercial............................. 21,045 25,817 15,668 4,453 2,588 -- 69,571
Construction........................... 10,402 167 -- 1,743 430 1,222 13,964
--------- --------- --------- --------- --------- --------- ---------
Total real estate loans............ 155,560 62,750 44,208 32,473 190,545 70,383 555,919
--------- --------- --------- --------- --------- --------- ---------
Consumer and other loans.................. 17,407 8,732 9,931 11,323 17,584 396 65,373
Commercial business loans................. 2,949 323 340 545 -- 118 4,275
--------- --------- --------- --------- --------- --------- ---------
Total loans........................ $ 175,916 $ 71,805 $ 54,479 $ 44,341 $ 208,129 $ 70,897 $ 625,567
========= ========= ========= ========= ========= ========= =========
</TABLE>
<PAGE>
EXHIBIT I-10
Lockport Savings Bank
Fixed Rate and Adjustable Rate Loans
<TABLE>
<CAPTION>
Due After September 30, 1998
--------------------------------------------------
Fixed Adjustable Total
-------------- ---------------- -----------
(In thousands)
<S> <C> <C> <C>
Real Estate Loans:
- -----------------
One- to four-family................... $ 284,306 $ 13,675 $ 297,981
Home equity........................... 4,232 -- 4,232
Multi-family.......................... 13,823 32,235 46,058
Commercial............................ 11,080 37,446 48,526
Construction.......................... 3,395 167 3,562
--------- --------- ---------
Total real estate loans........... 316,836 83,523 400,359
--------- --------- ---------
Consumer and other loans.................. 47,966 -- 47,966
Commercial business loans................. 1,326 -- 1,326
--------- --------- ---------
Total loans....................... $ 366,128 $ 83,523 $ 449,651
========= ========= =========
</TABLE>
<PAGE>
EXHIBIT I-11
Lockport Savings Bank
Loan Originations, Purchases and Sales
<TABLE>
<CAPTION>
Nine Months
Ended September 30, Year Ended December 31,
------------------- --------------------------
1997 1996 1996 1995 1994
-------- -------- -------- -------- --------
(In thousands)
<S> <C> <C> <C> <C> <C>
Originations By Type:
- --------------------
Real estate:
One-to four-family.................... $ 77,381 $ 82,951 $110,894 $107,618 $ 84,096
Home equity........................... 2,334 1,070 1,357 852 404
Commercial and multi-family........... 18,012 17,570 27,168 24,880 27,462
Consumer and other...................... 20,323 23,784 31,688 25,053 26,507
Commercial business..................... 3,991 4,693 5,972 2,767 2,684
-------- -------- -------- -------- --------
Total loans originated............. 122,041 130,068 177,079 161,170 141,153
-------- -------- -------- -------- --------
Sales:
- -----
Real estate:
One- to four- family................. 23,191 19,290 26,148 30,141 19,527
Consumer and other..................... 4,126 3,871 4,749 4,948 3,679
-------- -------- -------- -------- --------
Total loans sold................... 27,317 23,161 30,897 35,089 23,206
-------- -------- -------- -------- --------
Repayments:
- ----------
Real estate:
One- to four- family................. 29,755 32,920 42,323 32,959 36,911
Home equity.......................... 624 400 254 1,347 507
Commercial and multi-family.......... 12,225 14,619 17,066 11,716 8,558
Consumer and other..................... 25,247(1) 12,295 16,247 15,141 15,783
Commercial business.................... 4,058 3,526 5,169 2,630 2,057
-------- -------- -------- -------- --------
Total repayments................... 71,909 63,760 81,059 63,793 63,816
-------- -------- -------- -------- --------
Total reductions................... 99,226 86,921 111,956 98,882 87,022
Increase (decrease) in other items, net(2) 1,000 (420) (776) 7 (839)
-------- -------- -------- -------- --------
Net increase...................... $ 23,815 $ 42,727 $ 64,347 $ 62,295 $ 53,292
======== ======== ======== ======== ========
</TABLE>
- ---------------
(1) Includes the early repayment of loans secured by pledges and assignments of
automobile leases.
(2) Other items include charge-offs, deferred fees and expenses, and discounts
and premiums.
<PAGE>
EXHIBIT I-12
Lockport Savings Bank
Non-Performing Assets
<TABLE>
<CAPTION>
At December 31,
At Sept 30, --------------------------------------------------------
1997 1996 1995 1994 1993 1992
------- ------- ------- ------- ------- -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Non-accruing loans (1)
One- to four-family........................... $ 659 $ 473 $ 1,100 $ 715 $ 689 $ 342
Home equity................................... 57 58 34 12 9 --
Commercial real estate and multi-family....... 692 1,822 2,436 3,133 3,611 2,094
Consumer and other............................ 123 257 166 117 140 129
Commercial business........................... 394 2,108 219 245 99 66
------- ------- ------- ------- ------- -------
Total....................................... 1,925 4,718 3,955 4,222 4,548 2,631
------- ------- ------- ------- ------- -------
Non-performing assets:
Other real estate owned (2):
One- to four-family........................... 22 155 -- -- 15 51
Commercial real estate and multi-family....... 246 162 257 259 922 2,281
Other non-performing assets:
Investments in affiliates..................... -- 157 264 629 789 920
Nationar receivable (3)....................... -- -- 5,053 -- -- --
------- ------- ------- ------- ------- -------
Total....................................... 268 474 5,574 888 1,726 3,252
------- ------- ------- ------- ------- -------
Total non-performing assets..................... $ 2,193 $ 5,192 $ 9,529 $ 5,110 $ 6,274 $ 5,883
======= ======= ======= ======= ======= =======
Total non-performing assets as a percentage
of total assets................................. 0.19% 0.48% 0.97% 0.56% 0.69% 0.70%
======= ======= ======= ======= ======= =======
Total non-performing loans to total loans (4)... 0.31% 0.78% 0.74% 0.89% 1.10% 0.75%
======= ======= ======= ======= ======= =======
</TABLE>
- --------------------
(1) Loans are placed on non-accrual status when they become 90 days or more past
due or if they have been identified by the Bank as presenting uncertainty
with respect to the collectibility of interest or principal.
(2) Other real estate owned balances are shown net of related allowances.
(3) On February 6, 1995, the Superintendent seized Nationar, a check-clearing
and trust company, freezing all of Nationar's assets. As of December 31,
1995, the Bank had $5.7 million in demand deposits held in receivership by
the New York State Banking Department. As of December 31, 1996, the Bank
had received all funds due from Nationar.
(4) Excludes loans that had matured and the Bank had not formally extended the
maturity date. Regular principal and interest payments continued in
accordance with the original terms of the loan. The Bank continued to
accrue interest on these loans as long as regular payments received were
less than 90 days delinquent. These loans totaled $312,000, $3.9 million,
$3.1 million, $2.7 million, $1.5 million and $245,000 at September 30, 1997
and December 31, 1996, 1995, 1994, 1993 and 1992, respectively.
<PAGE>
EXHIBIT I-13
Lockport Savings Bank
Loan Loss Allowance Activity
<TABLE>
<CAPTION>
Nine Months Ended
September 30, Year Ended December 31,
----------------------- ------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
---------- ---------- -------- -------- -------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at the beginning of period............... $ 6,539 $ 4,707 $ 4,707 $ 4,192 $ 4,030 $ 2,689 $ 1,888
Charge-offs:
One- to four-family.......................... 43 28 28 17 -- -- --
Multi-family................................. 265 39 122 215 223 -- --
Commercial real estate....................... 107 35 35 108 460 -- --
Construction or development.................. -- -- -- -- -- -- 526
Consumer and other........................... 303 185 251 216 142 160 123
Commercial business(1)....................... 553 -- -- -- -- 66 --
-------- -------- -------- -------- -------- -------- --------
1,271 287 436 556 825 226 649
-------- -------- -------- -------- -------- -------- --------
Recoveries:
One- to four-family.......................... -- -- -- -- -- -- --
Multi-family................................. 33 -- -- -- -- -- --
Commercial real estate....................... -- -- 25 -- -- -- --
Construction or development.................. -- -- -- -- -- -- --
Consumer and other........................... 68 37 56 55 30 42 52
Commercial business.......................... 9 -- -- -- 9 3 --
-------- -------- -------- -------- -------- -------- --------
110 37 81 55 39 45 52
-------- -------- -------- -------- -------- -------- --------
Net charge-offs.................................. 1,161 250 355 501 786 181 597
Provision for loan losses........................ 975 1,861 2,187 1,016 948 1,522 1,398
-------- -------- -------- -------- -------- -------- --------
Balance at end of period......................... $ 6,353 $ 6,318 $ 6,539 $ 4,707 $ 4,192 $ 4,030 $ 2,689
======== ======== ======== ======== ======== ======== ========
Ratio of net charge-offs during the period
to average loans outstanding during
the period................................... 0.19% 0.04% 0.06% 0.10% 0.17% 0.05% 0.18%
======== ======== ======== ======== ======== ======== ========
Allowance for loan losses to total loans......... 1.02% 1.08% 1.09% 0.88% 0.88% 0.96% 0.75%
======== ======== ======== ======== ======== ======== ========
Allowance for loan losses to
non-performing loans........................... 330.03% 118.58% 138.60% 119.01% 99.29% 88.61% 102.20%
======== ======== ======== ======== ======== ======== ========
</TABLE>
- ---------------
(1) Included in commercial business loan charge-offs for 1997 is $486,000
related to a settlement that the Bank had reached with the bankruptcy
trustee relating to loans to a borrower that had filed for bankruptcy
protection.
<PAGE>
EXHIBIT I-14
Lockport Savings Bank
Deposit Composition
<TABLE>
<CAPTION>
For the Nine Months Ended For the Year Ended
September 30, December 31,
---------------------------------------- ----------------------------------------
1997 1996
---------------------------------------- ----------------------------------------
Percent Percent
of Total Weighted of Total Weighted
Average Average Average Average Average Average
Balance Deposits Rate Balance Deposits Rate
--------- ---------- --------- --------- ---------- ---------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Money market accounts................ $ 60,173 6.25% 3.57% $ 53,999 6.04% 3.55%
Savings accounts..................... 304,106 31.60 3.34 307,530 34.36 3.37
NOW accounts......................... 60,240 6.26 1.82 51,718 5.78 1.85
Non-interest-bearing accounts........ 27,629 2.87 -- 26,273 2.94 --
--------- --------- --------- ---------
Total.............................. 452,148 46.98 2.96 439,250 49.12 3.01
--------- --------- --------- ---------
Certificates of deposit:
Less than six months................. 188,291 19.58 -- 176,787 19.76 --
Over six through 12 months........... 124,360 12.92 -- 106,793 11.94 --
Over 12 through 24 months............ 81,310 8.45 -- 53,409 5.97 --
Over 24 months....................... 28,417 2.95 -- 38,486 4.30 --
Certificates over $100,000........... 87,746 9.12 -- 79,755 8.91 --
--------- --------- --------- ---------
Total certificates of deposit...... 510,124 53.02 5.74 455,230 50.88 5.81
--------- --------- --------- ---------
Total average deposits.......... $ 962,272 100.00% 4.44% $ 894,750 100.00% 4.43%
========= ========= ========= =========
<CAPTION>
For the Year Ended December 31,
---------------------------------------------------------------------------------------
1995/(1)/ 1994
---------------------------------------- ----------------------------------------
Percent Percent
of Total Weighted of Total Weighted
Average Average Average Average Average Average
Balance Deposits Rate Balance Deposits Rate
--------- ---------- --------- --------- ---------- ---------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Money market accounts................ $ 52,528 6.27% 3.96% $ 49,671 6.05% 3.09%
Savings accounts..................... 326,125 38.91 3.42 415,843 50.68 3.09
NOW accounts......................... 44,023 5.25 1.89 36,386 4.43 2.06
Non-interest-bearing accounts........ 28,720 3.43 -- 30,996 3.78 --
--------- --------- --------- ---------
Total.............................. 451,396 53.86 3.12 532,896 64.94 2.84
--------- --------- --------- ---------
Certificates of deposit:
Less than six months................. 117,584 14.03 -- 64,323 7.85 --
Over six through 12 months........... 94,366 11.26 -- 56,520 6.89 --
Over 12 through 24 months............ 55,039 6.57 -- 46,226 5.63 --
Over 24 months....................... 50,891 6.07 -- 62,147 7.57 --
Certificates over $100,000........... 68,768 8.21 -- 58,445 7.12 --
--------- --------- --------- ---------
Total certificates of deposit...... 386,648 46.14 6.09 287,661 35.06 5.72
--------- --------- --------- ---------
Total average deposits.......... $ 838,044 100.00% 4.49% $ 820,557 100.00% 3.85%
========= ========= ========= =========
</TABLE>
- ---------------------------
/(1)/ Calculations for this table exclude a $1.25 million special interest
payment in 1995 which was approved by the Bank's Board of Trustees and
paid on a pro rata basis on all interest-bearing savings, NOW, money
market and certificate of deposit accounts in recognition of the Bank's
125th anniversary.
<PAGE>
EXHIBIT I-15
Lockport Savings Bank
Time Deposit Rate/Maturity
<TABLE>
<CAPTION>
Period to Maturity from September 30, 1997 At December 31,
------------------------------------------------------------------------------ ------------------------------
Less Three Four
Than One to Two to to to Five At
One Two Three Four Five Years or Sept. 30,
Year Years Years Years Years More 1997 1996 1995 1994
------- -------- -------- -------- -------- -------- --------- -------- -------- --------
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Rate:
0 to 4.00%........... $ 1,142 $ -- $ 2 $ -- $ -- $ 4 $ 1,148 $ 1,567 $ 5,222 $ 63,605
4.01 to 5.00%........ 22,935 496 65 -- -- 103 23,599 57,140 46,340 64,416
5.01 to 6.00%........ 322,677 79,103 13,173 4,397 877 1,758 421,985 351,270 202,715 107,776
6.01 to 7.00%........ 11,670 4,136 1,141 211 30 413 17,601 23,173 94,957 5,922
7.01 to 8.00%........ 1,948 327 111 4,415 -- -- 6,801 7,456 10,662 11,195
8.01 to 9.00%........ 4,069 10,406 3,084 1,600 -- -- 19,159 18,775 19,765 19,209
Over 9.01%........... 15 26,455 -- -- -- 105 26,575 25,340 42,875 48,296
-------- -------- -------- -------- -------- ------- --------- -------- -------- --------
Total.............. $364,456 $120,923 $ 17,576 $ 10,623 $ 907 $ 2,383 $ 516,868 $484,721 $422,536 $320,419
======== ======== ======== ======== ======== ======= ========= ======== ======== ========
</TABLE>
<PAGE>
EXHIBIT I-16
Lockport Savings Bank
Borrowed Funds
<TABLE>
<CAPTION>
Nine Months
Ended September 30, Year Ended
------------------- December 31,
1997 1996 1996
-------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C>
Maximum Balance:
- ---------------
FHLB advances............................... $ 10,000 $ 5,000 $ 12,000
Securities sold under agreements
to repurchase.............................. 28,961 24,675 24,675
Average Balance:
- ---------------
FHLB advances............................... 6,889 5,000 5,583
Securities sold under agreements
to repurchase.............................. 22,030 8,147 11,091
Weighted Average Interest Rate:
- ------------------------------
FHLB advances............................... 5.93% 5.72% 5.78%
Securities sold under agreements
to repurchase.............................. 5.59 5.35 5.38
</TABLE>
<PAGE>
EXHIBIT II-1
Lockport Savings Bank
List of Branch Offices
<PAGE>
EXHIBIT II-1
Lockport Savings Bank
List of Branch Offices
<TABLE>
<CAPTION>
Location Leased Original Date of Net Book Value
or Year Lease of Property or
Owned Leased or Expiration Leasehold
Acquired Improvements at
September 30, 1997
- -----------------------------------------------------------------------------------------------------------
(In thousands)
<S> <C> <C> <C> <C>
Administrative/Home Office:
Administrative Center
6950 South Transit Road
Lockport, NY 14094 Owned 1996 N/A $7,986
Branch Offices:
Loan Center Office
80 Washburn Street
Lockport NY 14094 Owned 1968 N/A $538
Main Office (1)
55 East Avenue
Lockport, NY 14094 Owned 1968 N/A $1,385
Town of Lockport Office (2)
5737 South Transit Road
Lockport, NY 14094 Leased 1973 4/30/12 $639
Town of Lockport Office (2)
Drive Thru Facility
6210 Shimer Drive
Lockport, NY 14094 Leased 1993 9/30/12 $218
Batavia Office
401 West Main Street
Batavia, NY 14020 Owned 1977 N/A $413
Cheektowaga Office
1455 French Road
Depew, NY 14043 Owned 1991 N/A $813
Clarence Office
6409 Transit Road
East Amherst, NY 14051 Leased 1989 12/31/09 $25
Depew Office
570 Dick Road
Depew, NY 14043 Leased 1996 12/31/99 $208
Hamburg Office
5751 South Park Avenue
Hamburg, NY 14075 Owned 1995 N/A $897
Medina Office
327 Main Street
Medina NY 14103 Owned 1975 N/A $319
Niagara Falls Office
Tops Int'l Super Center
7200 Niagara Falls Blvd.
Niagara Falls, NY 14304 Leased 1993 3/31/08 $124
North Tonawanda Office
100 River Road
North Tonawanda, NY 14120 Owned 1994 N/A $728
Ransomville Office
2547 Youngstown/Lockport Rd.
Ransomville, NY 14131 Owned 1985 N/A $71
</TABLE>
<PAGE>
EXHIBIT II-1
Lockport Savings Bank
List of Branch Offices
<TABLE>
<S> <C> <C> <C> <C>
Tonawanda Office
Sheridan/Delaware Plaza
Tonawanda, NY 14223 Leased 1997 3/31/17 $336
West Amherst Office
Tops Super Center
3035 Niagara Falls Blvd.
Amherst, NY 14228 Leased 1993 9/30/08 $137
West Seneca Office
1251 Union Road
West Seneca, NY 14224 Leased 1996 8/31/06 $254
North Buffalo Office
2141 Elmwood Avenue
Buffalo, NY 14207 Leased 1997 3/31/17 $292
</TABLE>
- ---------------
(1) The Main Office Branch building also houses certain administrative
offices.
(2) The Bank owns the building but leases the land.
<PAGE>
EXHIBIT II-2
Historical Interest Rates
<PAGE>
Exhibit II-2
Historical Interest Rates(1)
<TABLE>
<CAPTION>
Prime 90 Day One Year 30 Year
Year/Qtr. Ended Rate T-Bill T-Bill T-Bond
- --------------- ---- ------ ------ ------
<S> <C> <C> <C> <C> <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%
Quarter 3 8.50% 5.10% 5.44% 6.40%
November 28, 1997 8.50% 5.20% 5.50% 6.05%
</TABLE>
(1) End of period data.
Source: SNL Securities.
<PAGE>
EXHIBIT II-3
Market Area Demographic Information
<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
1990 91,947,410 18+ 74.3
1997 99,019,931 Spending Potential Index*
2002 104,000,643 -------------------------
Median Age Auto Loan 100
---------- Home Loan 100
Household Growth Rate 1 1990 32.9 Investments 100
Average Household Size 2.64 1997 34.8 Retirement Plans 100
Home Repair 100
Families Lawn & Garden 100
- -------- Male/Female Ratio 95.9 Remodeling 100
1990 64,517,947 Appliances 100
1997 68,999,546 Per Capita Income $18,100 Electronics 100
Furniture 100
Restaurants 100
Family Growth Rate 0.9 1997 Household Income* Sporting Goods 100
---------------------- Theater/Concerts 100
Race 1990 1997 Base 99,019,225 Toys & Hobbies 100
- ---- ---- ---- % less than $15K 17.7 Travel 100
% White 80.3 78.4 % $15K-25K 14.4 Video Rental 100
% Black 12.1 12.4 % $25K-50K 33.5 Apparel 100
% Asian % $50K-100K 26.5 Auto Aftermarket 100
/Pacific Isl. 2.9 3.7 % $100K-150K 5.4 Health Insurance 100
% greater than $150K 2.6 Pets & Supplies 100
% 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.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
STATE DEMOGRAPHIC REPORT
- --------------------------------------------------------------------------------
State 36
State Name NEW YORK
<TABLE>
<CAPTION>
Population 1997 Age Distribution 1997 Average Disposable Income
- ---------- --------------------- -------------------------------
<S> <C> <C> <C> <C> <C>
1980 17,558,165 0-4 6.9 Total $33,910
1990 17,990,455 5-9 7 Householder less than 35 $30,429
1997 18,191,341 10-14 6.7 Householder 35-44 $36,263
2002 18,332,121 15-19 6.6 Householder 45-54 $43,029
20-24 6.4 Householder 55-64 $39,393
Population Growth Rate 0.2 25-44 32.3 Householder 65+ $21,618
45-64 20.9
Households 65-84 11.7
- ---------- 85+ 1.5
1990 6,639,322 18+ 75.7
1997 6,699,651 Spending Potential Index*
2002 6,743,853 -------------------------
Median Age Auto Loan 101
---------- Home Loan 108
Household Growth Rate 0.1 1990 33.9 Investments 110
Average Household Size 2.63 1997 35.3 Retirement Plans 106
Home Repair 103
Families Lawn & Garden 103
- -------- Male/Female Ratio 93.8 Remodeling 96
1990 4,489,312 Appliances 101
1997 4,530,808 Per Capita Income $18,504 Electronics 101
Furniture 108
Restaurants 104
Family Growth Rate 0.1 1997 Household Income* Sporting Goods 103
---------------------- Theater/Concerts 105
Race 1990 1997 Base 6,699,533 Toys & Hobbies 101
- ---- ---- ---- % less than $15K 20.2 Travel 111
% White 74.4 71.6 % $15K-25K 13.9 Video Rental 100
% Black 15.9 16.5 % $25K-50K 31.3 Apparel 105
% Asian % $50K-100K 25.9 Auto Aftermarket 103
/Pacific Isl. 3.9 5 % $100K-150K 5.5 Health Insurance 100
% greater than $150K 3.2 Pets & Supplies 101
% Hispanic* 12.3 15.2
Median Household Income
-----------------------
1997 $36,341
2002 $38,815
</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.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
COUNTY DEMOGRAPHIC REPORT
- --------------------------------------------------------------------------------
State/County 36063
County Name NIAGARA NY
<TABLE>
<CAPTION>
Population 1997 Age Distribution 1997 Average Disposable Income
- ---------- --------------------- -------------------------------
<S> <C> <C> <C> <C> <C>
1980 227,354 0-4 7 Total $24,980
1990 220,756 5-9 7.2 Householder less than 35 $22,318
1997 221,054 10-14 7.2 Householder 35-44 $29,136
2002 221,260 15-19 7.1 Householder 45-54 $34,459
20-24 5.9 Householder 55-64 $28,555
Population Growth Rate 0 25-44 29.5 Householder 65+ $15,223
45-64 20.6
Households 65-84 14
- ---------- 85+ 1.6
1990 84,809 18+ 74.6
1997 84,933 Spending Potential Index*
2002 85,068 -------------------------
Median Age Auto Loan 97
---------- Home Loan 90
Household Growth Rate 0 1990 34.6 Investments 98
Average Household Size 2.56 1997 36.2 Retirement Plans 91
Home Repair 98
Families Lawn & Garden 94
- -------- Male/Female Ratio 92.7 Remodeling 95
1990 59,732 Appliances 98
1997 59,975 Per Capita Income $13,239 Electronics 94
Furniture 97
Restaurants 94
Family Growth Rate 0.1 1997 Household Income* Sporting Goods 96
---------------------- Theater/Concerts 95
Race 1990 1997 Base 84,933 Toys & Hobbies 99
- ---- ---- ---- % less than $15K 24.6 Travel 96
% White 93 91.8 % $15K-25K 17.9 Video Rental 97
% Black 5.5 6.4 % $25K-50K 37.4 Apparel 93
% Asian/Pacific Isl. 0.4 0.6 % $50K-100K 18.3 Auto Aftermarket 94
% Hispanic* 1 1.4 % $100K-150K 1.3 Health Insurance 99
% greater than $150K 0.5 Pets & Supplies 98
Median Household Income
-----------------------
1997 $28,460
2002 $28,703
</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.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
COUNTY DEMOGRAPHIC REPORT
- --------------------------------------------------------------------------------
State/County 36029
County Name ERIE NY
<TABLE>
<CAPTION>
Population 1997 Age Distribution 1997 Average Disposable Income
- ---------- --------------------- -------------------------------
<S> <C> <C> <C> <C> <C>
1980 1,015,472 0-4 6.7 Total $26,341
1990 968,532 5-9 6.9 Householder less than 35 $23,119
1997 948,948 10-14 6.7 Householder 35-44 $30,401
2002 935,627 15-19 6.6 Householder 45-54 $36,334
20-24 6.2 Householder 55-64 $31,147
Population Growth Rate -0.3 25-44 30.5 Householder 65+ $16,358
45-64 20.4
Households 65-84 14.2
- ---------- 85+ 1.7
1990 376,994 18+ 75.9
1997 368,823 Spending Potential Index*
2002 363,791 -------------------------
Median Age Auto Loan 97
---------- Home Loan 95
Household Growth Rate -0.3 1990 34.7 Investments 103
Average Household Size 2.51 1997 36.4 Retirement Plans 96
Home Repair 100
Families Lawn & Garden 97
- -------- Male/Female Ratio 92.1 Remodeling 92
1990 254,472 Appliances 99
1997 250,475 Per Capita Income $14,307 Electronics 95
Furniture 100
Restaurants 97
Family Growth Rate -0.2 1997 Household Income* Sporting Goods 97
---------------------- Theater/Concerts 98
Race 1990 1997 Base 368,819 Toys & Hobbies 99
- ---- ---- ---- % less than $15K 25.7 Travel 101
% White 85.9 83.5 % $15K-25K 17.3 Video Rental 97
% Black 11.3 12.9 % $25K-50K 34.3 Apparel 96
% Asian/Pacific Isl. 1.1 1.5 % $50K-100K 19.3 Auto Aftermarket 96
% Hispanic* 2.3 3.2 % $100K-150K 2.3 Health Insurance 99
% greater than $150K 1.1 Pets & Supplies 98
Median Household Income
-----------------------
1997 $28,644
2002 $28,786
</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 11/10/97
<PAGE>
- --------------------------------------------------------------------------------
COUNTY DEMOGRAPHIC REPORT
- --------------------------------------------------------------------------------
State/County 36037
County Name GENESEE NY
<TABLE>
<CAPTION>
Population 1997 Age Distribution 1997 Average Disposable Income
- ---------- --------------------- -------------------------------
<S> <C> <C> <C> <C> <C>
1980 59,400 0-4 7.5 Total $27,174
1990 60,060 5-9 7.6 Householder less than 35 $25,255
1997 61,228 10-14 7.7 Householder 35-44 $30,343
2002 62,036 15-19 7.1 Householder 45-54 $37,061
20-24 5.7 Householder 55-64 $31,110
Population Growth Rate 0.3 25-44 30.4 Householder 65+ $15,667
45-64 20.4
Households 65-84 12.1
- ---------- 85+ 1.5
1990 21,614 18+ 73.2
1997 22,047 Spending Potential Index*
2002 22,350 -------------------------
Median Age Auto Loan 99
---------- Home Loan 87
Household Growth Rate 0.3 1990 33.3 Investments 94
Average Household Size 2.72 1997 35 Retirement Plans 90
Home Repair 95
Families Lawn & Garden 93
- -------- Male/Female Ratio 95.5 Remodeling 101
1990 16,050 Appliances 99
1997 16,375 Per Capita Income $13,681 Electronics 95
Furniture 94
Restaurants 94
Family Growth Rate 0.3 1997 Household Income* Sporting Goods 97
---------------------- Theater/Concerts 94
Race 1990 1997 Base 22,047 Toys & Hobbies 101
- ---- ---- ---- % less than $15K 18.9 Travel 91
% White 96.5 95.8 % $15K-25K 17.5 Video Rental 98
% Black 1.8 2.1 % $25K-50K 39.4 Apparel 93
% Asian % $50K-100K 21.8 Auto Aftermarket 94
/Pacific Isl. 0.4 0.5 % $100K-150K 1.6 Health Insurance 101
% greater than $150K 0.6 Pets & Supplies 100
% Hispanic* 0.8 1
Median Household Income
-----------------------
1997 $32,281
2002 $35,575
</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.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
COUNTY DEMOGRAPHIC REPORT
- --------------------------------------------------------------------------------
State/County 36073
County Name ORLEANS NY
<TABLE>
<CAPTION>
Population 1997 Age Distribution 1997 Average Disposable Income
- ---------- --------------------- -------------------------------
<S> <C> <C> <C> <C> <C>
1980 38,496 0-4 7.4 Total $24,360
1990 41,846 5-9 7.3 Householder less than 35 $22,710
1997 45,190 10-14 7.6 Householder 35-44 $27,930
2002 47,497 15-19 7.3 Householder 45-54 $33,448
20-24 5.9 Householder 55-64 $25,621
Population Growth Rate 1.1 25-44 31.6 Householder 65+ $14,055
45-64 20.6
Households 65-84 11
- ---------- 85+ 1.3
1990 14,428 18+ 73.5
1997 15,293 Spending Potential Index*
2002 16,138 -------------------------
Median Age Auto Loan 98
---------- Home Loan 80
Household Growth Rate 0.8 1990 32.5 Investments 85
Average Household Size 2.74 1997 34.8 Retirement Plans 84
Home Repair 93
Families Lawn & Garden 89
- -------- Male/Female Ratio 100.8 Remodeling 104
1990 10,685 Appliances 98
1997 11,317 Per Capita Income $11,705 Electronics 93
Furniture 88
Restaurants 88
Family Growth Rate 0.8 1997 Household Income* Sporting Goods 95
---------------------- Theater/Concerts 88
Race 1990 1997 Base 15,293 Toys & Hobbies 99
- ---- ---- ---- % less than $15K 21.9 Travel 86
% White 91.5 90.1 % $15K-25K 21.1 Video Rental 97
% Black 6.6 7.6 % $25K-50K 40.1 Apparel 87
% Asian % $50K-100K 15.4 Auto Aftermarket 90
/Pacific Isl. 0.4 0.5 % $100K-150K 0.9 Health Insurance 101
% greater than $150K 0.6 Pets & Supplies 99
% Hispanic* 2.5 3.4
Median Household Income
-----------------------
1997 $27,741
2002 $28,969
</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.
- --------------------------------------------------------------------------------
<PAGE>
EXHIBIT II-4
Sources of Personal Income/Employment Sectors
<PAGE>
REGIONAL ECONOMIC PROFILE
for States and counties
<TABLE>
<CAPTION>
Erie, New York (36.000)
- ------------------------------------------------------------------------------------------------------------------------------
Item 1991 1992 1993 1994 1995
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Place of residence profile
Personal income (thousands of dollars) 426,449,104 449,364,254 457,203,969 476,488,152 501,555,050
Nonfarm personal income 425,831,123 449,193,087 456,503,357 475,959,923 501,054,661
Farm income 617,981 671,167 700,612 528,229 500,389
Derivation of personal income
Net earnings 1/ 271,251,641 288,944,503 293,390,203 301,263,987 315,214,465
Transfer payments 72,096,558 81,236,170 83,481,538 90,859,367 98,118,658
Income maintenance 2/ 7,423,158 8,638,524 9,532,421 10,383,993 10,999,344
Unemployment insurance 2,654,137 4,716,712 3,424,635 2,250,673 2,085,462
Retirement and other 62,019,263 67,880,934 70,524,482 78,224,701 85,033,852
Dividends, interest, and rent 83,100,905 79,683,581 80,332,228 84,364,798 88,221,927
Population (number of persons) 3/ 18,036,973 18,099,081 18,170,321 18,196,829 18,190,562
Per capita incomes (dollars) 4/
Per capita personal income 23,643 24,856 25,162 26,185 27,572
Per capita net earnings 15,039 15,965 16,147 16,556 17,328
Per capita transfer payments 3,997 4,488 4,594 4,993 5,394
Per capita income maintenance 412 477 525 571 605
Per capita unemployment insurance 147 261 188 124 115
Per capita retirement & other 3,438 3,751 3,881 4,299 4,675
Per capita dividends, interest, & rent 4,607 4,403 4,421 4,636 4,850
Place of work profile
Total earnings (place of work, $000) 305,441,339 326,475,141 331,289,663 340,128,647 356,642,266
Wages and salary disbursements 247,723,582 261,957,013 266,625,813 272,565,079 285,813,769
Other labor income 26,017,929 28,145,814 29,950,705 31,069,418 32,280,796
Proprietors' income 31,699,828 36,372,314 34,713,145 36,494,150 38,547,701
Nonfarm proprietors' income 31,413,087 36,023,647 34,366,752 36,315,083 38,438,534
Farm proprietors' income 286,741 348,667 346,393 179,067 109,167
Total full- and part-time employment 9,619,382 9,587,629 9,600,441 9,692,949 9,740,793
Wage and salary jobs 8,332,467 8,179,896 8,196,939 8,250,134 8,283,479
Number of proprietors 1,286,915 1,407,733 1,403,502 1,442,815 1,457,314
Number of nonfarm proprietors /5 1,247,624 1,368,316 1,364,876 1,406,145 1,420,640
Number of farm proprietors 39,291 39,417 38,626 36,670 36,674
Average earnings per job (dollars) 31,753 34,052 34,508 35,090 36,613
Wage & salary earnings per job 29,730 32,024 32,527 33,038 34,504
Average earnings per nonfarm proprietor 25,178 26,327 25,179 25,826 27,057
</TABLE>
See footnotes at end of table. REGIONAL ECONOMIC INFORMATION SYSTEM
Table CA30 August 1997 BUREAU OF ECONOMIC ANALYSIS
<PAGE>
REGIONAL ECONOMIC PROFILE
for States and counties
<TABLE>
<CAPTION>
Erie, New York [36.029]
- -------------------------------------------------------------------------------------------------------------------------
Item 1991 1992 1993 1994 1995
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Place of residence profile
Personal income (thousands of dollars) 18,746,468 19,466,440 19,942,117 21,077,115 22,105,612
Nonfarm personal income 18,728,560 19,447,602 19,921,683 21,061,393 22,090,233
Farm income 17,908 18,838 20,434 15,722 15,379
Derivation of personal Income
Net earnings 1/ 11,794,095 12,398,339 12,673,556 13,261,019 13,842,055
Transfer payments 3,651,396 4,046,101 4,140,026 4,459,686 4,739,786
Income maintenance 2/ 372,514 414,380 436,944 465,538 473,364
Unemployment insurance 140,211 220,631 158,207 107,742 99,725
Retirement and other 3,138,671 3,411,090 3,544,875 3,886,406 4,166,697
Dividends, interest, and rent 3,300,977 3,022,000 3,128,535 3,356,410 3,523,771
Population (number of persons) 3/ 970,281 971,253 970,238 966,271 960,314
Per capita incomes (dollars) 4/
Per capita personal income 19,321 20,043 20,554 21,813 23,019
Per capita net earnings 12,155 12,765 13,062 13,724 14,414
Per capita transfer payments 3,763 4,166 4,267 4,615 4,936
Per capita income maintenance 384 427 450 482 493
Per capita unemployment insurance 145 227 163 112 104
Per capita retirement & other 3,235 3,512 3,654 4,022 4,339
Per capita dividends, interest, & rent 3,402 3,111 3,225 3,474 3,669
Place of work profile
Total earnings (place of work, $000) 13,079,037 13,753,376 14,071,367 14,729,001 15,418,592
Wages and salary disbursements 10,848,897 11,289,562 11,566,203 12,011,111 12,580,513
Other labor income 1,222,563 1,322,143 1,436,196 1,529,702 1,586,872
Proprietors' income 1,007,577 1,141,671 1,068,968 1,188,188 1,251,207
Nonfarm proprietors' income 1,001,827 1,134,546 1,061,398 1,185,152 1,250,040
Farm proprietors' income 5,750 7,125 7,570 3,036 1,167
Total full--and part--time employment 531,031 531,857 532,048 539,827 543,909
Wage and salary jobs 467,917 463,340 463,179 468,943 472,196
Number of proprietors 63,114 68,517 68,869 70,884 71,713
Number of nonfarm proprietors /5 61,947 67,354 67,729 69,802 70,631
Number of farm proprietors 1,167 1,163 1,140 1,082 1,082
Average earnings per job (dollars) 24,630 25,859 26,448 27,285 28,348
Wage & salary earnings per job 23,186 24,366 24,971 25,613 26,643
Average earnings per nonfarm proprietor 16,172 16,845 15,671 16,979 17,698
</TABLE>
See footnotes at end of table. REGIONAL ECONOMIC INFORMATION SYSTEM
Table CA30 August 1997 BUREAU OF ECONOMIC ANALYSIS
<PAGE>
REGIONAL ECONOMIC PROFILE
for States and counties
<TABLE>
<CAPTION>
Genesee, New York [36.037]
- -----------------------------------------------------------------------------------------------------------------
Item 1991 1992 1993 1994 1995
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Place of residence profile
Personal income (thousands of dollars) 1,047,922 1,086,255 1,124,469 1,176,875 1,238,226
Nonfarm personal income 1,026,415 1,067,731 1,098,064 1,159,763 1,221,120
Farm Income 21,507 18,524 26,405 17,112 17,106
Derivation of personal income
Net earnings 1/ 701,065 729,235 757,304 785,285 824,087
Transfer payments 188,660 211,143 215,863 231,210 245,738
Income maintenance 2/ 10,441 11,714 12,752 13,987 14,648
Unemployment insurance 11,307 17,693 11,599 8,451 7,736
Retirement and other 166,912 181,736 191,512 208,772 223,354
Dividends, interest, and rent 158,197 145,877 151,302 160,380 168,401
Population (number of persons) 3/ 60,540 60,883 61,216 61,329 61,105
Per capita incomes (dollars) 4/
Per capita personal income 17,310 17,842 18,369 19,190 20,264
Per capita net earnings 11,580 11,978 12,371 12,804 13,486
Per capita transfer payments 3,116 3,468 3,526 3,770 4,022
Per capita income maintenance 172 192 208 228 240
Per capita unemployment insurance 187 291 189 138 127
Per capita retirement & other 2,757 2,985 3,128 3,404 3,655
Per capita dividends, interest, & rent 2,613 2,396 2,472 2,615 2,756
Place of work profile
Total earnings (place of work, $000) 576,523 603,188 628,184 650,903 668,435
Wages and salary disbursements 463,487 484,239 499,606 518,154 533,551
Other labor income 52,681 57,269 62,460 65,194 66,245
Proprietors' income 60,355 61,680 66,118 67,555 68,639
Nonfarm proprietors' income 49,166 53,173 50,718 61,278 63,679
Farm proprietors' income 11,189 8,507 15,400 6,277 4,960
Total full--and part--time employment 28,594 28,988 29,280 29,177 29,468
Wage and salary jobs 23,392 23,401 23,725 23,800 24,006
Number of proprietors 5,202 5,587 5,555 5,377 5,462
Number of nonfarm proprietors /5 4,533 4,919 4,900 4,756 4,840
Number of farm proprietors 669 668 655 621 622
Average earnings per job (dollars) 20,162 20,808 21,454 22,309 22,683
Wage & salary earnings per job 19,814 20,693 21,058 21,771 22,226
Average earnings per nonfarm proprietor 10,846 10,810 10,351 12,884 13,157
</TABLE>
See footnotes at end of table. REGIONAL ECONOMIC INFORMATION SYSTEM
Table CA30 August 1997 BUREAU OF ECONOMIC ANALYSIS
<PAGE>
REGIONAL ECONOMIC PROFILE
for States and counties
<TABLE>
<CAPTION>
Niagara, New York [36.063]
- ------------------------------------------------------------------------------------------------------------------------------------
Item 1991 1992 1993 1994 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Place of residence profile
Personal income (thousands of dollars) 3,949,362 4,079,850 4,198,151 4,431,914 4,659,893
Nonfarm personal income 3,935,544 4,066,969 4,183,483 4,420,893 4,649,324
Farm income 13,818 12,881 14,668 11,021 10,569
Derivation of personal income
Net earnings 1/ 2,585,535 2,682,219 2,750,239 2,894,342 3,032,115
Transfer payments 773,675 862,959 892,437 956,192 1,017,394
Income maintenance 2/ 65,946 72,966 77,378 80,961 84,256
Unemployment insurance 35,756 59,423 42,224 29,588 26,757
Retirement and other 671,973 730,570 772,835 845,643 906,381
Dividends, interest, and rent 590,152 534,672 555,475 581,380 610,384
Population (number of persons) 3/ 221,166 221,020 221,641 221,578 221,660
Per capita incomes (dollars) 4/
Per capita personal income 17,857 18,459 18,941 20,002 21,023
Per capita net earnings 11,690 12,136 12,409 13,062 13,679
Per capita transfer payments 3,498 3,904 4,026 4,315 4,590
Per capita income maintenance 298 330 349 365 380
Per capita unemployment insurance 162 269 191 134 121
Per capita retirement & other 3,038 3,305 3,487 3,816 4,089
Per capita dividends, interest, & rent 2,668 2,419 2,506 2,624 2,754
Place of work profile
Total earnings (place of work, $000) 2,448,427 2,524,177 2,579,942 2,734,703 2,823,954
Wages and salary disbursements 2,020,753 2,057,474 2,094,131 2,202,070 2,274,850
Other labor income 260,622 286,985 316,879 350,974 361,377
Proprietors' income 167,052 179,718 168,932 181,659 187,727
Nonfarm proprietors' income 161,324 174,718 162,914 179,187 186,728
Farm proprietors' income 5,728 5,000 6,018 2,472 999
Total full- and part- time employment 98,836 88,738 98,340 98,648 100,238
Wage and salary jobs 85,438 84,151 83,726 83,973 85,357
Number of proprietors 13,398 14,587 14,614 14,675 14,881
Number of nonfarm proprietors /5 12,488 13,687 13,732 13,838 14,044
Number of farm proprietors 910 900 882 837 837
Average earnings per job (dollars) 24,773 25,564 26,235 27,722 28,172
Wage & salary earnings per job 23,652 24,450 25,012 26,224 26,651
Average earnings per nonfarm proprietor 12,918 12,765 11,864 12,949 13,296
</TABLE>
See footnotes at end of table. REGIONAL ECONOMIC INFORMATION SYSTEM
Table CA30 August 1997 BUREAU OF ECONOMIC ANALYSIS
<PAGE>
REGIONAL ECONOMIC PROFILE
for States and counties
<TABLE>
<CAPTION>
Orleans, New York [36.073]
- ------------------------------------------------------------------------------------------------------
Item 1991 1992 1993 1994 1995
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Place of residence profile
Personal income (thousands of dollars) 664,054 677,592 702,782 742,273 779,848
Nonfarm personal income 643,377 660,856 681,126 726,182 765,528
Farm income 20,677 16,736 21,656 16,091 14,320
Derivation of personal income
Net earnings 1/ 449,395 456,032 474,032 490,115 510,941
Transfer payments 119,505 136,630 139,898 152,251 164,011
Income maintenance 2/ 11,102 11,984 13,386 14,342 14,747
Unemployment insurance 6,126 10,894 7,825 5,494 6,209
Retirement and other 102,277 113,752 118,687 132,415 143,055
Dividends, interest, and rent 95,154 84,930 88,852 99,907 104,896
Population (number of persons) 3/ 42,557 43,910 44,197 44,708 44,919
Per capita incomes (dollars) 4/
Per capita personal income 15,604 15,431 15,901 16,603 17,361
Per capita net earnings 10,560 10,386 10,725 10,963 11,375
Per capita transfer payments 2,808 3,112 3,165 3,405 3,651
Per capita income maintenance 261 273 303 321 328
Per capita unemployment insurance 144 248 177 123 138
Per capita retirement & other 2,403 2,591 2,685 2,962 3,185
Per capita dividends, interest, & rent 2,236 1,934 2,010 2,235 2,335
Place of work profile
Total earnings (place of work, $000] 308,560 312,631 331,972 343,383 371,707
Wages and salary disbursements 244,731 249,512 264,281 274,721 301,454
Other labor income 25,578 26,517 28,952 30,497 34,002
Proprietors' income 38,251 36,602 38,739 38,165 36,251
Nonfarm proprietors' income 29,385 31,654 30,034 34,832 36,229
Farm proprietors' income 8,866 4,948 8,705 3,333 (L)
Total full-and part-time employment 15,912 16,026 15,964 16,051 16,313
Wage and salary jobs 12,650 12,583 12,585 12,836 13,051
Number of proprietors 3,262 3,443 3,379 3,215 3,262
Number of nonfarm proprietors /5 2,696 2,879 2,826 2,690 2,737
Number of farm proprietors 566 564 553 525 525
Average earnings per job (dollars) 19,392 19,508 20,795 21,393 22,786
Wage & salary earnings per job 19,346 19,829 21,000 21,402 23,098
Average earnings per nonfarm proprietor 10,899 10,995 10,628 12,949 13,237
</TABLE>
See footnotes at end of table. REGIONAL ECONOMIC INFORMATION SYSTEM
Table CA30 August 1997 BUREAU OF ECONOMIC ANALYSIS
<PAGE>
Footnotes for Table CA30, Regional Economic Profiles
1/ Total earnings less personal contributions for social insurance adjusted to
place of residence.
2/ Consists largely of 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 1990-95 reflect
county population estimates available as of March 1997. The population
estimates for the United States, Utah, and Cache, UT, 1991-94, have been
adjusted by BEA for consistency with a special, upward adjustment made by
the Census Bureau to its 1995 estimate for Cache County. Additionally, as a
result of special and test censuses conducted in 1995, the Census Bureau
reduced substantially the 1995 population estimates for Yuma, AZ; DeSoto,
LA; Dorchester, SC; and Montgomery, TN, but made no adjustments to the
estimates for the other years. For these counties, BEA was unable to make
adjustments to the population estimates in time for this release, and the
estimates of per capita personal income are discontinuous between 1994 and
1995. BEA's further adjustments to the population estimates for 1991-94
will be reflected in the release of State per capita personal income on
September 19, 1997 and in the release of local area per capita personal
income in the Spring of 1998.
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. The
Yuma, AZ MSA includes La Paz, AZ through 1982.
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 Borough
and Aleutians West Census Area. Estimates for 1991 forward separate Denali
Borough from Yukon-Koyukuk Census Area and Lake and Peninsula Borough from
Dillingham Census Area. Estimates from 1993 forward separate
Skagway-Yakutat-Angoon Census Area into Skagway-Hoonah-Angoon Census
Area and Yakutat Borough.
9/ Shawano, WI and Menominee, WI are combined as Shawano (incl. Menominee), WI
for the years prior to 1989.
(L) Less than $50,000 or less than 10 jobs, as appropriate. Estimates are
included in totals.
(N) Data not available for this year.
<PAGE>
FULL-TIME AND PART-TIME EMPLOYEES BY MAJOR INDUSTRY 1/
for States and counties
(number of jobs)
<TABLE>
<CAPTION>
New York [36.000]
- ----------------------------------------------------------------------------------------------------------------------------------
Item 1991 1992 1993 1994 1995
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Employment by place of work
Total full- and part-time employment 9,619,382 9,587,629 9,600,441 9,692,949 9,740,793
By type
Wage and salary employment 8,332,467 8,179,896 8,196,939 8,250,134 8,283,479
Proprietors' employment 1,286,915 1,407,733 1,403,502 1,442,815 1,457,314
Farm proprietors' employment 39,291 39,417 38,626 36,670 36,674
Nonfarm proprietors' employment 2/ 1,247,624 1,368,316 1,364,876 1,406,145 1,420,640
By industry
Farm employment 65,040 64,787 63,878 62,579 60,966
Nonfarm employment 9,554,342 9,522,842 9,536,563 9,630,370 9,679,827
Private employment 8,054,500 8,047,730 8,063,842 8,172,340 8,260,522
Ag. serv., forestry, fishing, and other 3/ 56,253 57,490 62,005 64,437 67,572
Mining 10,964 10,698 10,790 10,897 10,748
Construction 381,720 364,084 358,140 368,762 373,361
Manufacturing 1,091,374 1,049,796 1,017,410 995,564 982,532
Transportation and public utilities 475,571 460,298 466,961 472,117 476,424
Wholesale trade 469,070 466,328 455,794 455,376 463,204
Retail trade 1,337,963 1,342,957 1,343,627 1,373,590 1,403,944
Finance, insurance, and real estate 1,083,164 1,058,557 1,052,103 1,068,536 1,049,318
Services 3,148,421 3,237,522 3,297,012 3,363,061 3,433,419
Government and government enterprises 1,499,842 1,475,112 1,472,721 1,458,030 1,419,305
Federal, civilian 156,797 154,683 149,185 146,900 145,670
Military 87,585 84,377 81,039 73,994 65,142
State and local 1,255,460 1,236,052 1,242,497 1,237,136 1,208,493
State 265,674 264,629 266,643 267,737 259,036
Local 989,786 971,423 975,654 969,399 949,457
</TABLE>
See footnotes at end of table. REGIONAL ECONOMIC INFORMATION SYSTEM
Table CA25 BUREAU OF ECONOMIC ANALYSIS
August 1997
<PAGE>
FULL-TIME AND PART-TIME EMPLOYEES BY MAJOR INDUSTRY/1/
for States and counties
(number of jobs)
<TABLE>
<CAPTION>
Erie, New York [36.029]
- ---------------------------------------------------------------------------------------------------------------
Item 1991 1992 1993 1994 1995
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Employment by place of work
Total full-and part-time employment 531,031 531,857 532,048 539,827 543,909
By type
Wage and salary employment 467,917 463,340 463,179 468,943 472,196
Proprietors' employment 63,114 68,517 68,869 70,884 71,713
Farm proprietors' employment 1,167 1,163 1,140 1,082 1,082
Nonfarm proprietors' employment 2/ 61,947 67,354 67,729 69,802 70,631
By industry
Farm employment 2,247 2,142 2,114 2,082 2,019
Nonfarm employment 528,884 529,715 529,934 537,745 541,890
Private employment 452,472 454,589 455,152 462,793 467,699
Ag. serv., forestry, fishing, and other 3/ 2,867 3,078 3,208 3,367 3,427
Mining 625 615 646 691 697
Construction 22,062 21,793 21,783 22,038 22,862
Manufacturing 74,703 72,868 71,546 72,112 73,337
Transportation and public utilities 23,940 23,062 23,470 23,978 24,201
Wholesale trade 26,212 26,704 26,399 26,595 26,957
Retail trade 100,541 100,719 99,651 101,455 100,904
Finance, insurance, and real estate 40,413 40,573 40,193 40,600 39,852
Services 161,109 165,177 168,256 171,957 175,462
Government and government enterprises 76,412 75,126 74,782 74,952 74,191
Federal, civilian 9,041 9,048 8,896 8,890 9,025
Military 3,397 3,272 3,144 2,839 2,595
State and local 63,974 62,806 62,742 63,223 62,571
State 19,262 18,313 18,602 18,722 18,352
Local 44,712 44,493 44,140 44,501 44,219
</TABLE>
See footnotes at end of table. REGIONAL ECONOMIC INFORMATION SYSTEM
Table CA25 August 1997 BUREAU OF ECONOMIC ANALYSIS
<PAGE>
FULL-TIME AND PART-TIME EMPLOYEES BY MAJOR INDUSTRY 1/
for States and counties
(number of jobs)
<TABLE>
<CAPTION>
Genesee, New York [36.037]
- ----------------------------------------------------------------------------------------------------------
Item 1991 1992 1993 1994 1995
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Employment by place of work
Total full--and Part--time employment 28,594 28,988 29,280 29,177 29,468
By type
Wage and salary employment 23,392 23,401 23,725 23,800 24,006
Proprietors' employment 5,202 5,587 5,555 5,377 5,462
Farm proprietors' employment 669 668 655 621 622
Nonfarm proprietors' employment 2/ 4,533 4,919 4,900 4,756 4,840
By industry
Farm employment 1,337 1,335 1,319 1,302 1,261
Nonfarm employment 27,257 27,653 27,961 27,875 28,207
Private employment 22,139 22,542 22,773 22,627 23,001
Ag. serv., forestry, fishing, and other 3/ 342 326 352 350 373
Mining 158 102 106 102 85
Construction 1,211 1,247 1,298 1,277 1,304
Manufacturing 4,750 4,645 4,713 4,688 4,609
Transportation and public utilities 861 935 1,028 1,001 877
Wholesale trade 1,480 1,519 1,432 1,480 1,554
Retail trade 4,944 5,132 5,111 5,190 5,460
Finance, insurance, and real estate 1,195 1,217 1,163 1,162 1,149
Services 7,198 7,419 7,570 7,377 7,590
Government and government enterprises 5,118 5,111 5,188 5,248 5,206
Federal, civilian 627 642 642 658 649
Military 187 180 170 152 140
State and local 4,304 4,289 4,376 4,438 4,417
State 517 521 507 510 494
Local 3,787 3,768 3,869 3,928 3,923
</TABLE>
See footnotes at end of table. REGIONAL ECONOMIC INFORMATION SYSTEM
Table CA25 August 1997 BUREAU OF ECONOMIC ANALYSIS
<PAGE>
FULL-TIME AND PART-TIME EMPLOYEES BY MAJOR INDUSTRY/1/
for States and counties
(number of jobs)
<TABLE>
<CAPTION>
Niagara, New York [36.063]
- ----------------------------------------------------------------------------------------------------------------
Item 1991 1992 1993 1994 1995
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Employment by place of work
Total full-and part-time employment 98,836 98,738 98,340 98,648 100,238
By type
Wage and salary employment 85,438 84,151 83,726 83,973 85,357
Proprietors' employment 13,398 14,587 14,614 14,675 14,881
Farm proprietors' employment 910 900 882 837 837
Nonfarm proprietors' employment 2/ 12,488 13,687 13,732 13,838 14,044
By industry
Farm employment 1,755 1,761 1,739 1,716 1,661
Nonfarm employment 97,081 96,977 96,601 96,932 98,577
Private employment 83,691 83,829 83,411 83,698 85,413
Ag. serv., forestry, fishing, and other 3/ 641 (D) (D) (D) (D)
Mining 158 (D) (D) (D) (D)
Construction 4,976 4,677 4,421 4,434 4,631
Manufacturing 21,603 21,099 20,633 20,164 20,741
Transportation and public utilities 4,466 4,674 4,839 5,084 5,187
Wholesale trade 2,853 2,966 2,806 2,827 3,027
Retail trade 20,262 20,282 20,800 20,893 20,780
Finance, insurance, and real estate 4,236 4,341 4,039 4,059 4,029
Services 24,496 25,059 25,077 25,368 26,054
Government and government enterprises 13,390 13,148 13,190 13,234 13,164
Federal, civilian 1,239 1,271 1,231 1,252 1,221
Military 706 668 635 575 534
State and local 11,445 11,209 11,324 11,407 11,409
State 1,084 1,057 1,011 1,064 1,023
Local 10,361 10,152 10,313 10,343 10,386
</TABLE>
See footnotes at end of table. REGIONAL ECONOMIC INFORMATION SYSTEM
Table CA25 August 1997 BUREAU OF ECONOMIC ANALYSIS
<PAGE>
FULL-TIME AND PART-TIME EMPLOYEES BY MAJOR INDUSTRY 1/
for States and counties
(number of jobs)
<TABLE>
<CAPTION>
Orleans, New York [36.073]
- --------------------------------------------------------------------------------------------------------
Item 1991 1992 1993 1994 1995
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Employment by place of work
Total full- and part-time employment 15,912 16,026 15,964 16,051 16,313
By type
Wage and salary employment 12,650 12,583 12,585 12,836 13,051
Proprietors' employment 3,262 3,443 3,379 3,215 3,262
Farm proprietors' employment 566 564 553 525 525
Nonfarm proprietors' employment 2/ 2,696 2,879 2,826 2,690 2,737
By industry
Farm employment 1,409 1,419 1,404 1,398 1,344
Nonfarm employment 14,503 14,607 14,560 14,653 14,969
Private employment 10,558 10,507 10,330 10,325 10,601
Ag. serv., forestry, fishing, and other 3/ 220 236 275 275 281
Mining 16 26 48 48 41
Construction 678 686 657 685 706
Manufacturing 2,654 2,455 2,240 2,383 2,429
Transportation and public utilities 367 350 379 368 403
Wholesale trade 295 281 294 286 298
Retail trade 2,554 2,597 2,630 2,557 2,674
Finance, insurance, and real estate 777 814 725 728 758
Services 2,997 3,062 3,082 2,995 3,011
Government and government enterprises 3,945 4,100 4,230 4,328 4,368
Federal, civilian 87 96 90 90 91
Military 130 127 124 113 102
State and local 3,728 3,877 4,016 4,125 4,175
State 1,159 1,299 1,414 1,456 1,444
Local 2,569 2,578 2,602 2,669 2,731
</TABLE>
See footnotes at end of table. REGIONAL ECONOMIC INFORMATION SYSTEM
Table CA25 August 1997 BUREAU OF ECONOMIC ANALYSIS
<PAGE>
Footnotes for Table CA25
Total Full- and Part-time Employment by Major Industry
1/ 1969-74 based on 1967 SIC. 1975-87 based on 1972 SIC. 1988-95 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. The
Yuma, AZ MSA includes La Paz, AZ through 1982.
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 Borough
and Aleutians West Census Area. Estimates for 1991 forward separate Denali
Borough from Yukon-Koyukuk Census Area and Lake and Peninsula Borough from
Dillingham Census Area. Estimates from 1993 forward separate
Skagway-Yakutat-Angoon Census Area into Skagway-Hoonah-Angoon Census
Area and Yakutat Borough.
7/ Shawano, WI and Menominee, WI are combined as Shawano (incl. Menominee), WI
for the years prior to 1989.
E Estimate shown constitutes the major portion of the true estimate.
(D) Not shown to avoid disclosure of confidential information. Estimates are
included in totals.
(L) Less than 10 jobs. Estimates are included in totals.
(N) Data not available for this year.
<PAGE>
PERSONAL INCOME BY MAJOR SOURCE AND EARNINGS BY INDUSTRY 1/
for States and counties
(thousands of dollars)
<TABLE>
<CAPTION>
New York [36.000]
- -----------------------------------------------------------------------------------------------------------------------------------
Item 1991 1992 1993 1994 1995
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Income by place of residence
Personal income (thousands of dollars) 426,449,104 449,864,254 457,203,969 476,488,152 501,555,050
Nonfarm personal income 425,831,123 449,193,087 456,503,357 475,959,923 501,054,661
Farm income 2/ 617,981 671,167 700,612 528,229 500,389
Population (number of persons] 3/ 18,036,973 18,099,081 18,170,321 18,196,829 18,190,562
Per capita personal income (dollars) 23,643 24,856 25,162 26,185 27,572
Derivation of personal Income
Earnings by place of work 305,441,339 326,475,141 331,289,663 340,128,647 356,642,266
Less: Personal cont. for social insurance 4/ 20,157,669 21,277,343 21,723,056 22,809,811 23,969,575
Plus: Adjustment for residence 5/ -14,032,029 -16,253,295 -16,176,404 -16,054,849 -17,458,226
Equals: Net earnings by place of residence 271,251,641 288,944,503 293,390,203 301,263,987 315,214,465
Plus: Dividends, interest, and rent 6/ 83,100,905 79,683,581 80,332,228 84,364,798 88,221,927
Plus: Transfer payments 72,096,558 81,236,170 83,481,538 90,859,367 98,118,658
Earnings by place of work
Components of earnings
Wage and salary disbursements 247,723,582 261,957,013 266,625,813 272,565,079 285,813,769
Other labor income 26,017,929 28,145,814 29,950,705 31,069,418 32,280,796
Proprietors' income 7/ 31,699,828 36,372,314 34,713,145 36,494,150 38,547,701
Farm proprietors' Income 286,741 348,667 346,393 179,067 109,167
Nonfarm proprietors' income 31,413,087 36,023,647 34,366,752 36,315,083 38,438,534
Earnings by industry
Farm earnings 617,981 671,167 700,612 528,229 500,389
Nonfarm earnings 304,823,358 325,803,974 330,589,051 339,600,418 356,141,877
Private earnings 256,703,602 276,348,868 279,258,676 286,634,354 302,158,622
Ag. serv., forestry, fishing, and other 8/ 1,086,872 1,102,025 1,139,347 1,174,292 1,239,111
Mining 276,048 273,802 281,155 298,633 293,435
Construction 12,677,634 11,765,608 11,856,560 12,667,535 12,766,179
Manufacturing 44,745,691 45,876,270 45,362,772 45,494,376 46,445,386
Durable goods 25,068,221 25,047,552 24,575,906 24,293,517 24,738,903
Nondurable goods 19,677,470 20,828,718 20,786,866 21,200,859 21,706,483
Transportation and public utilities 19,450,794 20,065,314 20,486,738 21,318,786 22,111,552
Wholesale trade 19,119,719 19,824,455 19,800,313 20,338,035 21,278,758
Retail trade 21,686,107 22,345,983 22,588,182 23,592,343 24,447,935
Finance, insurance, and real estate 44,488,557 54,163,800 53,874,820 52,813,729 58,166,600
Services 93,172,180 100,931,611 103,868,789 108,936,625 115,409,666
Government and government enterprises 48,119,756 49,455,106 51,330,375 52,966,064 53,983,255
Federal, civilian 6,006,187 6,332,570 6,418,896 6,543,912 6,584,486
Military 1,138,593 1,185,018 1,155,578 1,083,014 979,334
State and local 40,974,976 41,937,518 43,755,901 45,339,138 46,419,435
State 9,418,527 9,580,671 10,046,333 10,577,353 10,448,545
Local 31,556,449 32,356,847 33,709,568 34,761,785 35,970,890
</TABLE>
See footnotes at end of table. REGIONAL ECONOMIC INFORMATION SYSTEM
Table CA05.1 August 1997 BUREAU OF ECONOMIC ANALYSIS
<PAGE>
PERSONAL INCOME BY MAJOR SOURCE AND EARNINGS BY INDUSTRY 1/
for States and counties
(thousands of dollars)
<TABLE>
<CAPTION>
Erie, New York [36.029]
- ----------------------------------------------------------------------------------------------------------------------------------
Item 1991 1992 1993 1994 1995
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Income by place of residence
Personal income (thousands of dollars) 18,746,468 19,466,440 19,942,117 21,077,115 22,105,612
Nonfarm personal income 18,728,560 19,447,602 19,921,683 21,061,393 22,090,233
Farm income 2/ 17,908 18,838 20,434 15,722 15,379
Population (number of persons) 3/ 970,281 971,253 970,238 966,271 960,314
Per capita personal income (dollars) 19,321 20,043 20,554 21,813 23,019
Derivation of personal income
Earnings by place of work 13,079,037 13,753,376 14,071,367 14,729,001 15,418,592
Less: Personal cont. for social insurance 4/ 870,279 905,045 933,025 1,001,350 1,048,656
Plus: Adjustment for residence 5/ -414,663 -449,992 -464,786 -466,632 -527,881
Equals: Net earnings by place of residence 11,794,095 12,398,339 12,673,556 13,261,019 13,842,055
Plus: Dividends, interest, and rent 6/ 3,300,977 3,022,000 3,128,535 3,356,410 3,523,771
Plus: Transfer payments 3,651,396 4,046,101 4,140,026 4,459,686 4,739,786
Earnings by place of work
Components of earnings
Wage and salary disbursements 10,848,897 11,289,562 11,566,203 12,011,111 12,580,513
Other labor income 1,222,563 1,322,143 1,436,196 1,529,702 1,586,872
Proprietors' income 7/ 1,007,577 1,141,671 1,068,968 1,188,188 1,251,207
Farm proprietors' income 5,750 7,125 7,570 3,036 1,167
Nonfarm proprietors' income 1,001,827 1,134,546 1,061,398 1,185,152 1,250,040
Earnings by industry
Farm earnings 17,908 18,838 20,434 15,722 15,379
Nonfarm earnings 13,061,129 13,734,538 14,050,933 14,713,279 15,403,213
Private earnings 10,651,295 11,253,968 11,519,761 12,120,942 12,673,485
Ag. serv., forestry, fishing, and other 8/ 44,045 46,814 46,708 47,880 50,383
Mining 11,751 11,400 10,532 11,110 11,100
Construction 658,886 652,430 671,365 694,300 729,531
Manufacturing 2,808,182 2,914,736 3,011,778 3,234,377 3,341,160
Durable goods 1,747,294 1,797,398 1,871,942 2,073,697 2,153,002
Nondurable goods 1,060,888 1,117,338 1,139,836 1,160,680 1,188,158
Transportation and public utilities 859,208 903,203 919,751 957,013 982,216
Wholesale trade 760,709 785,828 798,595 825,941 877,417
Retail trade 1,314,591 1,330,004 1,313,219 1,356,064 1,390,167
Finance, insurance, and real estate 841,905 918,244 946,983 960,120 991,008
Services 3,352,018 3,691,309 3,800,830 4,034,137 4,300,503
Government and government enterprises 2,409,834 2,480,570 2,531,172 2,592,337 2,729,728
Federal, civilian 333,083 349,183 360,749 373,100 390,071
Military 28,992 30,856 31,307 30,487 29,324
State and local 2,047,759 2,100,531 2,139,116 2,188,750 2,310,333
State 658,892 639,630 672,740 714,294 710,091
Local 1,388,867 1,460,901 1,466,376 1,474,456 1,600,242
</TABLE>
See footnotes at and of table. REGIONAL ECONOMIC INFORMATION SYSTEM
Table CA05.1 August 1997 BUREAU OF ECONOMIC ANALYSIS
<PAGE>
PERSONAL INCOME BY MAJOR SOURCE AND EARNINGS BY INDUSTRY 1/
for States and counties
(thousands of dollars)
<TABLE>
<CAPTION>
Genesee, New York [36.037]
- ----------------------------------------------------------------------------------------------------------------------------------
Item 1991 1992 1993 1994 1995
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Income by place of residence
Personal income (thousands of dollars) 1,047,922 1,086,255 1,124,469 1,176,875 1,238,226
Nonfarm personal income 1,026,415 1,067,731 1,098,064 1,159,763 1,221,120
Farm income 2/ 21,507 18,524 26,405 17,112 17,106
Population (number of persons) 3/ 60,540 60,883 61,216 61,329 61,105
Per capita personal income (dollars) 17,310 17,842 18,369 19,190 20,264
Derivation of personal income
Earnings by place of work 576,523 603,188 628,184 650,903 668,435
Less: Personal cont. for social insurance 4/ 36,173 37,608 38,927 41,723 43,268
Plus: Adjustment for residence 5/ 160,715 163,655 168,047 176,105 198,920
Equals: Net earnings by place of residence 701,065 729,235 757,304 785,285 824,087
Plus: Dividends, interest, and rent 6/ 158,197 145,877 151,302 160,380 168,401
Plus: Transfer payments 188,660 211,143 215,863 231,210 245,738
Earnings by place of work
Components of earnings
Wage and salary disbursements 463,487 484,239 499,606 518,154 533,551
Other labor income 52,681 57,269 62,460 65,194 66,245
Proprietors' income 7/ 60,355 61,680 66,118 67,555 68,639
Farm proprietors' income 11,189 8,507 15,400 6,277 4,960
Nonfarm proprietors' income 49,166 53,173 50,718 61,278 63,679
Earnings by industry
Farm earnings 21,507 18,524 26,405 17,112 17,106
Nonfarm earnings 555,016 584,664 601,779 633,791 651,329
Private earnings 422,615 443,525 454,944 475,856 490,029
Ag. serv., forestry, fishing, and other 8/ 3,681 3,295 3,083 3,074 3,277
Mining 5,399 3,951 4,051 4,050 3,561
Construction 27,095 27,351 29,995 31,000 30,941
Manufacturing 142,550 146,520 148,539 155,510 153,733
Durable goods 94,836 96,061 95,574 99,217 94,687
Nondurable goods 47,714 50,459 52,965 56,293 59,046
Transportation and public utilities 27,576 34,557 37,389 37,553 34,168
Wholesale trade 44,086 44,573 41,754 44,094 47,708
Retail trade 52,942 55,801 56,824 58,646 64,578
Finance, insurance, and real estate 14,574 15,369 16,679 15,212 15,759
Services 104,712 112,108 116,630 126,717 136,304
Government and government enterprises 132,401 141,139 146,835 157,935 161,300
Federal, civilian 21,529 23,037 22,675 28,093 28,282
Military 1,202 1,261 1,234 1,204 1,141
State and local 109,670 116,841 122,926 128,638 131,877
State 17,121 17,477 18,013 18,583 18,475
Local 92,549 99,364 104,913 110,055 113,402
</TABLE>
See footnotes at end of table. REGIONAL ECONOMIC INFORMATION SYSTEM
Table CAO5.1 August 1997 BUREAU OF ECONOMIC ANALYSIS
<PAGE>
PERSONAL INCOME BY MAJOR SOURCE AND EARNINGS BY INDUSTRY 1/
for States and counties
(thousands of dollars)
<TABLE>
<CAPTION>
Niagara, New York (36.063]
- ----------------------------------------------------------------------------------------------------------------------------
Item 1991 1992 1993 1994 1995
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Income by place of residence
Personal income (thousands of dollars) 3,949,362 4,079,850 4,198,151 4,431,914 4,659,893
Nonfarm personal income 3,935,544 4,066,969 4,183,483 4,420,893 4,649,324
Farm income 2/ 13,818 12,881 14,668 11,021 10,569
Population (number of persons) 3/ 221,166 221,020 221,641 221,578 221,660
Per capita personal income (dollars) 17,857 18,459 18,941 20,002 21,023
Derivation of personal income
Earnings by place of work 2,448,427 2,524,177 2,579,942 2,734,703 2,823,954
Less: Personal cont. for social insurance 4/ 166,276 168,937 172,595 186,969 194,588
Plus: Adjustment for residence 5/ 303,384 326,979 342,892 346,608 402,749
Equals: Net earnings by place of residence 2,585,535 2,682,219 2,750,239 2,894,342 3,032,115
Plus: Dividends, interest, and rent 6/ 590,152 534,672 555,475 581,380 610,384
Plus: Transfer payments 773,675 862,959 892,437 956,192 1,017,394
Earnings by place of work
Components of earnings
Wage and salary disbursements 2,020,753 2,057,474 2,094,131 2,202,070 2,274,850
Other labor income 260,622 286,985 316,879 350,974 361,377
Proprietors' income 7/ 167,052 179,718 168,932 181,659 187,727
Farm proprietors' income 5,728 5,000 6,018 2,472 999
Nonfarm proprietors' income 161,324 174,718 162,914 179,187 186,728
Earnings by industry
Farm earnings 13,818 12,881 14,668 11,021 10,569
Nonfarm earnings 2,434,609 2,511,296 2,565,274 2,723,682 2,813,385
Private earnings 2,051,095 2,115,422 2,146,535 2,286,215 2,376,080
Ag. serv., forestry, fishing, and other 8/ 8,648 (D) (D) (D) (D)
Mining 6,401 (D) (D) (D) (D)
Construction 150,815 132,590 125,985 135,125 135,990
Manufacturing 957,712 976,315 992,986 1,068,438 1,106,105
Durable goods 677,308 672,191 697,154 776,122 796,494
Nondurable goods 280,404 304,124 295,832 292,316 309,611
Transportation and public utilities 140,234 154,143 162,596 172,248 184,877
Wholesale trade 71,913 79,773 83,504 85,437 90,279
Retail trade 246,229 247,593 256,625 264,486 270,256
Finance, insurance, and real estate 50,776 54,237 55,655 56,748 59,549
Services 418,367 458,882 456,426 489,832 513,171
Government and government enterprises 383,514 395,874 418,739 437,467 437,305
Federal, civilian 42,684 46,019 47,430 46,968 47,486
Military 4,972 5,133 4,980 5,079 5,128
State and local 335,858 344,722 366,329 385,420 384,691
State 36,655 37,959 37,223 41,438 41,989
Local 299,203 306,763 329,106 343,982 342,702
</TABLE>
See footnotes at end of table. REGIONAL ECONOMIC INFORMATION SYSTEM
Table CA05.l August 1997 BUREAU OF ECONOMIC ANALYSIS
<PAGE>
PERSONAL INCOME BY MAJOR SOURCE AND EARNINGS BY INDUSTRY 1/
for States and counties
(thousands of dollars)
<TABLE>
<CAPTION>
Orleans, New York [36.073]
- ------------------------------------------------------------------------------------------------------------------------
Item 1991 1992 1993 1994 1995
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Income by place of residence
Personal income (thousands of dollars] 664,054 677,592 702,782 742,273 779,848
Nonfarm personal income 643,377 660,856 681,126 726,182 765,528
Farm income 2/ 20,677 16,736 21,656 16,091 14,320
Population (number of persons] 3/ 42,557 43,910 44,197 44,708 44,919
Per capita personal income (dollars] 15,604 15,431 15,901 16,603 17,361
Derivation of personal Income
Earnings by place of work 308,560 312,631 331,972 343,383 371,707
Less: Personal cont. for social insurance 4/ 16,869 17,128 17,708 19,165 21,381
Plus: Adjustment for residence 5/ 157,704 160,529 159,768 165,897 160,615
Equals: Net earnings by place of residence 449,395 456,032 474,032 490,115 510,941
Plus: Dividends, interest, and rent 6/ 95,154 84,930 88,852 99,907 104,896
Plus: Transfer payments 119,505 136,630 139,898 152,251 164,011
Earnings by place of work
Components of earnings
Wage and salary disbursements 244,731 249,512 264,281 274,721 301,454
Other labor income 25,578 26,517 28,952 30,497 34,002
Proprietors' income 7/ 38,251 36,602 38,739 38,165 36,251
Farm proprietors' income 8,866 4,948 8,705 3,333 (L)
Nonfarm proprietors' income 29,385 31,654 30,034 34,832 36,229
Earnings by Industry
Farm earnings 20,677 16,736 21,656 16,091 14,320
Nonfarm earnings 287,883 295,895 310,316 327,292 357,387
Private earnings 180,345 181,241 183,314 193,135 215,961
Ag. serv., forestry, fishing, and other 8/ 2,050 2,132 2,541 2,769 2,931
Mining 486 786 1,626 1,967 1,492
Construction 13,732 13,263 13,869 15,421 15,857
Manufacturing 65,736 63,150 60,680 63,228 79,537
Durable goods 44,258 42,342 39,548 41,337 55,391
Nondurable goods 21,478 20,808 21,132 21,891 24,146
Transportation and public utilities 10,776 10,429 11,470 11,654 11,950
Wholesale trade 7,214 6,575 6,684 6,469 6,588
Retail trade 26,353 27,059 27,602 27,593 29,742
Finance, insurance, and real estate 11,113 11,425 11,393 11,394 12,626
Services 42,885 46,422 47,449 52,640 55,238
Government and government enterprises 107,538 114,654 127,002 134,157 141,426
Federal, civilian 3,213 3,771 3,658 3,701 3,831
Military 812 877 874 878 821
State and local 103,513 110,006 122,470 129,578 136,774
State 39,164 45,055 51,971 56,138 56,461
Local 64,349 64,951 70,499 73,440 80,313
</TABLE>
See footnotes at end of table. REGIONAL ECONOMIC INFORMATION SYSTEM
Table CAO5.1 August 1997 BUREAU OF ECONOMIC ANALYSIS
<PAGE>
Footnotes for table CA05
Personal Income by major source and Earnings by Major Industry
1/ 1969-74 based on 1967 SIC. 1975-87 based on 1972 SIC. 1988-95 based on 1987
SIC.
2/ Farm income consists of proprietors' net income; the cash wages,
pay-in-kind, and other labor income of hired farm workers; and the salaries
of officers of corporate farms.
3/ Census Bureau midyear population estimates. Estimates for 1990-95 reflect
county population estimates available as of March 1997. The population
estimates for the United States, Utah, and Cache, UT, 1991-94, have been
adjusted by BEA for consistency with a special, upward adjustment made by
the Census Bureau to its 1995 estimate for Cache County. Additionally, as a
result of special and test censuses conducted in 1995, the Census Bureau
reduced substantially the 1995 population estimates for Yuma, AZ; DeSoto,
LA; Dorchester, SC; and Montgomery, TN, but made no adjustments to the
estimates for the other years. For these counties, BEA was unable to make
adjustments to the population estimates in time for this release, and the
estimates of per capita personal income are discontinuous between 1994 and
1995. BEA's further adjustments to the population estimates for 1991-94
will be reflected in the release of State per capita personal income on
September 19, 1997 and in the release of local area per capita personal
income in the Spring of 1998.
4/ Personal contributions for social insurance are included in earnings by
type and industry but excluded from personal income.
5/ The adjustment for residence is the net inflow of the earnings of interarea
commuters. For the United States, it consists of adjustments for border
workers: Earnings of U.S. residents commuting outside U.S. borders to work
less earnings of foreign residents commuting inside U.S. borders to work
and of 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 wage and salary disbursements of U.S. residents
employed by international organizations and foreign embassies and
consulates in the United States.
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. Estimates for 1991 forward separate Denali
Borough from Yukon-Koyukuk Census Area and Lake and Peninsula Borough from
Dillingham Census Area. 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. The
Yuma, AZ MSA contains La Paz, AZ through 1982.
16/ Shawano, WI and Menominee, WI are combined as Shawano (incl. Menominee), WI
for the years prior to 1989.
E The estimate shown here constitutes the major portion of the true estimate.
(D) Not shown to avoid disclosure of confidential information. Estimates
are included in totals.
(L) Less than $50,000. Estimates are included in totals.
(N) Data not available for this year.
<PAGE>
EXHIBIT III-1
General Characteristics of Publicly-Traded Institutions
<PAGE>
RP FINANCIAL, LC.
- -------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
December 5, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
---------------------------- ------ ------- --------- ------ ------- ---- ---- ----- ------
($Mil) ($) ($Mil)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
California Companies
--------------------
AHM Ahmanson and Co. H.F. of CA NYSE Nationwide M.B. 46,800 391 12-31 10/72 59.50 5,617
GDW Golden West Fin. Corp. of CA NYSE Nationwide M.B. 39,229 246 12-31 05/59 89.62 5,088
GSB Glendale Fed. Bk, FSB of CA NYSE CA Div. 16,433 154 06-30 10/83 33.31 1,681
CSA Coast Savings Financial of CA NYSE California R.E. 9,040 92 12-31 12/85 60.00 1,119
DSL Downey Financial Corp. of CA NYSE Southern CA Thrift 5,854 82 12-31 01/71 27.50 736
FED FirstFed Fin. Corp. of CA NYSE Los Angeles CA R.E. 4,105 25 12-31 12/83 36.50 386
BPLS Bank Plus Corp. of CA OTC Los Angeles CA R.E. 3,920 33 12-31 / 11.12 215
WES Westcorp Inc. of Orange CA NYSE California Div. 3,757 26 12-31 05/86 17.00 446
BVCC Bay View Capital Corp. of CA OTC San Francisco CA M.B. 3,162 45 12-31 05/86 33.75 419
PFFB PFF Bancorp of Pomona CA OTC Southern CA Thrift 2,615 23 03-31 03/96 18.37 329
CENF CENFED Financial Corp. of CA OTC Los Angeles CA Thrift 2,305 18 12-31 10/91 40.75 243
AFFFZ America First Fin. Fund of CA OTC San Francisco CA Div. 2,251 36 12-31 / 47.12 283
HEMT HF Bancorp of Hemet CA OTC Southern CA Thrift 1,050 19 06-30 06/95 16.75 105
REDF RedFed Bancorp of Redlands CA OTC Southern CA Thrift 967 14 12-31 04/94 20.00 144
ITLA Imperial Thrift & Loan of CA (3) OTC Los Angeles CA R.E. 902 9 12-31 / 18.00 141
HTHR Hawthorne Fin. Corp. of CA OTC Southern CA Thrift 891 6 12-31 / 21.00 65
QCBC Quaker City Bancorp of CA OTC Los Angeles CA R.E. 847 8 06-30 12/93 20.50 96
PROV Provident Fin. Holdings of CA OTC Southern CA M.B. 641 9 06-30 06/96 20.00 97
HBNK Highland Federal Bank of CA OTC Los Angeles CA R.E. 516 8 12-31 / 32.00 74
MBBC Monterey Bay Bancorp of CA OTC West Central CA Thrift 410 7 12-31 02/95 19.00 61
SGVB SGV Bancorp of W. Covina CA OTC Los Angeles CA Thrift 409 8 06-30 06/95 17.12 40
BYFC Broadway Fin. Corp. of CA OTC Los Angeles CA Thrift 122 J 3 12-31 01/96 13.00 11
Florida Companies
-----------------
OCN Ocwen Financial Corp. of FL OTC Southeast FL Div. 2,956 1 12-31 / 24.25 1,467
BANC BankAtlantic Bancorp of FL OTC Southeastern FL M.B. 2,845 56 12-31 11/83 14.37 320
BKUNA BankUnited SA of FL OTC Miami FL Thrift 2,145 14 09-30 12/85 12.94 123
FFPB First Palm Beach Bancorp of FL OTC Southeast FL Thrift 1,808 40 09-30 09/93 38.75 196
HARB Harbor FSB, MHC of FL (46.6) OTC Eastern FL Thrift 1,131 23 09-30 01/94 65.00 323
</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
December 5, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
------ ---------------------------------- ------ ---------------- --------- ------ ------- ---- ---- ----- ------
($Mil) ($) ($Mil)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Florida Companies (continued)
-----------------------------
FFFL Fidelity FSB, MHC of FL (47.7) OTC Southeast FL Thrift 999 J 20 12-31 01/94 27.87 189
CMSV Commty. Svgs, MHC of FL (48.5) OTC Southeast FL Thrift 709 19 12-31 10/94 35.00 178
FFLC FFLC Bancorp of Leesburg FL OTC Central FL Thrift 383 9 12-31 01/94 22.50 86
Mid-Atlantic Companies
----------------------
DME Dime Bancorp, Inc. of NY (3) NYSE NY,NJ,FL M.B. 19,413 86 12-31 08/86 24.25 2,461
SVRN Sovereign Bancorp of PA OTC PA,NJ,DE M.B. 14,601 120 12-31 08/86 18.94 1,691
GPT GreenPoint Fin. Corp. of NY (3) NYSE New York City NY Thrift 13,094 74 12-31 01/94 66.62 2,853
ASFC Astoria Financial Corp. of NY OTC NY Thrift 7,904 45 12-31 11/93 55.12 1,139
LISB Long Island Bancorp, Inc of NY OTC Long Island NY M.B. 5,931 36 09-30 04/94 47.12 1,132
ALBK ALBANK Fin. Corp. of Albany NY OTC Upstate NY,MA,VT Thrift 3,717 70 12-30 04/92 46.25 595
ROSE T R Financial Corp. of NY (3) OTC New York City NY Thrift 3,692 15 12-31 06/93 32.87 578
RSLN Roslyn Bancorp, Inc. of NY (3) OTC Long Island NY M.B. 3,474 6 12-31 01/97 21.75 949
NYB New York Bancorp, Inc. of NY NYSE Southeastern NY Thrift 3,244 29 09-30 01/88 35.37 754
MLBC ML Bancorp of Villanova PA OTC Philadelphia PA M.B. 2,316 18 03-31 08/94 28.75 341
CMSB Cmnwealth Bancorp of PA OTC Philadelphia PA M.B. 2,278 39 06-30 06/96 20.37 331
HARS Harris SB, MHC of PA (24.3) OTC Southeast PA Thrift 2,110 31 12-31 01/94 19.00 642
NWSB Northwest SB, MHC of PA (30.7) OTC Pennsylvania Thrift 2,101 53 06-30 11/94 14.00 655
RELY Reliance Bancorp, Inc. of NY OTC New York City NY Thrift 2,035 28 06-30 03/94 33.12 289
HAVN Haven Bancorp of Woodhaven NY OTC New York City NY Thrift 1,833 20 12-31 09/93 43.00 189
QCSB Queens County Bancorp of NY (3) OTC New York City NY Thrift 1,541 13 12-31 11/93 35.00 529
JSB JSB Financial, Inc. of NY NYSE New York City NY Thrift 1,531 13 12-31 06/90 46.62 461
WSFS WSFS Financial Corp. of DE (3) OTC DE Div. 1,496 16 12-31 11/86 19.62 244
OCFC Ocean Fin. Corp. of NJ OTC Eastern NJ Thrift 1,448 J 10 12-31 07/96 37.12 303
DIME Dime Community Bancorp of NY OTC New York City NY Thrift 1,385 15 06-30 06/96 23.25 294
PFSB PennFed Fin. Services of NJ OTC Northern NJ Thrift 1,364 17 06-30 07/94 33.19 160
MFSL Maryland Fed. Bancorp of MD OTC MD Thrift 1,157 J 25 02-28 06/87 26.62 172
YFED York Financial Corp. of PA OTC PA,MD Thrift 1,156 22 06-30 02/84 26.50 233
FSLA First SB SLA MHC of NJ (47.5) OTC Eastern NJ Thrift 1,045 16 12-31 07/92 40.37 323
PVSA Parkvale Financial Corp of PA OTC Southwestern PA Thrift 1,005 28 06-30 07/87 29.75 152
FFIC Flushing Fin. Corp. of NY (3) OTC New York City NY Thrift 960 7 12-31 11/95 22.25 178
</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
December 5, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
------ ---------------------------------- ------ --------------- --------- ------ ------- ---- ----- ----- ------
($Mil) ($) ($Mil)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mid-Atlantic Companies (continued)
----------------------------------
PSBK Progressive Bank, Inc. of NY (3) OTC Southeast NY Thrift 885 17 12-31 08/84 33.75 129
PKPS Poughkeepsie Fin. Corp. of NY OTC Southeast NY Thrift 884 13 12-31 11/85 9.94 125
PWBC PennFirst Bancorp of PA OTC Western PA Thrift 822 9 12-31 06/90 18.25 97
MBB MSB Bancorp of Middletown NY (3) AMEX Southeastern NY Thrift 814 J 16 12-31 09/92 29.00 82
GAF GA Financial Corp. of PA AMEX Pittsburgh PA Thrift 802 13 12-31 03/96 19.25 153
IBSF IBS Financial Corp. of NJ OTC Southwest NJ Thrift 735 10 09-30 10/94 17.44 191
SFIN Statewide Fin. Corp. of NJ OTC Northern NJ Thrift 703 16 12-31 10/95 21.50 99
FBBC First Bell Bancorp of PA OTC Pittsburgh PA Thrift 681 7 12-31 06/95 17.25 112
TSBS Peoples Bcrp, MHC of NJ (35.9) OTC Central NJ Thrift 639 14 12-31 08/95 34.75 314
THRD TF Financial Corp. of PA OTC Philadelphia PA Thrift 625 14 06-30 07/94 28.00 114
FSNJ Bayonne Banchsares of NJ OTC Northern NJ Thrift 609 4 03-31 08/97 12.00 108
FMCO FMS Financial Corp. of NJ OTC Southern NJ Thrift 582 18 12-31 12/88 29.37 70
PULS Pulse Bancorp of S. River NJ OTC Central NJ Thrift 526 4 09-30 09/86 24.50 75
FSPG First Home Bancorp of NJ OTC NJ,DE Thrift 525 10 12-31 04/87 23.75 64
LVSB Lakeview SB of Paterson NJ OTC Northern NJ Thrift 506 J 8 07-31 12/93 24.12 109
AHCI Ambanc Holding Co., Inc. of NY (3) OTC East-Central NY Thrift 485 J 9 12-31 12/95 17.00 73
PFNC Progress Financial Corp. of PA OTC Southeastern PA M.B. 437 9 12-31 07/83 15.50 62
CNY Carver Bancorp, Inc. of NY AMEX New York, NY Thrift 416 7 03-31 10/94 17.06 39
RARB Raritan Bancorp. of Raritan NJ (3) OTC Central NJ Thrift 407 6 12-31 03/87 27.25 65
SHEN First Shenango Bancorp of PA OTC Western PA Thrift 401 4 12-31 04/93 33.75 70
FKFS First Keystone Fin. Corp of PA OTC Philadelphia PA Thrift 373 5 09-30 01/95 32.00 39
PBCI Pamrapo Bancorp, Inc. of NJ OTC Northern NJ Thrift 372 8 12-31 11/89 23.87 68
FSBI Fidelity Bancorp, Inc. of PA OTC Southwestern PA Thrift 363 J 8 09-30 06/88 26.62 41
FOBC Fed One Bancorp of Wheeling WV OTC Northern WV,OH Thrift 358 9 12-31 01/95 24.87 59
HARL Harleysville SA of PA OTC Southeastern PA Thrift 345 4 09-30 08/87 29.37 49
LFBI Little Falls Bancorp of NJ OTC New Jersey Thrift 324 6 12-31 01/96 20.00 52
CVAL Chester Valley Bancorp of PA OTC Southeastern PA Thrift 322 6 06-30 03/87 26.25 57
YFCB Yonkers Fin. Corp. of NY OTC Yonkers NY Thrift 313 4 09-30 04/96 18.50 56
EQSB Equitable FSB of Wheaton MD OTC Central MD Thrift 308 J 4 09-30 09/93 45.00 27
FIBC Financial Bancorp, Inc. of NY OTC New York, NY Thrift 297 5 09-30 08/94 24.81 42
CATB Catskill Fin. Corp. of NY (3) OTC Albany NY Thrift 290 4 09-30 04/96 17.62 82
LFED Leeds FSB, MHC of MD (36.3) OTC Baltimore MD Thrift 285 1 06-30 05/94 21.50 111
FBER First Bergen Bancorp of NJ OTC Northern NJ Thrift 285 4 09-30 04/96 18.62 53
</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
December 5, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
----------------------------------------- ------ --------------- --------- ------ ------- ---- ---- ----- ------
($Mil) ($) ($Mil)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mid-Atlantic Companies (continued)
----------------------------------
WVFC WVS Financial Corp. of PA (3) OTC Pittsburgh PA Thrift 282 5 06-30 11/93 31.50 55
PHFC Pittsburgh Home Fin. of PA OTC Pittsburgh PA Thrift 273 6 09-30 04/96 20.69 41
WSB Washington SB, FSB of MD AMEX Southeastern MD Thrift 268 J 4 07-31 / 7.37 32
WYNE Wayne Bancorp of NJ OTC Northern NJ Thrift 267 0 12-31 06/96 22.75 46
IFSB Independence FSB of DC OTC Washington DC Ret. 258 J 2 12-31 06/85 13.78 18
GDVS Greater DV SB,MHC of PA (19.9) (3) OTC Southeast PA Thrift 249 7 12-31 03/95 31.00 101
ESBK The Elmira SB FSB of Elmira NY (3) OTC NY,PA Thrift 228 6 12-31 03/85 30.00 21
SBFL SB Fngr Lakes MHC of NY (33.1) OTC Western NY Thrift 228 4 04-30 11/94 29.25 52
HRBF Harbor Federal Bancorp of MD OTC Baltimore MD Thrift 217 9 03-31 08/94 21.75 37
LARL Laurel Capital Group of PA OTC Southwestern PA Thrift 210 6 06-30 02/87 27.75 40
PHSB Ppls Home SB, MHC of PA (45.0) OTC Western PA Thrift 206 9 12-31 07/97 18.62 51
PBHC OswegoCity SB, MHC of NY (46.) (3) OTC NY Thrift 193 5 12-31 11/95 28.50 55
PEEK Peekskill Fin. Corp. of NY OTC Southeast NY Thrift 181 3 06-30 12/95 17.50 56
PLSK Pulaski SB, MHC of NJ (46.0) OTC New Jersey Thrift 179 6 12-31 04/97 18.75 39
SFED SFS Bancorp of Schenectady NY OTC Eastern NY Thrift 174 3 12-31 06/95 22.12 27
AFED AFSALA Bancorp, Inc. of NY OTC Central NY Thrift 159 J 4 09-30 10/96 19.12 28
SKBO First Carnegie,MHC of PA(45.0) OTC Western PA Thrift 147 J 3 03-31 04/97 18.62 43
PRBC Prestige Bancorp of PA OTC Thrift 138 0 12-31 06/96 18.41 17
TPNZ Tappan Zee Fin., Inc. of NY OTC Southeast NY Thrift 119 S 1 03-31 10/95 19.75 29
GOSB GSB Financial Corp. of NY OTC Southeast NY Thrift 114 P 2 09-30 07/97 15.63 35
WWFC Westwood Fin. Corp. of NJ OTC Northern NJ Thrift 110 2 03-31 06/96 27.62 18
AFBC Advance Fin. Bancorp of WV OTC Northern Neck WV Thrift 106 2 06-30 01/97 17.75 19
WHGB WHG Bancshares of MD OTC Baltimore MD Thrift 100 J 5 09-30 04/96 16.25 24
SHSB SHS Bancorp, Inc. of PA OTC Pittsburgh Thrift 90 P 4 12/31 10/97 16.00 13
ALBC Albion Banc Corp. of Albion NY OTC Western NY Thrift 71 2 09-30 07/93 29.00 7
PWBK Pennwood SB of PA (3) OTC Pittsburgh PA Thrift 48 3 12-31 07/96 18.94 11
Mid-West Companies
------------------
COFI Charter One Financial of OH OTC OH,MI Div. 15,197 155 12-31 01/88 59.25 2,937
CFB Commercial Federal Corp. of NE NYSE NE,CO,KS,OK,IA M.B. 7,207 107 06-30 12/84 48.06 1,037
SPBC St. Paul Bancorp, Inc. of IL OTC Chicago IL Div. 4,549 52 12-31 05/87 24.50 836
</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
December 5, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
----------------------------------------- ------ ---------------- --------- ------ ------- ---- ---- ----- ------
($Mil) ($) ($Mil)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mid-West Companies (continued)
------------------------------
MAFB MAF Bancorp of IL OTC Chicago IL Thrift 3,371 20 12-31 01/90 32.50 496
CTZN CitFed Bancorp of Dayton OH OTC Dayton OH M.B. 3,295 33 03-31 01/92 50.62 438
GTFN Great Financial Corp. of KY OTC Kentucky M.B. 2,894 45 12-31 03/94 48.00 664
FLGS Flagstar Bancorp, Inc of MI OTC MI Thrift 2,033 15 12/31 / 18.25 249
ABCW Anchor Bancorp Wisconsin of WI OTC Wisconsin M.B. 1,955 33 03-31 07/92 31.50 285
DNFC D&N Financial Corp. of MI OTC MI Ret. 1,754 37 12-31 02/85 24.12 199
STFR St. Francis Cap. Corp. of WI OTC Milwaukee WI Thrift 1,646 J 23 09-30 06/93 38.25 200
FTFC First Fed. Capital Corp. of WI OTC Southern WI M.B. 1,560 44 12-31 11/89 27.87 255
FISB First Indiana Corp. of IN OTC Central IN M.B. 1,547 28 12-31 08/83 26.25 277
ABCL Allied Bancorp of IL OTC Chicago IL M.B. 1,371 14 09-30 07/92 26.25 211
JSBA Jefferson Svgs Bancorp of MO OTC St. Louis MO,TX Thrift 1,297 M 32 12-31 04/93 43.25 217
AADV Advantage Bancorp of WI OTC WI,IL Thrift 1,037 15 09-30 03/92 62.25 201
OFCP Ottawa Financial Corp. of MI OTC Western MI Thrift 867 26 12-31 08/94 27.50 147
CFSB CFSB Bancorp of Lansing MI OTC Central MI Thrift 860 17 12-31 06/90 35.50 181
NASB North American SB of MO OTC KS,MO M.B. 737 J 7 09-30 09/85 49.94 111
GSBC Great Southern Bancorp of MO OTC Southwest MO Thrift 728 25 06-30 12/89 21.88 177
HOMF Home Fed Bancorp of Seymour IN OTC Southern IN Thrift 694 16 06-30 01/88 27.50 140
SFSL Security First Corp. of OH OTC Northeastern OH R.E. 681 13 03-31 01/88 19.50 148
FNGB First Northern Cap. Corp of WI OTC Northeast WI Thrift 657 20 12-31 12/83 13.50 119
MSBK Mutual SB, FSB of Bay City MI OTC Michigan M.B. 654 22 12-31 07/92 13.00 56
FFYF FFY Financial Corp. of OH OTC Youngstown OH Thrift 611 10 06-30 06/93 29.75 123
EMLD Emerald Financial Corp of OH OTC Cleveland OH Thrift 604 13 12-31 / 19.25 98
AVND Avondale Fin. Corp. of IL OTC Chicago IL Ret. 597 5 12-31 04/95 16.00 56
HFFC HF Financial Corp. of SD OTC South Dakota Thrift 575 19 06-30 04/92 26.00 73
FDEF First Defiance Fin.Corp. of OH OTC Northwest OH Thrift 574 9 06-30 10/95 15.25 137
HMNF HMN Financial, Inc. of MN OTC Southeast MN Thrift 569 7 12-31 06/94 25.87 109
FFBH First Fed. Bancshares of AR OTC Northern AR Thrift 547 12 12-31 05/96 21.37 105
FFOH Fidelity Financial of OH OTC Cincinnati OH Thrift 529 4 12-31 03/96 15.00 84
FCBF FCB Fin. Corp. of Neenah WI OTC Eastern WI Thrift 523 J 6 03-31 09/93 27.25 106
HFGI Harrington Fin. Group of IN OTC Eastern IN Thrift 521 3 06-30 / 12.37 40
CAFI Camco Fin. Corp. of OH OTC Eastern OH M.B. 502 7 12-31 / 24.00 77
FBCI Fidelity Bancorp of Chicago IL OTC Chicago IL Thrift 498 5 09-30 12/93 23.25 65
CBCI Calumet Bancorp of Chicago IL OTC Chicago IL Thrift 488 5 06-30 02/92 31.87 101
</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
December 5, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
---------------------------- ------ ------- --------- ------ ------- ---- ---- ----- ------
($Mil) ($) ($Mil)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mid-West Companies (continued)
------------------------------
FFSX First FS&LA. MHC of IA (46.1) OTC Western IA Thrift 457 13 06-30 07/92 31.87 90
PERM Permanent Bancorp of IN OTC Southwest IN Thrift 434 12 03-31 04/94 25.62 54
SFSB SuburbFed Fin. Corp. of IL OTC IL,IN Thrift 427 J 12 12-31 03/92 34.87 44
HALL Hallmark Capital Corp. of WI OTC Milwaukee WI Thrift 418 3 06-30 01/94 15.25 44
MCBS Mid Continent Bancshares of KS OTC Central KS M.B. 409 J 9 09-30 06/94 41.25 81
CASH First Midwest Fin. Corp. of IA OTC IA,SD R.E. 405 12 09-30 09/93 20.50 55
FMBD First Mutual Bancorp of IL OTC Central IL Thrift 402 12 12-31 07/95 20.25 71
PMFI Perpetual Midwest Fin. of IA OTC EastCentral IA Thrift 402 5 12-31 03/94 27.00 51
WOFC Western Ohio Fin. Corp. of OH OTC Western OH Thrift 396 J 6 12-31 07/94 25.75 61
CBSB Charter Financial Inc. of IL OTC Southern IL Thrift 393 J 8 09-30 12/95 22.00 91
ASBI Ameriana Bancorp of IN OTC Eastern IN,OH Thrift 393 8 12-31 03/87 19.50 63
FFHH FSF Financial Corp. of MN OTC Southern MN Thrift 388 11 09-30 10/94 20.00 60
PFSL Pocahnts Fed, MHC of AR (47.0) OTC Northeast AR Thrift 383 6 09-30 04/94 34.00 55
PVFC PVF Capital Corp. of OH OTC Cleveland OH R.E. 383 9 06-30 12/92 20.50 53
FFKY First Fed. Fin. Corp. of KY OTC Central KY Thrift 383 8 06-30 07/87 22.00 91
SWBI Southwest Bancshares of IL OTC Chicago IL Thrift 375 6 12-31 06/92 25.50 68
INBI Industrial Bancorp of OH OTC Northern OH Thrift 354 10 12-31 08/95 18.00 93
SMFC Sho-Me Fin. Corp. of MO OTC Southwest MO Thrift 345 8 12-31 07/94 47.00 70
HBEI Home Bancorp of Elgin IL OTC Northern IL Thrift 343 5 12-31 09/96 18.00 123
KNK Kankakee Bancorp of IL AMEX Illinois Thrift 340 9 12-31 01/93 33.87 48
HBFW Home Bancorp of Fort Wayne IN OTC Northeast IN Thrift 335 J 9 09-30 03/95 27.37 69
HMCI Homecorp, Inc. of Rockford IL OTC Northern IL Thrift 327 9 12-31 06/90 25.00 43
WFI Winton Financial Corp. of OH OTC Cincinnati OH R.E. 317 J 5 09-30 08/88 20.00 40
WCBI WestCo Bancorp of IL OTC Chicago IL Thrift 309 1 12-31 06/92 27.50 68
FSFF First SecurityFed Fin of IL OTC Chicago Thrift 303 P 5 12-31 10/97 16.06 103
GFCO Glenway Financial Corp. of OH OTC Cincinnati OH Thrift 293 6 06-30 11/90 19.00 43
PFDC Peoples Bancorp of Auburn IN OTC Northeastern IN Thrift 288 J 6 09-30 07/87 22.00 75
CBK Citizens First Fin.Corp. of IL AMEX Central IL Thrift 278 6 12-31 05/96 18.25 47
EFBI Enterprise Fed. Bancorp of OH OTC Cincinnati OH Thrift 275 5 09-30 10/94 27.75 55
FBCV 1st Bancorp of Vincennes IN OTC Southwestern IN M.B. 261 1 06-30 04/87 40.00 28
MFBC MFB Corp. of Mishawaka IN OTC Northern IN Thrift 256 4 09-30 03/94 23.25 38
WAYN Wayne S&L Co. MHC of OH (47.8) OTC Central OH Thrift 250 6 03-31 06/93 31.00 70
CAPS Capital Savings Bancorp of MO OTC Central MO Thrift 242 8 06-30 12/93 22.37 42
</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
December 5, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
---------------------------- ------ ------- --------- ------ ------- ---- ---- ----- ------
($Mil) ($) ($Mil)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mid-West Companies (continued)
------------------------------
FFED Fidelity Fed. Bancorp of IN OTC Southwestern IN Thrift 235 4 06-30 08/87 10.00 28
OHSL OHSL Financial Corp. of OH OTC Cincinnati, OH Thrift 235 4 12-31 02/93 27.75 34
FFHS First Franklin Corp. of OH OTC Cincinnati OH Thrift 231 7 12-31 01/88 26.00 31
LARK Landmark Bancshares of KS OTC Central KS Thrift 228 J 5 09-30 03/94 24.00 41
MBLF MBLA Financial Corp. of MO OTC Northeast MO Thrift 224 2 06-30 06/93 27.00 34
BFFC Big Foot Fin. Corp. of IL OTC Chicago IL Thrift 215 J 3 07-31 12/96 18.50 46
FFFD North Central Bancshares of IA OTC Central IA Thrift 215 4 12-31 03/96 18.87 61
GFED Guarnty FS&LA,MHC of MO (31.0) OTC Southwest MO Thrift 210 4 06-30 04/95 23.75 74
MFFC Milton Fed. Fin. Corp. of OH OTC Southwest OH Thrift 210 2 09-30 10/94 15.00 35
CMRN Cameron Fin. Corp. of MO OTC Northwest MO Thrift 208 J 3 09-30 04/95 19.62 52
MWFD Midwest Fed. Fin. Corp of WI OTC Central WI Thrift 207 J 9 12-31 07/92 26.50 43
WEFC Wells Fin. Corp. of Wells MN OTC Southcentral MN Thrift 205 7 12-31 04/95 17.75 35
FFBZ First Federal Bancorp of OH OTC Eastern OH Thrift 204 6 09-30 06/92 19.25 30
HCBB HCB Bancshares of AR OTC Southern AR Thrift 200 J 6 06-30 05/97 13.62 36
LSBI LSB Fin. Corp. of Lafayette IN OTC Central IN Thrift 200 4 12-31 02/95 26.00 24
NEIB Northeast Indiana Bncrp of IN OTC Northeast IN Thrift 190 3 12-31 06/95 20.00 35
FFWC FFW Corporation of Wabash IN OTC Central IN Thrift 181 3 06-30 04/93 37.75 27
PULB Pulaski SB, MHC of MO (29.8) OTC St. Louis MO Thrift 180 J 5 09-30 05/94 30.50 64
MARN Marion Capital Holdings of IN OTC Central IN Thrift 180 2 06-30 03/93 26.50 47
PFED Park Bancorp of Chicago IL OTC Chicago IL Thrift 175 3 12-31 08/96 17.87 43
EGLB Eagle BancGroup of IL OTC Central IL Thrift 172 3 12-31 07/96 19.75 24
FFWD Wood Bancorp of OH OTC Northern OH Thrift 167 6 06-30 08/93 18.50 39
BWFC Bank West Fin. Corp. of MI OTC Southeast MI Thrift 165 3 06-30 03/95 22.00 39
JXSB Jcksnville SB,MHC of IL (45.6) OTC Central IL Thrift 164 4 12-31 04/95 26.75 34
SMBC Southern Missouri Bncrp of MO OTC Southeast MO Thrift 163 8 06-30 04/94 19.00 31
FBSI First Bancshares of MO OTC Southcentral MO Thrift 163 6 06-30 12/93 26.25 29
HMLK Hemlock Fed. Fin. Corp. of IL OTC Chicago IL Thrift 162 3 12-31 04/97 17.25 36
QCFB QCF Bancorp of Virginia MN OTC Northeast MN Thrift 157 J 2 06-30 04/95 28.50 39
MWBI Midwest Bancshares, Inc. of IA OTC Southeast IA Thrift 150 4 12-31 11/92 18.50 19
WEHO Westwood Hmstd Fin Corp of OH OTC Cincinnati OH Thrift 143 2 12-31 09/96 17.50 49
RIVR River Valley Bancorp of IN OTC Southeast IN Thrift 140 J 3 12-31 12/96 18.75 22
GTPS Great American Bancorp of IL OTC East Central IL Thrift 140 3 12-31 06/95 19.00 32
FKKY Frankfort First Bancorp of KY OTC Frankfort KY Thrift 133 3 06-30 07/95 9.25 30
</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
December 5, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
--------------------------------------- ------ ------- --------- ------ ------- ---- ---- ----- -----
($Mil) ($) ($Mil)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mid-West Companies (continued)
------------------------------
CLAS Classic Bancshares of KY OTC Eastern KY Thrift 130 J 3 03-31 12/95 17.12 22
MIFC Mid Iowa Financial Corp. of IA OTC Central IA Thrift 126 J 6 09-30 10/92 10.62 18
MFCX Marshalltown Fin. Corp. of IA OTC Central IA Thrift 125 3 09-30 03/94 17.25 24
PTRS Potters Financial Corp of OH OTC Northeast OH Thrift 123 4 12-31 12/93 34.00 16
NBSI North Bancshares of Chicago IL OTC Chicago IL Thrift 122 2 12-31 12/93 26.50 25
HFSA Hardin Bancorp of Hardin MO OTC Western MO Thrift 117 3 03-31 09/95 17.50 15
FFSL First Independence Corp. of KS OTC Southeast KS Thrift 113 2 09-30 10/93 15.00 15
ASBP ASB Financial Corp. of OH OTC Southern OH Thrift 112 1 06-30 04/95 13.12 22
BDJI First Fed. Bancorp. of MN OTC Northern MN Thrift 111 5 09-30 04/95 28.00 19
HFFB Harrodsburg 1st Fin Bcrp of KY OTC Central KY Thrift 109 J 2 09-30 10/95 17.12 35
DCBI Delphos Citizens Bancorp of OH OTC Northwest OH Thrift 108 1 09-30 11/96 17.50 34
CBES CBES Bancorp of MO OTC Western MO Thrift 107 2 06-30 09/96 20.37 21
FTNB Fulton Bancorp of MO OTC Central MO Thrift 104 2 06-30 10/96 20.25 35
AMFC AMB Financial Corp. of IN OTC Northwest IN Thrift 103 4 12-31 04/96 16.00 15
PSFC Peoples Sidney Fin. Corp of OH OTC WestCentral OH Thrift 103 2 06-30 04/97 17.25 31
MONT Montgomery Fin. Corp. of IN OTC Westcentral IN Thrift 102 4 06-30 07/97 12.31 20
FTSB Fort Thomas Fin. Corp. of KY OTC Northern KY Thrift 98 2 09-30 06/95 14.75 22
CNSB CNS Bancorp of MO OTC Central MO Thrift 97 5 12-31 06/96 20.00 33
NWEQ Northwest Equity Corp. of WI OTC Northwest WI Thrift 97 3 03-31 10/94 19.00 16
INCB Indiana Comm. Bank, SB of IN OTC Central IN Ret. 96 3 06-30 12/94 20.50 19
THR Three Rivers Fin. Corp. of MI AMEX Southwest MI Thrift 95 J 4 06-30 08/95 19.75 16
GFSB GFS Bancorp of Grinnell IA OTC Central IA Thrift 94 1 06-30 01/94 16.87 17
WCFB Wbstr Cty FSB MHC of IA (45.2) OTC Central IA Thrift 94 1 12-31 08/94 20.25 43
CIBI Community Inv. Bancorp of OH OTC NorthCentral OH Thrift 94 3 06-30 02/95 15.75 14
FFDF FFD Financial Corp. of OH OTC Northeast OH Thrift 88 1 06-30 04/96 18.37 27
KYF Kentucky First Bancorp of KY AMEX Central KY Thrift 88 2 06-30 08/95 14.50 19
HZFS Horizon Fin'l. Services of IA OTC Central IA Thrift 88 3 06-30 06/94 11.00 9
SFFC StateFed Financial Corp. of IA OTC Des Moines IA Thrift 88 2 06-30 01/94 13.50 21
PFFC Peoples Fin. Corp. of OH OTC Northeast OH Thrift 86 J 2 09-30 09/96 14.00 21
LOGN Logansport Fin. Corp. of IN OTC Northern IN Thrift 86 1 12-31 06/95 15.25 19
PSFI PS Financial of Chicago IL OTC Chicago IL Thrift 86 1 12-31 11/96 17.25 37
SOBI Sobieski Bancorp of S. Bend IN OTC Northern IN Thrift 84 3 06-30 03/95 19.62 15
FFBI First Financial Bancorp of IL OTC Northern IL M.B. 84 2 12-31 10/93 19.00 8
</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
December 5, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
-------------------------------------- ------ ---------------- --------- ------ ------- ---- ---- ----- -----
($Mil) ($) ($Mil)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mid-West Companies (continued)
------------------------------
HHFC Harvest Home Fin. Corp. of OH OTC Southwest OH Thrift 83 M 3 09-30 10/94 14.75 13
PCBC Perry Co. Fin. Corp. of MO OTC EastCentral MO Thrift 81 J 1 09-30 02/95 23.25 19
MSBF MSB Financial Corp. of MI OTC Southcentral MI Thrift 77 2 06-30 02/95 19.50 24
HCFC Home City Fin. Corp. of OH OTC Southwest OH Thrift 70 1 06-30 12/96 18.00 16
MIVI Miss. View Hold. Co. of MN OTC Central MN Thrift 70 J 1 09-30 03/95 18.25 14
ATSB AmTrust Capital Corp. of IN OTC Northcentral IN Thrift 70 2 06-30 03/95 14.00 7
GWBC Gateway Bancorp of KY OTC Eastern KY Thrift 63 2 12-31 01/95 19.62 21
CKFB CKF Bancorp of Danville KY OTC Central KY Thrift 60 1 12-31 01/95 18.50 17
NSLB NS&L Bancorp of Neosho MO OTC Southwest MO Thrift 60 J 2 09-30 06/95 18.75 13
LXMO Lexington B&L Fin. Corp. of MO OTC West Central MO Thrift 59 J 1 09-30 06/96 16.75 19
MRKF Market Fin. Corp. of OH OTC Cincinnati OH Thrift 56 2 09-30 03/97 15.25 20
CSBF CSB Financial Group Inc of IL (3) OTC Centralia IL Thrift 49 J 2 09-30 10/95 12.50 12
FLKY First Lancaster Bncshrs of KY OTC Central KY Thrift 47 1 06-30 07/96 15.75 15
RELI Reliance Bancshares Inc of WI (3) OTC Milwaukee WI Thrift 47 1 06-30 04/96 8.87 22
HBBI Home Building Bancorp of IN OTC Southwest IN Thrift 42 2 09-30 02/95 21.25 7
HWEN Home Financial Bancorp of IN OTC Central IN Thrift 41 1 06-30 07/96 16.44 8
LONF London Financial Corp. of OH OTC Central OH Thrift 38 J 1 09-30 04/96 14.75 8
JOAC Joachim Bancorp of MO OTC Eastern MO Thrift 35 1 03-31 12/95 14.75 11
New England Companies
---------------------
PBCT Peoples Bank, MHC of CT (40.1) (3) OTC Southwestern CT Div. 7,731 97 12-31 07/88 33.69 2,059
WBST Webster Financial Corp. of CT OTC Central CT Thrift 6,811 77 12-31 12/86 62.66 849
PHBK Peoples Heritage Fin Grp of ME (3) OTC ME,NH,MA Div. 6,056 132 12-31 12/86 42.62 1,171
CFX CFX Corp of NH (3) AMEX NH,MA M.B. 2,821 43 12-31 02/87 27.75 665
EGFC Eagle Financial Corp. of CT OTC Western CT Thrift 2,097 19 09-30 02/87 51.75 327
SISB SIS Bancorp Inc of MA (3) OTC Central MA Div. 1,453 24 12-31 02/95 33.62 188
ANDB Andover Bancorp, Inc. of MA (3) OTC MA,NH M.B. 1,281 12 12-31 05/86 37.75 194
FESX First Essex Bancorp of MA (3) OTC MA,NH Div. 1,210 15 12-31 08/87 19.87 150
MDBK Medford Bank of Medford, MA (3) OTC Eastern MA Thrift 1,106 16 12-31 03/86 37.00 168
AFCB Affiliated Comm BC, Inc of MA OTC MA Thrift 1,090 J 11 12-31 10/95 28.50 185
FAB FirstFed America Bancorp of MA AMEX MA,RI M.B. 1,036 12 03-31 01/97 20.62 180
</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
December 5, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
------ ---------------------------------- ------ ---------------- --------- ------ ------- ---- ---- ----- ------
($Mil) ($) ($Mil)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
New England Companies (continued)
---------------------------------
FFES First FS&LA of E. Hartford CT OTC Central CT Thrift 987 12 12-31 06/87 37.00 99
BFD BostonFed Bancorp of MA AMEX Boston MA M.B. 961 10 12-31 10/95 20.37 115
MASB MassBank Corp. of Reading MA (3) OTC Eastern MA Thrift 933 14 12-31 05/86 45.00 160
DIBK Dime Financial Corp. of CT (3) OTC Central CT Thrift 922 11 12-31 07/86 31.50 163
MECH Mechanics SB of Hartford CT (3) OTC Hartford CT Thrift 831 14 12-31 06/96 25.62 136
NSSB Norwich Financial Corp. of CT (3) OTC Southeastern CT Thrift 701 19 12-31 11/86 29.75 162
NSSY Norwalk Savings Society of CT (3) OTC Southwest CT Thrift 617 M 7 12-31 06/94 38.50 93
BKC American Bank of Waterbury CT (3) AMEX Western CT Thrift 610 15 12-31 12/81 47.12 109
MWBX MetroWest Bank of MA (3) OTC Eastern MA Thrift 586 11 12-31 10/86 8.25 115
PBKB People's SB of Brockton MA (3) OTC Southeastern MA Thrift 549 M 14 12-31 10/86 20.00 66
SOSA Somerset Savings Bank of MA (3) OTC Eastern MA R.E. 520 5 12-31 07/86 4.87 81
SWCB Sandwich Co-Op. Bank of MA (3) OTC Southeastern MA Thrift 512 11 12-31 07/86 41.75 80
ABBK Abington Savings Bank of MA (3) OTC Southeastern MA M.B. 502 7 12-31 06/86 36.00 66
EIRE Emerald Island Bancorp, MA (3) OTC Eastern MA R.E. 443 8 12-31 09/86 32.25 73
BKCT Bancorp Connecticut of CT (3) OTC Central CT Thrift 424 3 12-31 07/86 40.00 102
WRNB Warren Bancorp of Peabody MA (3) OTC Eastern MA R.E. 364 6 12-31 07/86 20.62 78
LSBX Lawrence Savings Bank of MA (3) OTC Northeastern MA Thrift 353 5 12-31 05/86 13.87 59
CEBK Central Co-Op. Bank of MA (3) OTC Eastern MA Thrift 344 J 8 03-31 10/86 26.50 52
NHTB NH Thrift Bancshares of NH OTC Central NH Thrift 319 10 12-31 05/86 21.00 44
NMSB Newmil Bancorp. of CT (3) OTC Eastern CT Thrift 317 13 06-30 02/86 14.25 55
NBN Northeast Bancorp of ME (3) OTC Eastern ME Thrift 265 8 06-30 08/87 27.75 36
ANE Alliance Bancorp of New Englan (3) AMEX Northern CT Thrift 242 7 12-31 12/86 17.50 28
HIFS Hingham Inst. for Sav. of MA (3) OTC Eastern MA Thrift 216 5 12-31 12/88 27.12 35
IPSW Ipswich SB of Ipswich MA (3) OTC Northwest MA Thrift 203 5 12-31 05/93 12.87 31
HPBC Home Port Bancorp, Inc. of MA (3) OTC Southeastern MA Thrift 201 2 12-31 08/88 24.00 44
BSBC Branford SB of CT (3) OTC New Haven CT R.E. 183 5 12-31 11/86 6.00 39
FCME First Coastal Corp. of ME (3) OTC Southern ME Thrift 149 7 12-31 / 13.87 19
KSBK KSB Bancorp of Kingfield ME (3) OTC Western ME M.B. 146 J 8 12-31 06/93 15.25 19
MFLR Mayflower Co-Op. Bank of MA (3) OTC Southeastern MA Thrift 126 J 4 04-30 12/87 24.44 22
NTMG Nutmeg FS&LA of CT OTC CT M.B. 102 J 3 12-31 / 13.00 10
FCB Falmouth Co-Op Bank of MA (3) AMEX Southeast MA Thrift 94 J 2 09-30 03/96 20.25 29
MCBN Mid-Coast Bancorp of ME OTC Eastern ME Thrift 61 2 03-31 11/89 28.75 7
</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
December 5, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
------ --------------------- ------ ---------------- --------- ------ ------- ---- ---- ----- ------
($Mil) ($) ($Mil)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
WAMU Washington Mutual Inc. of WA (3) OTC WA,OR,ID,UT,MT Div. 95,608 290 12-31 03/83 69.12 17,776
WFSL Washington FS&LA of Seattle WA OTC Western US Thrift 5,720 89 09-30 11/82 32.19 1,529
IWBK Interwest SB of Oak Harbor WA OTC Western WA Div. 2,047 31 12-31 / 39.50 318
STSA Sterling Financial Corp. of WA OTC WA,OR M.B. 1,870 41 06-30 / 21.12 160
FWWB First Savings Bancorp of WA (3) OTC Central WA Thrift 1,008 M 16 03-31 11/95 25.25 259
KFBI Klamath First Bancorp of OR OTC Southern OR Thrift 728 J 7 09-30 10/95 21.88 219
HRZB Horizon Financial Corp. of WA (3) OTC Northwest WA Thrift 531 12 03-31 08/86 16.56 123
FMSB First Mutual SB of Bellevue WA (3) OTC Western WA M.B. 451 6 12-31 12/85 18.25 74
CASB Cascade SB of Everett WA OTC Seattle WA Thrift 426 6 06-30 08/92 12.75 43
RVSB Riverview Bancorp of WA OTC Southwest WA Thrift 282 9 03-31 10/97 15.00 92
OTFC Oregon Trail Fin. Corp of OR OTC Baker City Thrift 260 P 2 06-30 10/97 16.00 75
FBNW FirstBank Corp of Clarkston WA OTC West. WA/East ID Thrift 178 5 03-31 07/97 17.62 35
EFBC Empire Federal Bancorp of MT OTC Southern MT Thrift 110 P 3 12-31 01/97 16.50 43
South-East Companies
--------------------
FFCH First Fin. Holdings Inc. of SC OTC CHARLESTON SC Div. 1,713 32 09-30 11/83 43.12 275
LIFB Life Bancorp of Norfolk VA OTC Southeast VA Thrift 1,486 20 12-31 10/94 31.12 306
FLFC First Liberty Fin. Corp. of GA OTC Georgia M.B. 1,289 J 31 9-30 12/83 27.87 215
ISBF ISB Financial Corp. of LA OTC SouthCentral LA Thrift 947 J 27 12-31 04/95 26.25 181
EBSI Eagle Bancshares of Tucker GA OTC Atlanta GA Thrift 873 14 03-31 04/86 19.25 109
HFNC HFNC Financial Corp. of NC OTC Charlotte NC Thrift 867 8 06-30 12/95 14.87 256
VFFC Virginia First Savings of VA OTC Petersburg VA M.B. 858 J 23 06-30 01/78 25.25 147
CNIT Cenit Bancorp of Norfolk VA OTC Southeastern VA Thrift 702 19 12-31 08/92 68.00 112
PALM Palfed, Inc. of Aiken SC OTC Southwest SC Thrift 669 19 12-31 12/85 27.00 143
VABF Va. Beach Fed. Fin. Corp of VA OTC Southeast VA M.B. 605 12 12-31 11/80 16.62 83
FFFC FFVA Financial Corp. of VA OTC Southern VA Thrift 567 11 12-31 10/94 33.37 151
CFCP Coastal Fin. Corp. of SC OTC SC Thrift 494 9 09-30 09/90 23.00 107
FSPT FirstSpartan Fin. Corp. of SC OTC Northwestern SC Thrift 482 5 06-30 07/97 37.50 166
TSH Teche Holding Company of LA AMEX Southern LA Thrift 406 J 9 09-30 04/95 21.88 75
CFBC Community First Bnkg Co. of GA OTC Westcentral GA Thrift 395 12 12-31 07/97 38.37 93
COOP Cooperative Bk.for Svgs. of NC OTC Eastern NC Thrift 360 17 03-31 08/91 17.37 52
FSFC First So.east Fin. Corp. of SC OTC Northwest SC Thrift 350 11 06-30 10/93 15.12 66
FSTC First Citizens Corp of GA OTC Western GA M.B. 337 9 03-31 03/86 24.00 66
</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
December 5, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
------ -------------------------------- ------ ------- --------- ------ ------- ---- ----- ----- ------
($Mil) ($) ($Mil)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
South-East Companies (continued)
--------------------------------
SOPN First SB, SSB, Moore Co. of NC OTC Central NC Thrift 295 5 06-30 01/94 24.37 90
UFRM United FS&LA of Rocky Mount NC OTC Eastern NC M.B. 286 9 12-31 07/80 11.50 35
ANA Acadiana Bancshares of LA (3) AMEX Southern LA Thrift 267 J 4 12-31 07/96 23.75 64
PERT Perpetual of SC, MHC (46.8) OTC Northwest SC Thrift 256 J 6 09-30 10/93 51.00 77
SSFC South Street Fin. Corp. of NC (3) OTC South Central NC Thrift 241 2 09-30 10/96 17.50 79
FLAG Flag Financial Corp of GA OTC Western GA M.B. 238 4 12-31 12/86 18.50 38
MERI Meritrust FSB of Thibodaux LA OTC Southeast LA Thrift 233 8 12-31 / 51.22 40
CFTP Community Fed. Bancorp of MS OTC Northeast MS Thrift 216 1 09-30 03/96 17.12 79
ESX Essex Bancorp of VA AMEX VA, NC M.B. 192 4 12-31 07/90 5.00 5
GSFC Green Street Fin. Corp. of NC OTC Southern NC Thrift 178 3 09-30 04/96 18.50 80
CFFC Community Fin. Corp. of VA OTC Central VA Thrift 175 J 3 03-31 03/88 24.75 32
FTF Texarkana Fst. Fin. Corp of AR AMEX Southwest AR Thrift 171 J 5 09-30 07/95 24.75 44
FGHC First Georgia Hold. Corp of GA OTC Southeastern GA Thrift 156 J 9 09-30 02/87 8.37 26
BFSB Bedford Bancshares of VA OTC Southern VA Thrift 139 3 09-30 08/94 28.25 32
FFBS FFBS Bancorp of Columbus MS OTC Columbus MS Thrift 135 3 06-30 07/93 22.50 35
GSLA GS Financial Corp. of LA OTC New Orleans LA Thrift 131 3 12-31 04/97 17.75 61
PDB Piedmont Bancorp of NC AMEX Central NC Thrift 127 2 06-30 12/95 10.37 29
CFNC Carolina Fincorp of NC (3) OTC Southcentral NC Thrift 114 4 06-30 11/96 17.37 32
KSAV KS Bancorp of Kenly NC OTC Central NC Thrift 110 3 12-31 12/93 22.50 20
CCFH CCF Holding Company of GA OTC Atlanta GA Thrift 109 4 12-31 07/95 20.00 16
TWIN Twin City Bancorp of TN OTC Northeast TN Thrift 107 3 12-31 01/95 13.62 17
SRN Southern Banc Company of AL AMEX Northeast AL Thrift 105 J 4 06-30 10/95 16.87 21
SSM Stone Street Bancorp of NC AMEX Central NC Thrift 105 2 12-31 04/96 20.25 38
CENB Century Bancshares of NC (3) OTC Charlotte NC Thrift 101 1 06-30 12/96 80.00 33
SZB SouthFirst Bancshares of AL AMEX Central AL Thrift 97 J 2 09-30 02/95 19.00 16
SFNB Security First Netwrk Bk of GA OTC GA (Internet) Div. 79 J 1 12-31 / 8.00 69
SCBS Southern Commun. Bncshrs of AL OTC NorthCentral AL Thrift 70 J 1 09-30 12/96 18.19 21
SSB Scotland Bancorp of NC AMEX S. Central NC Thrift 64 2 09-30 04/96 10.25 20
SCCB S. Carolina Comm. Bnshrs of SC OTC Central SC Thrift 46 1 06-30 07/94 23.00 16
MBSP Mitchell Bancorp of NC (3) OTC Western NC Thrift 35 1 12-31 07/96 17.50 16
</TABLE>
South-West Companies
--------------------
<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
December 5, 1997(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
------ -------------------------------- ------ ------- --------- ------ ------- ---- ----- ----- ------
($Mil) ($) ($Mil)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
South-West Companies (continued)
--------------------------------
CBSA Coastal Bancorp of Houston TX OTC Houston TX M.B. 2,930 40 12-31 / 28.87 144
FBHC Fort Bend Holding Corp. of TX OTC Eastcentral TX M.B. 319 5 03-31 06/93 19.62 32
JXVL Jacksonville Bancorp of TX OTC East Central TX Thrift 226 J 6 09-30 04/96 18.75 47
FFDB FirstFed Bancorp of AL OTC Central AL Thrift 176 7 03-31 11/91 22.00 25
ETFS East Texas Fin. Serv. of TX OTC Northeast TX Thrift 116 2 09-30 01/95 20.00 21
GUPB GFSB Bancorp of Gallup NM OTC Northwest NM Thrift 110 1 06-30 06/95 20.25 16
AABC Access Anytime Bancorp of NM OTC Eastern NM Thrift 106 3 12-31 08/86 10.12 12
Western Companies (Excl CA)
---------------------------
FFBA First Colorado Bancorp of Co OTC Denver CO Thrift 1,513 26 12-31 01/96 22.75 375
WSTR WesterFed Fin. Corp. of MT OTC MT Thrift 999 35 06-30 01/94 23.56 131
GBCI Glacier Bancorp of MT OTC Western MT Div. 574 16 12-31 03/84 20.75 141
UBMT United Fin. Corp. of MT OTC Central MT Thrift 103 4 12-31 09/86 27.00 33
TRIC Tri-County Bancorp of WY OTC Southeastern WY Thrift 88 2 12-31 09/93 27.50 16
CRZY Crazy Woman Creek Bncorp of WY OTC Northeast WY Thrift 60 1 09-30 03/96 15.37 15
</TABLE>
Other Areas
-----------
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: 12/05/97
<PAGE>
EXHIBIT IV-1
Stock Prices:
As of November 28, 1997
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1
Weekly Thrift Market Line - Part One
Prices As Of November 28, 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) ($) ($) ($) (%) (%) (%)
Market Averages. SAIF-Insured Thrifts(no MHC)
- ---------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts(300) 23.60 5,828 182.2 25.04 15.57 23.58 0.24 242.71 45.34
NYSE Traded Companies(10) 45.35 33,668 1,732.6 48.11 28.17 45.95 -1.19 330.14 47.84
AMEX Traded Companies(16) 17.98 3,147 56.6 20.34 12.89 17.87 0.19 300.42 32.59
NASDAQ Listed OTC Companies(274) 23.07 4,879 127.9 24.40 15.22 23.03 0.30 229.78 45.99
California Companies(21) 30.34 18,713 848.5 32.40 18.78 30.51 -0.32 161.38 50.01
Florida Companies(5) 22.56 20,239 438.5 24.64 13.59 23.02 -1.73 191.87 51.35
Mid-Atlantic Companies(59) 25.35 6,651 183.5 26.46 15.92 25.28 0.25 224.85 55.99
Mid-West Companies(144) 21.99 3,577 100.1 23.16 14.72 21.91 0.43 269.50 41.96
New England Companies(9) 28.99 5,017 186.0 30.60 17.51 29.01 0.75 447.76 61.03
North-West Companies(8) 23.54 11,774 339.9 25.33 17.41 23.33 0.97 182.66 36.15
South-East Companies(41) 22.86 3,451 78.3 25.18 16.17 22.89 0.17 223.14 36.52
South-West Companies(7) 19.94 1,905 42.5 21.98 13.50 20.00 -0.52 49.93 45.99
Western Companies (Excl CA)(6) 22.82 5,273 118.6 24.08 16.16 22.95 -0.61 358.71 35.18
Thrift Strategy(241) 22.49 3,693 93.8 23.79 15.09 22.43 0.26 222.24 44.00
Mortgage Banker Strategy(36) 28.96 14,581 600.6 30.79 17.99 29.01 0.51 303.59 54.34
Real Estate Strategy(9) 26.74 7,823 242.8 28.27 16.19 26.97 0.12 234.36 51.31
Diversified Strategy(10) 32.71 30,268 1,012.6 36.02 20.42 33.08 -1.22 210.32 43.50
Retail Banking Strategy(4) 17.97 4,340 90.8 19.79 11.66 17.91 0.17 382.33 36.57
Companies Issuing Dividends(253) 23.95 5,538 181.5 25.41 15.85 23.90 0.36 255.82 43.92
Companies Without Dividends(47) 21.59 7,489 186.4 22.87 13.95 21.73 -0.45 161.04 54.82
Equity/Assets less than 6%(23) 30.07 19,015 661.9 31.88 18.00 30.16 0.26 206.22 57.08
Equity/Assets 6-12%(142) 25.94 5,707 201.0 27.24 16.08 25.85 0.49 259.34 53.65
Equity/Assets greater than 12%(135) 20.32 3,727 84.0 21.82 14.68 20.33 0.00 200.38 34.41
Converted Last 3 Mths (no MHC)(3) 16.02 3,974 63.7 16.39 15.13 16.08 -0.35 0.00 0.00
Actively Traded Companies(39) 34.03 18,235 770.6 35.59 20.89 34.10 0.13 278.06 58.40
Market Value Below $20 Million(50) 18.02 864 14.5 19.20 12.57 18.04 -0.29 288.91 40.11
Holding Company Structure(266) 23.66 5,578 179.4 25.11 15.74 23.61 0.27 229.80 43.75
Assets Over $1 Billion(60) 33.98 18,928 708.4 35.89 21.18 34.00 0.12 270.84 50.15
Assets $500 Million-$1 Billion(49) 23.72 5,454 116.3 25.19 14.94 23.85 -0.09 285.33 51.51
Assets $250-$500 Million(65) 23.34 2,774 60.8 24.63 15.38 23.23 0.63 223.45 51.29
Assets less than $250 Million(126) 18.90 1,468 26.5 20.17 13.31 18.84 0.24 156.51 37.30
Goodwill Companies(121) 27.52 10,008 323.5 29.07 17.35 27.53 0.20 266.04 50.60
Non-Goodwill Companies(178) 21.06 3,109 90.4 22.40 14.41 21.00 0.30 209.81 41.70
Acquirors of FSLIC Cases(10) 42.61 35,626 1,876.4 44.73 26.57 42.87 -0.25 351.12 50.81
<CAPTION>
Current Per Share Financials
----------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- -------- ------- ------- ------- -------
($) ($) ($) ($) ($)
Market Averages. SAIF-Insured Thrifts(no MHC)
- ---------------------------------------------
<S> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts(300) 1.16 1.16 15.56 15.10 149.81
NYSE Traded Companies(10) 2.79 2.65 22.22 21.43 338.78
AMEX Traded Companies(16) 0.57 0.72 14.03 13.83 107.55
NASDAQ Listed OTC Companies(274) 1.13 1.12 15.38 14.96 145.06
California Companies(21) 1.70 1.60 17.44 16.85 265.71
Florida Companies(5) 1.17 0.85 11.42 10.73 171.97
Mid-Atlantic Companies(59) 1.29 1.33 16.23 15.62 167.94
Mid-West Companies(144) 1.07 1.06 15.36 15.05 129.68
New England Companies(9) 1.22 1.45 17.38 16.63 235.52
North-West Companies(8) 1.08 1.07 14.46 14.08 125.97
South-East Companies(41) 0.97 0.97 14.50 14.20 111.94
South-West Companies(7) 1.30 1.30 15.15 14.39 194.42
Western Companies (Excl CA)(6) 1.16 1.16 16.28 15.61 108.86
Thrift Strategy(241) 1.07 1.09 15.65 15.30 134.04
Mortgage Banker Strategy(36) 1.65 1.52 15.72 14.78 228.23
Real Estate Strategy(9) 1.71 1.60 14.81 14.52 225.37
Diversified Strategy(10) 1.93 1.73 14.11 13.56 195.62
Retail Banking Strategy(4) -0.35 -0.45 12.75 12.17 195.11
Companies Issuing Dividends(253) 1.21 1.20 15.70 15.24 146.85
Companies Without Dividends(47) 0.92 0.93 14.73 14.50 168.35
Equity/Assets less than 6%(23) 1.71 1.74 14.77 13.80 296.86
Equity/Assets 6-12%(142) 1.41 1.36 15.62 14.99 185.38
Equity/Assets greater than 12%(135) 0.84 0.87 15.63 15.48 92.21
Converted Last 3 Mths (no MHC)(3) 0.54 0.54 13.31 13.31 70.71
Actively Traded Companies(39) 1.95 1.95 17.26 16.62 228.67
Market Value Below $20 Million(50) 0.81 0.84 14.83 14.79 116.11
Holding Company Structure(266) 1.14 1.13 15.78 15.37 146.95
Assets Over $1 Billion(60) 1.83 1.82 17.56 16.34 249.27
Assets $500 Million-$1 Billion(49) 1.24 1.17 14.43 13.94 153.79
Assets $250-$500 Million(65) 1.17 1.17 15.91 15.53 153.13
Assets less than $250 Million(126) 0.82 0.84 14.90 14.84 101.22
Goodwill Companies(121) 1.48 1.44 16.06 14.98 198.06
Non-Goodwill Companies(178) 0.96 0.98 15.23 15.23 118.94
Acquirors of FSLIC Cases(10) 2.56 2.52 20.88 19.72 332.65
</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-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of November 28, 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) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Market Averages. BIF-Insured Thrifts(no MHC)
- --------------------------------------------
BIF-Insured Thrifts(60) 27.04 7,954 236.6 28.39 16.96 26.97 0.36 257.78 54.53
NYSE Traded Companies(2) 45.44 72,159 2,657.1 47.69 30.12 45.88 -0.65 141.05 52.33
AMEX Traded Companies(6) 27.52 2,187 62.7 28.42 15.90 27.45 0.55 160.90 64.92
NASDAQ Listed OTC Companies(52) 26.21 5,835 152.1 27.57 16.51 26.11 0.38 273.45 53.50
California Companies(1) 18.00 7,847 141.2 21.25 14.00 18.62 -3.33 0.00 20.00
Mid-Atlantic Companies(15) 28.49 17,474 554.1 30.10 17.82 28.56 -0.06 181.00 53.60
Mid-West Companies(2) 10.69 1,707 16.9 10.88 8.25 10.75 -0.29 0.00 27.46
New England Companies(33) 27.76 4,429 128.9 28.91 16.52 27.61 0.63 288.58 62.63
North-West Companies(4) 20.02 7,249 152.0 21.51 13.09 19.75 1.11 149.35 50.17
South-East Companies(5) 31.22 2,076 44.7 32.92 23.24 31.10 0.62 0.00 32.10
Thrift Strategy(43) 27.16 4,853 164.2 28.42 17.03 27.04 0.50 252.35 53.98
Mortgage Banker Strategy(7) 27.60 31,238 749.0 29.55 16.85 27.77 -0.27 272.43 67.09
Real Estate Strategy(5) 19.31 5,823 109.8 21.31 14.38 19.31 -0.11 511.87 28.73
Diversified Strategy(5) 28.93 13,256 438.1 30.19 17.56 29.03 -0.22 193.39 60.80
Companies Issuing Dividends(52) 28.68 8,402 258.4 30.02 17.97 28.57 0.51 259.28 54.57
Companies Without Dividends(8) 16.05 4,948 90.4 17.48 10.13 16.20 -0.65 236.91 54.24
Equity/Assets less than 6%(5) 19.19 29,899 700.4 20.09 10.03 19.30 -0.47 182.79 89.94
Equity/Assets 6-12%(39) 29.85 6,297 234.0 31.24 17.93 29.78 0.36 274.62 59.31
Equity/Assets greater than 12%(16) 23.04 5,990 126.0 24.41 16.63 22.92 0.56 45.01 34.25
Actively Traded Companies(18) 29.24 11,760 328.2 30.73 18.17 29.10 0.67 290.30 54.56
Market Value Below $20 Million(5) 15.70 951 14.4 16.38 10.69 15.74 -0.27 0.00 40.76
Holding Company Structure(40) 26.35 6,498 176.9 27.71 16.78 26.20 0.67 243.44 52.15
Assets Over $1 Billion(14) 33.02 24,469 812.0 34.75 20.66 32.97 0.48 233.49 57.07
Assets $500 Million-$1 Billion(16) 29.54 5,007 120.2 30.92 17.96 29.53 -0.03 235.02 55.62
Assets $250-$500 Million(13) 23.20 3,131 66.3 24.22 14.08 22.97 0.82 301.71 57.84
Assets less than $250 Million(17) 22.85 1,549 28.9 24.12 15.30 22.81 0.28 266.74 48.93
Goodwill Companies(30) 30.21 11,423 367.4 31.44 18.45 30.11 0.37 254.64 58.09
Non-Goodwill Companies(30) 23.88 4,486 105.8 25.35 15.46 23.82 0.34 264.07 51.10
<CAPTION>
Current Per Share Financials
----------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- -------- ------- ------- ------- -------
($) ($) ($) ($) ($)
Market Averages. BIF-Insured Thrifts(no MHC)
- --------------------------------------------
<S> <C> <C> <C> <C> <C>
BIF-Insured Thrifts(60) 1.60 1.53 16.01 15.15 153.47
NYSE Traded Companies(2) 2.34 2.29 20.01 12.88 248.52
AMEX Traded Companies(6) 1.26 1.08 17.59 15.21 172.42
NASDAQ Listed OTC Companies(52) 1.60 1.55 15.67 15.24 147.41
California Companies(1) 1.52 1.52 12.32 12.27 114.89
Mid-Atlantic Companies(15) 1.34 1.30 16.10 14.20 170.74
Mid-West Companies(2) 0.21 0.26 11.08 10.73 35.43
New England Companies(33) 1.95 1.84 15.00 14.43 170.02
North-West Companies(4) 1.02 0.99 11.07 10.68 93.56
South-East Companies(5) 1.34 1.34 27.07 27.07 99.86
Thrift Strategy(43) 1.57 1.50 16.65 15.72 149.11
Mortgage Banker Strategy(7) 1.58 1.55 14.32 13.84 180.63
Real Estate Strategy(5) 1.78 1.67 11.27 11.24 105.38
Diversified Strategy(5) 1.80 1.75 13.54 12.55 190.42
Companies Issuing Dividends(52) 1.58 1.51 16.78 15.80 162.40
Companies Without Dividends(8) 1.69 1.67 10.85 10.74 93.52
Equity/Assets less than 6%(5) 1.19 1.01 7.80 7.57 140.95
Equity/Assets 6-12%(39) 1.97 1.88 15.85 14.59 185.28
Equity/Assets greater than 12%(16) 0.90 0.92 18.40 18.23 89.01
Actively Traded Companies(18) 1.96 1.86 15.76 14.94 180.63
Market Value Below $20 Million(5) 1.53 1.53 13.58 13.41 70.48
Holding Company Structure(40) 1.53 1.48 16.26 15.54 138.29
Assets Over $1 Billion(14) 1.82 1.77 15.78 14.05 186.74
Assets $500 Million-$1 Billion(16) 1.92 1.81 16.87 15.51 187.91
Assets $250-$500 Million(13) 1.23 1.17 13.57 13.26 127.17
Assets less than $250 Million(17) 1.39 1.35 17.29 17.18 113.47
Goodwill Companies(30) 1.74 1.65 16.68 14.95 192.05
Non-Goodwill Companies(30) 1.46 1.42 15.34 15.34 114.89
</TABLE>
(1) Average of high/low or bid/ask price per share.
(2) Or since offering price if converted or first listed in 1994 or 1995.
Percent change figures are actual year-to-date and are not annualized
(3) EPS (earnings per share) is based on actual trailing twelve month data and
is not shown on a pro forma basis.
(4) Excludes intangibles (such as goodwill, value of core deposits, etc.).
(5) ROA (return on assets) and ROE (return on equity) are indicated ratios
based on trailing twelve month common earnings and average common equity
and assets balances.
(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.
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of November 28, 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) ($Mil) ($) ($) ($) (%) (%) (%)
Market Averages. MHC Institutions
- ---------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts(20) 24.50 8,361 55.6 26.91 12.98 24.86 -1.95 377.81 97.87
BIF-Insured Thrifts(3) 31.06 22,105 289.7 33.12 12.38 30.17 3.39 328.08 159.26
NASDAQ Listed OTC Companies(23) 25.66 10,786 97.0 28.01 12.88 25.79 -1.01 352.95 111.02
Florida Companies(3) 31.44 5,933 88.2 36.13 17.50 31.44 0.10 0.00 63.87
Mid-Atlantic Companies(11) 22.14 11,091 57.7 23.94 10.12 22.41 -1.99 0.00 156.46
Mid-West Companies(7) 28.07 2,111 25.7 30.20 14.96 28.07 0.00 377.81 82.55
New England Companies(1) 33.69 61,126 823.8 37.37 18.00 33.50 0.57 328.08 75.01
Thrift Strategy(22) 25.16 7,640 51.5 27.42 12.56 25.31 -1.10 377.81 113.79
Diversified Strategy(1) 33.69 61,126 823.8 37.37 18.00 33.50 0.57 328.08 75.01
Companies Issuing Dividends(22) 26.10 11,288 101.6 28.52 12.83 26.21 -0.91 352.95 111.02
Companies Without Dividends(1) 18.62 2,760 23.1 19.75 13.62 19.12 -2.62 0.00 0.00
Equity/Assets 6-12%(16) 27.22 14,077 127.3 29.94 13.07 27.35 -1.10 352.95 117.74
Equity/Assets greater than 12%(7) 21.90 2,887 24.2 23.37 12.42 22.05 -0.79 0.00 86.37
Holding Company Structure(2) 28.50 1,917 25.1 29.50 9.38 26.00 9.62 0.00 203.84
Assets Over $1 Billion(5) 22.23 47,219 393.3 24.83 10.17 23.54 -7.45 328.08 132.26
Assets $500 Million-$1 Billion(3) 31.44 5,933 88.2 36.13 17.50 31.44 0.10 0.00 63.87
Assets $250-$500 Million(5) 28.12 3,423 38.4 29.92 15.31 28.12 0.00 377.81 84.92
Assets less than $250 Million(10) 24.69 2,174 19.6 26.62 11.94 24.51 0.56 0.00 129.17
Goodwill Companies(9) 25.82 25,530 222.7 28.58 12.94 26.02 -1.97 352.95 120.18
Non-Goodwill Companies(14) 25.57 2,744 28.3 27.69 12.84 25.67 -0.48 0.00 104.15
MHC Institutions(23) 25.66 10,786 97.0 28.01 12.88 25.79 -1.01 352.95 111.02
</TABLE>
<TABLE>
<CAPTION>
Current Per Share Financials
----------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- -------- ------- ------- ------- -------
($) ($) ($) ($) ($)
Market Averages. MHC Institutions
- ---------------------------------
<S> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts(20) 0.65 0.67 10.70 10.63 95.33
BIF-Insured Thrifts(3) 1.06 0.85 10.76 10.12 101.07
NASDAQ Listed OTC Companies(23) 0.72 0.70 10.71 10.54 96.34
Florida Companies(3) 0.79 0.89 14.08 14.03 143.39
Mid-Atlantic Companies(11) 0.57 0.56 9.17 8.86 76.90
Mid-West Companies(7) 0.82 0.85 12.01 11.98 106.48
New England Companies(1) 1.44 0.93 11.41 11.40 126.48
Thrift Strategy(22) 0.68 0.69 10.67 10.48 94.46
Diversified Strategy(1) 1.44 0.93 11.41 11.40 126.48
Companies Issuing Dividends(22) 0.73 0.71 10.74 10.56 97.69
Companies Without Dividends(1) 0.56 0.54 10.22 10.22 74.79
Equity/Assets 6-12%(16) 0.79 0.74 10.87 10.62 109.41
Equity/Assets greater than 12%(7) 0.57 0.61 10.33 10.33 64.98
Holding Company Structure(2) 1.05 0.94 12.02 10.10 100.68
Assets Over $1 Billion(5) 0.79 0.59 6.95 6.67 77.96
Assets $500 Million-$1 Billion(3) 0.79 0.89 14.08 14.03 143.39
Assets $250-$500 Million(5) 0.88 0.85 11.27 11.23 109.10
Assets less than $250 Million(10) 0.64 0.65 11.03 10.82 87.76
Goodwill Companies(9) 0.85 0.78 9.89 9.39 107.23
Non-Goodwill Companies(14) 0.65 0.67 11.16 11.16 90.40
MHC Institutions(23) 0.72 0.70 10.71 10.54 96.34
</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.
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of November 28, 1997
<TABLE>
<CAPTION>
Price Change Data
Market Capitalization -----------------------------------------------
----------------------- 52 Week (1) % Change From
Shares Market --------------- -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NYSE Traded Companies
- ---------------------
AHM Ahmanson and Co. H.F. of CA 59.50 94,411 5,617.5 62.06 31.50 61.50 -3.25 217.33 83.08
CSA Coast Savings Financial of CA 60.00 18,644 1,118.6 61.44 34.75 61.37 -2.23 419.03 63.84
CFB Commercial Federal Corp. of NE 48.06 21,582 1,037.2 51.19 29.75 47.69 0.78 ***.** 50.19
DME Dime Bancorp, Inc. of NY* 24.25 101,492 2,461.2 26.00 14.62 24.25 0.00 141.05 64.41
DSL Downey Financial Corp. of CA 27.50 26,754 735.7 27.56 17.62 26.81 2.57 153.22 47.14
FED FirstFed Fin. Corp. of CA 36.50 10,585 386.4 39.44 21.50 39.44 -7.45 126.01 65.91
GSB Glendale Fed. Bk, FSB of CA 33.31 50,456 1,680.7 36.12 20.62 32.37 2.90 104.98 43.27
GDW Golden West Fin. Corp. of CA 89.62 56,770 5,087.7 93.81 59.87 89.87 -0.28 242.19 41.98
GPT GreenPoint Fin. Corp. of NY* 66.62 42,826 2,853.1 69.37 45.62 67.50 -1.30 N.A. 40.25
JSB JSB Financial, Inc. of NY 46.62 9,898 461.4 49.56 36.00 47.12 -1.06 305.39 22.68
NYB New York Bancorp, Inc. of NY 35.37 21,319 754.1 36.31 16.81 36.00 -1.75 398.87 82.60
WES Westcorp Inc. of Orange CA 17.00 26,256 446.4 23.62 13.25 17.37 -2.13 131.92 -22.30
AMEX Traded Companies
- ---------------------
ANA Acadiana Bancshares of LA* 23.75 2,697 64.1 24.75 14.19 23.37 1.63 N.A. 59.72
ANE Alliance Bancorp of New Englan* 17.50 1,627 28.5 18.00 8.72 17.25 1.45 141.38 94.44
BKC American Bank of Waterbury CT* 47.12 2,313 109.0 47.87 27.37 47.50 -0.80 151.31 68.29
BFD BostonFed Bancorp of MA 20.37 5,650 115.1 22.31 14.37 20.56 -0.92 N.A. 38.10
CFX CFX Corp of NH(8)* 27.75 23,977 665.4 27.75 14.29 27.50 0.91 133.19 79.03
CNY Carver Bancorp, Inc. of NY 17.06 2,314 39.5 17.06 7.75 16.50 3.39 172.96 106.79
CBK Citizens First Fin.Corp. of IL 18.25 2,584 47.2 19.50 13.50 18.12 0.72 N.A. 27.00
ESX Essex Bancorp of VA(8) 5.00 1,058 5.3 7.94 1.00 4.87 2.67 -70.15 128.31
FCB Falmouth Co-Op Bank of MA* 20.25 1,455 29.5 22.00 12.87 20.25 0.00 N.A. 54.34
FAB FirstFed America Bancorp of MA 20.62 8,707 179.5 22.12 13.62 20.25 1.83 N.A. N.A.
GAF GA Financial Corp. of PA 19.25 7,973 153.5 19.69 14.50 19.69 -2.23 N.A. 27.31
KNK Kankakee Bancorp of IL 33.87 1,426 48.3 34.62 23.37 31.75 6.68 238.70 36.85
KYF Kentucky First Bancorp of KY 14.50 1,303 18.9 14.62 10.56 14.62 -0.82 N.A. 33.39
MBB MSB Bancorp of Middletown NY* 29.00 2,844 82.5 29.50 16.37 28.87 0.45 190.00 47.81
PDB Piedmont Bancorp of NC 10.37 2,751 28.5 18.12 9.25 10.62 -2.35 N.A. -1.24
SSB Scotland Bancorp of NC 10.25 1,914 19.6 19.25 10.19 10.31 -0.58 N.A. -27.41
SZB SouthFirst Bancshares of AL 19.00 848 16.1 20.87 12.50 19.37 -1.91 N.A. 43.40
SRN Southern Banc Company of AL 16.87 1,230 20.8 17.37 13.12 16.87 0.00 N.A. 28.58
SSM Stone Street Bancorp of NC 20.25 1,898 38.4 27.25 19.25 20.50 -1.22 N.A. -1.22
TSH Teche Holding Company of LA 21.88 3,438 75.2 23.50 13.00 21.50 1.77 N.A. 52.26
FTF Texarkana Fst. Fin. Corp of AR 24.75 1,790 44.3 27.00 13.62 24.87 -0.48 N.A. 58.35
THR Three Rivers Fin. Corp. of MI 19.75 824 16.3 20.50 13.62 20.06 -1.55 N.A. 41.07
WSB Washington SB, FSB of MD 7.37 4,348 32.0 8.25 4.75 7.37 0.00 489.60 51.33
NASDAQ Listed OTC Companies
- ---------------------------
FBCV 1st Bancorp of Vincennes IN 40.00 692 27.7 41.00 27.14 40.00 0.00 N.A. 40.35
AFED AFSALA Bancorp, Inc. of NY 19.12 1,455 27.8 19.50 11.37 18.75 1.97 N.A. 59.33
ALBK ALBANK Fin. Corp. of Albany NY 46.25 12,872 595.3 47.75 30.50 45.50 1.65 98.92 47.43
AMFC AMB Financial Corp. of IN 16.00 964 15.4 17.75 12.50 16.06 -0.37 N.A. 20.75
ASBP ASB Financial Corp. of OH 13.12 1,700 22.3 18.25 11.50 13.25 -0.98 N.A. 0.92
ABBK Abington Savings Bank of MA* 36.00 1,840 66.2 36.75 19.00 36.75 -2.04 443.81 84.62
AABC Access Anytime Bancorp of NM 10.12 1,217 12.3 10.62 5.15 10.53 -3.89 49.93 87.76
AFBC Advance Fin. Bancorp of WV 17.75 1,084 19.2 17.87 12.75 17.75 0.00 N.A. N.A.
AADV Advantage Bancorp of WI(8) 62.25 3,236 201.4 62.25 31.75 62.00 0.40 576.63 93.02
AFCB Affiliated Comm BC, Inc of MA 28.50 6,493 185.1 32.12 17.10 29.00 -1.72 N.A. 66.67
ALBC Albion Banc Corp. of Albion NY 29.00 250 7.3 30.50 16.50 29.00 0.00 123.08 73.13
ABCL Allied Bancorp of IL 26.25 8,020 210.5 28.37 16.08 26.50 -0.94 293.55 57.47
<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 3.94 3.37 20.17 17.13 495.70
CSA Coast Savings Financial of CA 2.94 3.14 25.21 24.92 484.90
CFB Commercial Federal Corp. of NE 3.02 3.02 20.59 18.42 333.94
DME Dime Bancorp, Inc. of NY* 1.30 1.28 10.38 9.88 191.28
DSL Downey Financial Corp. of CA 1.49 1.43 15.61 15.41 218.81
FED FirstFed Fin. Corp. of CA 2.19 2.18 20.01 19.82 387.78
GSB Glendale Fed. Bk, FSB of CA 1.76 2.11 18.39 16.46 325.68
GDW Golden West Fin. Corp. of CA 5.93 5.83 45.36 45.36 691.01
GPT GreenPoint Fin. Corp. of NY* 3.38 3.30 29.63 15.88 305.75
JSB JSB Financial, Inc. of NY 2.97 2.64 35.91 35.91 154.68
NYB New York Bancorp, Inc. of NY 2.40 2.46 7.93 7.93 152.17
WES Westcorp Inc. of Orange CA 1.31 0.27 13.00 12.97 143.10
AMEX Traded Companies
- ---------------------
ANA Acadiana Bancshares of LA* 0.48 0.48 16.91 16.91 97.03
ANE Alliance Bancorp of New Englan* 1.15 1.06 10.95 10.68 148.69
BKC American Bank of Waterbury CT* 3.27 2.76 23.23 22.38 263.69
BFD BostonFed Bancorp of MA 1.16 1.05 14.48 13.94 170.04
CFX CFX Corp of NH(8)* 0.58 0.78 10.25 9.88 117.66
CNY Carver Bancorp, Inc. of NY -0.26 0.02 15.09 14.50 179.59
CBK Citizens First Fin.Corp. of IL 0.63 0.56 14.79 14.79 107.57
ESX Essex Bancorp of VA(8) 0.20 0.18 0.03 -0.14 181.37
FCB Falmouth Co-Op Bank of MA* 0.52 0.49 15.40 15.40 64.55
FAB FirstFed America Bancorp of MA 0.06 0.54 14.52 14.52 118.99
GAF GA Financial Corp. of PA 0.94 0.91 14.72 14.58 100.63
KNK Kankakee Bancorp of IL 2.15 2.11 27.25 25.69 238.38
KYF Kentucky First Bancorp of KY 0.78 0.77 11.29 11.29 67.60
MBB MSB Bancorp of Middletown NY* 0.79 0.52 21.15 10.38 286.18
PDB Piedmont Bancorp of NC -0.11 0.25 7.56 7.56 46.00
SSB Scotland Bancorp of NC 0.66 0.65 7.61 7.61 33.65
SZB SouthFirst Bancshares of AL -0.03 0.25 16.06 16.06 114.72
SRN Southern Banc Company of AL 0.12 0.43 14.58 14.43 85.72
SSM Stone Street Bancorp of NC 0.86 0.86 16.32 16.32 55.20
TSH Teche Holding Company of LA 0.78 1.08 15.53 15.53 118.17
FTF Texarkana Fst. Fin. Corp of AR 1.31 1.62 15.03 15.03 95.73
THR Three Rivers Fin. Corp. of MI 0.62 0.90 15.54 15.48 115.45
WSB Washington SB, FSB of MD 0.25 0.35 5.16 5.16 61.61
NASDAQ Listed OTC Companies
- ---------------------------
FBCV 1st Bancorp of Vincennes IN 2.76 1.37 32.62 32.00 377.07
AFED AFSALA Bancorp, Inc. of NY 0.82 0.82 14.74 14.74 109.40
ALBK ALBANK Fin. Corp. of Albany NY 2.89 2.87 26.69 23.51 288.76
AMFC AMB Financial Corp. of IN 0.98 0.69 14.95 14.95 107.25
ASBP ASB Financial Corp. of OH 0.64 0.60 10.30 10.30 66.15
ABBK Abington Savings Bank of MA* 2.29 2.04 19.43 17.61 272.62
AABC Access Anytime Bancorp of NM 1.26 1.17 7.51 7.51 86.80
AFBC Advance Fin. Bancorp of WV 0.83 0.81 15.02 15.02 97.52
AADV Advantage Bancorp of WI(8) 3.30 2.96 30.59 28.46 320.60
AFCB Affiliated Comm BC, Inc of MA 1.52 1.74 16.42 16.33 167.94
ALBC Albion Banc Corp. of Albion NY 1.31 1.29 24.26 24.26 283.24
ABCL Allied Bancorp of IL 1.06 1.18 16.10 15.90 170.97
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of November 28, 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>
ATSB AmTrust Capital Corp. of IN 14.00 526 7.4 14.50 10.00 14.50 -3.45 N.A. 40.00
AHCI Ambanc Holding Co., Inc. of NY* 17.00 4,306 73.2 17.37 10.50 17.06 -0.35 N.A. 51.11
ASBI Ameriana Bancorp of IN 19.50 3,231 63.0 22.00 15.25 19.75 -1.27 111.27 21.88
AFFFZ America First Fin. Fund of CA(8) 47.12 6,011 283.2 50.56 28.75 48.62 -3.09 151.31 55.77
ABCW Anchor Bancorp Wisconsin of WI 31.50 9,054 285.2 32.25 17.37 30.50 3.28 114.43 76.27
ANDB Andover Bancorp, Inc. of MA* 37.75 5,149 194.4 40.50 25.00 38.37 -1.62 251.16 47.35
ASFC Astoria Financial Corp. of NY 55.12 20,666 1,139.1 56.62 34.75 56.25 -2.01 109.98 49.50
AVND Avondale Fin. Corp. of IL 16.00 3,495 55.9 18.87 12.75 16.12 -0.74 N.A. -6.54
BKCT Bancorp Connecticut of CT* 40.00 2,543 101.7 40.00 21.50 38.87 2.91 357.14 77.78
BPLS Bank Plus Corp. of CA 11.12 19,341 215.1 13.75 9.62 11.50 -3.30 N.A. -3.30
BWFC Bank West Fin. Corp. of MI 22.00 1,753 38.6 22.50 10.50 22.12 -0.54 N.A. 107.16
BANC BankAtlantic Bancorp of FL 14.37 22,276 320.1 17.12 12.12 13.87 3.60 245.43 7.48
BKUNA BankUnited SA of FL 12.94 9,533 123.4 13.75 8.50 13.25 -2.34 138.31 29.40
BVCC Bay View Capital Corp. of CA 33.75 12,421 419.2 35.81 19.50 33.87 -0.35 70.89 59.27
FSNJ Bayonne Banchsares of NJ 12.00 8,993 107.9 13.06 5.63 12.25 -2.04 N.A. 53.06
BFSB Bedford Bancshares of VA 28.25 1,142 32.3 28.75 17.50 28.75 -1.74 169.05 60.33
BFFC Big Foot Fin. Corp. of IL 18.50 2,513 46.5 19.62 12.31 18.37 0.71 N.A. 42.31
BSBC Branford SB of CT(8)* 6.00 6,559 39.4 6.31 3.62 6.25 -4.00 183.02 55.04
BYFC Broadway Fin. Corp. of CA 13.00 831 10.8 13.00 9.12 13.00 0.00 N.A. 40.54
CBES CBES Bancorp of MO 20.37 1,025 20.9 22.37 13.31 20.00 1.85 N.A. 42.95
CCFH CCF Holding Company of GA 20.00 820 16.4 21.00 14.50 19.75 1.27 N.A. 35.59
CENF CENFED Financial Corp. of CA 40.75 5,959 242.8 42.25 25.45 38.75 5.16 159.89 53.25
CFSB CFSB Bancorp of Lansing MI 35.50 5,087 180.6 35.75 16.59 35.50 0.00 294.44 100.23
CKFB CKF Bancorp of Danville KY 18.50 903 16.7 20.50 17.50 18.37 0.71 N.A. -8.64
CNSB CNS Bancorp of MO 20.00 1,653 33.1 20.00 14.00 18.00 11.11 N.A. 32.28
CSBF CSB Financial Group Inc of IL* 12.50 942 11.8 12.75 10.00 12.75 -1.96 N.A. 23.52
CBCI Calumet Bancorp of Chicago IL 31.87 3,166 100.9 34.00 21.67 32.87 -3.04 138.37 43.75
CAFI Camco Fin. Corp. of OH 24.00 3,214 77.1 24.00 14.05 24.00 0.00 N.A. 58.73
CMRN Cameron Fin. Corp. of MO 19.62 2,627 51.5 19.87 15.00 19.00 3.26 N.A. 22.63
CAPS Capital Savings Bancorp of MO(8) 22.37 1,892 42.3 22.50 12.75 18.75 19.31 68.83 72.08
CFNC Carolina Fincorp of NC* 17.37 1,851 32.2 17.87 13.00 17.37 0.00 N.A. 29.92
CASB Cascade SB of Everett WA(8) 12.75 3,385 43.2 16.80 10.40 13.25 -3.77 -0.39 -1.16
CATB Catskill Fin. Corp. of NY* 17.62 4,657 82.1 19.12 13.75 17.50 0.69 N.A. 25.86
CNIT Cenit Bancorp of Norfolk VA 68.00 1,654 112.5 71.00 39.00 69.00 -1.45 328.21 63.86
CEBK Central Co-Op. Bank of MA* 26.50 1,965 52.1 26.50 15.87 26.00 1.92 404.76 51.43
CENB Century Bancshares of NC* 80.00 407 32.6 84.00 62.00 80.00 0.00 N.A. 23.08
CBSB Charter Financial Inc. of IL(8) 22.00 4,150 91.3 22.00 12.50 21.50 2.33 N.A. 76.00
COFI Charter One Financial of OH 59.25 49,563 2,936.6 61.91 36.91 60.62 -2.26 238.57 48.12
CVAL Chester Valley Bancorp of PA 26.25 2,189 57.5 27.50 14.10 26.50 -0.94 131.69 86.17
CTZN CitFed Bancorp of Dayton OH 50.62 8,656 438.2 55.50 28.25 50.50 0.24 462.44 53.39
CLAS Classic Bancshares of KY 17.12 1,300 22.3 17.25 11.50 16.75 2.21 N.A. 47.33
CMSB Cmnwealth Bancorp of PA 20.37 16,243 330.9 20.37 13.50 20.06 1.55 N.A. 35.80
CBSA Coastal Bancorp of Houston TX 28.87 4,992 144.1 33.25 22.37 29.00 -0.45 N.A. 26.24
CFCP Coastal Fin. Corp. of SC 23.00 4,647 106.9 27.75 14.44 22.75 1.10 130.00 46.03
CMSV Commty. Svgs, MHC of FL (48.5) 35.00 5,095 86.5 39.75 18.00 35.25 -0.71 N.A. 70.73
CFTP Community Fed. Bancorp of MS 17.12 4,629 79.2 20.00 16.37 16.75 2.21 N.A. 0.71
CFFC Community Fin. Corp. of VA 24.75 1,275 31.6 24.75 20.50 23.62 4.78 253.57 19.28
CFBC Community First Bnkg Co. of GA 38.37 2,414 92.6 40.00 31.87 38.37 0.00 N.A. N.A.
CIBI Community Inv. Bancorp of OH 15.75 916 14.4 17.00 10.33 16.37 -3.79 N.A. 39.01
COOP Cooperative Bk.for Svgs. of NC 17.37 2,983 51.8 17.75 10.00 17.00 2.18 247.40 71.64
CRZY Crazy Woman Creek Bncorp of WY 15.37 955 14.7 15.50 11.25 15.31 0.39 N.A. 28.08
DNFC D&N Financial Corp. of MI 24.12 8,244 198.8 25.37 14.87 23.87 1.05 175.66 44.00
DCBI Delphos Citizens Bancorp of OH 17.50 1,960 34.3 18.25 11.75 17.75 -1.41 N.A. 45.83
DIME Dime Community Bancorp of NY 23.25 12,625 293.5 23.62 14.06 22.94 1.35 N.A. 57.63
DIBK Dime Financial Corp. of CT* 31.50 5,162 162.6 32.00 16.50 30.25 4.13 200.00 82.61
<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>
ATSB AmTrust Capital Corp. of IN 0.54 0.31 14.48 14.33 132.48
AHCI Ambanc Holding Co., Inc. of NY* -0.65 -0.68 14.57 14.57 112.63
ASBI Ameriana Bancorp of IN 1.13 1.02 13.63 13.63 121.64
AFFFZ America First Fin. Fund of CA(8) 7.31 7.39 31.32 30.99 374.40
ABCW Anchor Bancorp Wisconsin of WI 2.09 1.95 13.82 13.58 215.90
ANDB Andover Bancorp, Inc. of MA* 2.51 2.45 20.20 20.20 248.71
ASFC Astoria Financial Corp. of NY 2.96 2.80 29.51 24.96 382.48
AVND Avondale Fin. Corp. of IL -3.37 -3.43 13.18 13.18 170.79
BKCT Bancorp Connecticut of CT* 2.23 2.04 17.92 17.92 166.65
BPLS Bank Plus Corp. of CA 0.65 0.54 9.16 9.15 202.69
BWFC Bank West Fin. Corp. of MI 0.88 0.48 13.30 13.30 94.04
BANC BankAtlantic Bancorp of FL 1.22 0.64 7.03 5.81 127.72
BKUNA BankUnited SA of FL 0.49 0.44 7.03 5.53 225.05
BVCC Bay View Capital Corp. of CA 1.42 1.59 14.81 12.37 254.59
FSNJ Bayonne Banchsares of NJ 0.25 0.35 10.58 10.58 67.73
BFSB Bedford Bancshares of VA 1.39 1.38 17.18 17.18 121.87
BFFC Big Foot Fin. Corp. of IL 0.12 0.35 14.97 14.97 85.62
BSBC Branford SB of CT(8)* 0.31 0.31 2.69 2.69 27.88
BYFC Broadway Fin. Corp. of CA -0.16 0.30 14.72 14.72 147.11
CBES CBES Bancorp of MO 1.18 1.07 17.60 17.60 104.03
CCFH CCF Holding Company of GA 0.16 -0.18 14.21 14.21 133.34
CENF CENFED Financial Corp. of CA 2.41 2.17 21.51 21.48 386.76
CFSB CFSB Bancorp of Lansing MI 1.98 1.86 13.03 13.03 169.05
CKFB CKF Bancorp of Danville KY 1.22 0.91 15.69 15.69 66.30
CNSB CNS Bancorp of MO 0.47 0.47 14.34 14.34 58.93
CSBF CSB Financial Group Inc of IL* 0.16 0.26 12.98 12.27 51.85
CBCI Calumet Bancorp of Chicago IL 2.27 2.23 25.01 25.01 154.25
CAFI Camco Fin. Corp. of OH 1.73 1.46 14.98 13.87 156.25
CMRN Cameron Fin. Corp. of MO 0.78 0.97 17.18 17.18 79.22
CAPS Capital Savings Bancorp of MO(8) 1.20 1.18 11.70 11.70 128.04
CFNC Carolina Fincorp of NC* 0.70 0.68 13.92 13.92 61.63
CASB Cascade SB of Everett WA(8) 0.65 0.65 8.36 8.36 125.98
CATB Catskill Fin. Corp. of NY* 0.84 0.85 15.41 15.41 62.19
CNIT Cenit Bancorp of Norfolk VA 3.39 3.15 29.47 26.99 424.25
CEBK Central Co-Op. Bank of MA* 1.45 1.47 17.40 15.57 175.28
CENB Century Bancshares of NC* 4.19 4.20 75.12 75.12 248.00
CBSB Charter Financial Inc. of IL(8) 1.05 1.47 13.71 12.13 94.76
COFI Charter One Financial of OH 3.64 3.56 21.63 19.86 306.62
CVAL Chester Valley Bancorp of PA 1.36 1.30 12.75 12.75 147.25
CTZN CitFed Bancorp of Dayton OH 2.97 2.97 23.88 21.70 380.61
CLAS Classic Bancshares of KY 0.51 0.63 14.93 12.63 100.19
CMSB Cmnwealth Bancorp of PA 1.02 0.86 13.02 10.15 140.25
CBSA Coastal Bancorp of Houston TX 2.40 2.47 20.36 17.12 586.85
CFCP Coastal Fin. Corp. of SC 1.25 1.08 6.97 6.97 106.31
CMSV Commty. Svgs, MHC of FL (48.5) 1.07 0.98 15.79 15.79 139.20
CFTP Community Fed. Bancorp of MS 0.66 0.65 12.47 12.47 46.65
CFFC Community Fin. Corp. of VA 1.32 1.67 18.86 18.86 137.58
CFBC Community First Bnkg Co. of GA 1.29 1.29 29.10 28.71 163.45
CIBI Community Inv. Bancorp of OH 1.01 1.01 12.10 12.10 102.98
COOP Cooperative Bk.for Svgs. of NC 0.73 0.73 9.27 9.27 120.53
CRZY Crazy Woman Creek Bncorp of WY 0.72 0.73 14.88 14.88 62.78
DNFC D&N Financial Corp. of MI 1.68 1.55 11.18 11.06 212.77
DCBI Delphos Citizens Bancorp of OH 0.82 0.82 14.65 14.65 55.00
DIME Dime Community Bancorp of NY 1.10 1.07 14.81 12.76 109.73
DIBK Dime Financial Corp. of CT* 3.05 3.04 14.54 14.12 178.52
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of November 28, 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>
EGLB Eagle BancGroup of IL 19.75 1,198 23.7 19.75 13.25 18.94 4.28 N.A. 32.82
EBSI Eagle Bancshares of Tucker GA 19.25 5,666 109.1 20.94 13.62 19.25 0.00 165.52 24.19
EGFC Eagle Financial Corp. of CT(8) 51.75 6,316 326.9 52.50 26.75 51.00 1.47 491.43 69.67
ETFS East Texas Fin. Serv. of TX 20.00 1,026 20.5 21.50 15.50 19.37 3.25 N.A. 22.17
EMLD Emerald Financial Corp of OH 19.25 5,072 97.6 19.25 10.62 19.25 0.00 N.A. 71.11
EIRE Emerald Island Bancorp, MA(8)* 32.25 2,250 72.6 32.25 14.20 31.94 0.97 323.23 101.56
EFBC Empire Federal Bancorp of MT 16.50 2,592 42.8 18.25 12.50 16.50 0.00 N.A. N.A.
EFBI Enterprise Fed. Bancorp of OH 27.75 1,986 55.1 27.75 14.12 27.00 2.78 N.A. 91.38
EQSB Equitable FSB of Wheaton MD 45.00 602 27.1 45.75 26.50 44.31 1.56 N.A. 59.29
FCBF FCB Fin. Corp. of Neenah WI 27.25 3,879 105.7 28.13 18.50 28.00 -2.68 N.A. 47.30
FFBS FFBS Bancorp of Columbus MS 22.50 1,572 35.4 26.00 21.00 22.50 0.00 N.A. -2.17
FFDF FFD Financial Corp. of OH 18.37 1,445 26.5 19.50 13.00 18.75 -2.03 N.A. 38.64
FFLC FFLC Bancorp of Leesburg FL 22.50 3,835 86.3 23.50 11.70 23.50 -4.26 N.A. 74.42
FFFC FFVA Financial Corp. of VA 33.37 4,522 150.9 35.12 20.00 33.75 -1.13 N.A. 62.78
FFWC FFW Corporation of Wabash IN 37.75 715 27.0 37.75 20.75 36.00 4.86 N.A. 72.53
FFYF FFY Financial Corp. of OH 29.75 4,122 122.6 30.12 25.00 30.12 -1.23 N.A. 17.54
FMCO FMS Financial Corp. of NJ 29.37 2,388 70.1 31.50 17.00 29.37 0.00 226.33 60.93
FFHH FSF Financial Corp. of MN 20.00 3,010 60.2 21.00 14.25 19.50 2.56 N.A. 32.28
FOBC Fed One Bancorp of Wheeling WV 24.87 2,373 59.0 27.00 15.37 25.75 -3.42 148.70 57.90
FBCI Fidelity Bancorp of Chicago IL 23.25 2,795 65.0 25.75 16.87 23.75 -2.11 N.A. 36.76
FSBI Fidelity Bancorp, Inc. of PA 26.62 1,555 41.4 26.62 16.82 25.50 4.39 244.37 46.42
FFFL Fidelity FSB, MHC of FL (47.7) 27.87 6,771 89.9 32.50 17.00 27.62 0.91 N.A. 57.01
FFED Fidelity Fed. Bancorp of IN 10.00 2,791 27.9 10.50 7.50 9.50 5.26 41.84 2.56
FFOH Fidelity Financial of OH 15.00 5,580 83.7 16.37 11.12 14.62 2.60 N.A. 30.43
FIBC Financial Bancorp, Inc. of NY 24.81 1,710 42.4 25.75 14.25 25.75 -3.65 N.A. 65.40
FBSI First Bancshares of MO 26.25 1,093 28.7 28.00 16.25 26.25 0.00 105.88 57.94
FBBC First Bell Bancorp of PA 17.25 6,511 112.3 18.37 13.12 18.00 -4.17 N.A. 30.19
FBER First Bergen Bancorp of NJ 18.62 2,865 53.3 19.50 11.37 18.75 -0.69 N.A. 61.91
SKBO First Carnegie,MHC of PA(45.0) 18.62 2,300 19.3 19.87 11.62 18.87 -1.32 N.A. N.A.
FSTC First Citizens Corp of GA 24.00 2,742 65.8 27.17 14.17 25.75 -6.80 190.91 42.60
FCME First Coastal Corp. of ME* 13.87 1,359 18.8 15.75 7.25 13.75 0.87 N.A. 78.97
FFBA First Colorado Bancorp of Co 22.75 16,485 375.0 23.50 16.00 23.50 -3.19 589.39 33.82
FDEF First Defiance Fin.Corp. of OH 15.25 8,957 136.6 16.00 11.75 15.37 -0.78 N.A. 23.28
FESX First Essex Bancorp of MA* 19.87 7,527 149.6 20.50 13.12 19.37 2.58 231.17 51.45
FFES First FS&LA of E. Hartford CT 37.00 2,682 99.2 37.50 22.75 37.50 -1.33 469.23 60.87
FFSX First FS&LA. MHC of IA (46.1) 31.87 2,833 41.5 35.00 20.75 31.87 0.00 377.81 63.44
BDJI First Fed. Bancorp. of MN 28.00 673 18.8 28.00 17.00 28.00 0.00 N.A. 51.35
FFBH First Fed. Bancshares of AR 21.37 4,896 104.6 21.75 15.75 21.50 -0.60 N.A. 34.66
FTFC First Fed. Capital Corp. of WI 27.87 9,165 255.4 29.00 15.50 26.87 3.72 271.60 77.86
FFKY First Fed. Fin. Corp. of KY 22.00 4,159 91.5 23.50 17.75 22.00 0.00 39.68 8.64
FFBZ First Federal Bancorp of OH 19.25 1,575 30.3 20.50 14.50 19.25 0.00 92.50 20.31
FFCH First Fin. Holdings Inc. of SC 43.12 6,368 274.6 44.00 22.25 44.00 -2.00 252.00 91.64
FFBI First Financial Bancorp of IL 19.00 415 7.9 20.00 15.50 19.00 0.00 N.A. 19.72
FFHS First Franklin Corp. of OH 26.00 1,192 31.0 26.00 16.00 26.00 0.00 98.17 57.58
FGHC First Georgia Hold. Corp of GA 8.37 3,052 25.5 9.50 5.17 8.25 1.45 118.54 47.62
FSPG First Home Bancorp of NJ 23.75 2,708 64.3 23.75 13.50 23.75 0.00 295.83 71.23
FFSL First Independence Corp. of KS 15.00 978 14.7 15.00 9.81 15.00 0.00 N.A. 44.65
FISB First Indiana Corp. of IN 26.25 10,561 277.2 26.50 17.37 26.50 -0.94 94.44 22.66
FKFS First Keystone Fin. Corp of PA 32.00 1,228 39.3 33.25 19.00 32.12 -0.37 N.A. 66.23
FLKY First Lancaster Bncshrs of KY 15.75 951 15.0 16.37 14.50 15.87 -0.76 N.A. 7.73
FLFC First Liberty Fin. Corp. of GA 27.87 7,725 215.3 28.37 18.25 27.12 2.77 448.62 51.71
CASH First Midwest Fin. Corp. of IA 20.50 2,699 55.3 20.75 15.00 20.31 0.94 N.A. 33.72
FMBD First Mutual Bancorp of IL 20.25 3,507 71.0 21.50 13.75 20.00 1.25 N.A. 35.00
FMSB First Mutual SB of Bellevue WA* 18.25 4,067 74.2 20.17 10.61 18.37 -0.65 253.68 72.01
FNGB First Northern Cap. Corp of WI 13.50 8,840 119.3 14.00 8.00 13.62 -0.88 85.95 66.05
<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>
EGLB Eagle BancGroup of IL 0.46 0.36 17.03 17.03 143.71
EBSI Eagle Bancshares of Tucker GA 0.88 0.89 12.59 12.59 154.03
EGFC Eagle Financial Corp. of CT(8) 0.90 1.30 22.91 18.23 332.04
ETFS East Texas Fin. Serv. of TX 0.75 0.70 20.35 20.35 113.01
EMLD Emerald Financial Corp of OH 1.20 1.11 9.28 9.15 118.99
EIRE Emerald Island Bancorp, MA(8)* 1.60 1.70 13.77 13.77 197.11
EFBC Empire Federal Bancorp of MT 0.35 0.46 14.76 14.76 42.30
EFBI Enterprise Fed. Bancorp of OH 0.82 0.99 15.82 15.81 138.41
EQSB Equitable FSB of Wheaton MD 2.20 3.51 25.80 25.80 511.96
FCBF FCB Fin. Corp. of Neenah WI 0.63 0.47 12.23 12.23 69.91
FFBS FFBS Bancorp of Columbus MS 1.16 1.16 14.34 14.34 85.85
FFDF FFD Financial Corp. of OH 1.16 0.57 14.86 14.86 61.05
FFLC FFLC Bancorp of Leesburg FL 0.94 0.89 13.73 13.73 99.97
FFFC FFVA Financial Corp. of VA 1.70 1.63 16.70 16.36 125.45
FFWC FFW Corporation of Wabash IN 2.43 2.38 24.63 22.36 253.80
FFYF FFY Financial Corp. of OH 1.87 1.84 20.30 20.30 148.22
FMCO FMS Financial Corp. of NJ 2.34 2.32 15.80 15.57 243.58
FFHH FSF Financial Corp. of MN 1.04 1.03 14.41 14.41 128.95
FOBC Fed One Bancorp of Wheeling WV 1.38 1.38 16.85 16.10 150.75
FBCI Fidelity Bancorp of Chicago IL 1.41 1.41 18.66 18.63 178.13
FSBI Fidelity Bancorp, Inc. of PA 1.08 1.71 15.78 15.78 233.63
FFFL Fidelity FSB, MHC of FL (47.7) 0.50 0.79 12.36 12.27 147.58
FFED Fidelity Fed. Bancorp of IN 0.67 0.65 5.15 5.15 84.32
FFOH Fidelity Financial of OH 0.76 0.85 12.34 10.95 94.75
FIBC Financial Bancorp, Inc. of NY 1.46 1.56 15.71 15.63 173.66
FBSI First Bancshares of MO 1.74 1.57 20.73 20.73 148.91
FBBC First Bell Bancorp of PA 1.18 1.15 11.02 11.02 104.63
FBER First Bergen Bancorp of NJ 0.71 0.71 13.57 13.57 99.39
SKBO First Carnegie,MHC of PA(45.0) 0.33 0.33 10.52 10.52 63.97
FSTC First Citizens Corp of GA 2.17 1.94 12.44 9.81 122.97
FCME First Coastal Corp. of ME* 4.52 4.34 10.66 10.66 109.32
FFBA First Colorado Bancorp of Co 1.11 1.10 12.00 11.85 91.76
FDEF First Defiance Fin.Corp. of OH 0.63 0.61 12.61 12.61 64.12
FESX First Essex Bancorp of MA* 1.33 1.14 11.90 10.41 160.71
FFES First FS&LA of E. Hartford CT 1.92 2.18 24.40 24.40 368.16
FFSX First FS&LA. MHC of IA (46.1) 1.18 1.15 14.08 13.96 161.26
BDJI First Fed. Bancorp. of MN 1.05 1.03 17.74 17.74 165.66
FFBH First Fed. Bancshares of AR 1.13 1.08 16.64 16.64 111.75
FTFC First Fed. Capital Corp. of WI 1.17 1.37 11.46 10.80 170.18
FFKY First Fed. Fin. Corp. of KY 1.46 1.45 12.60 11.89 91.99
FFBZ First Federal Bancorp of OH 1.25 1.26 9.92 9.91 129.34
FFCH First Fin. Holdings Inc. of SC 2.22 2.16 16.45 16.45 268.99
FFBI First Financial Bancorp of IL -0.15 0.94 18.10 18.10 202.99
FFHS First Franklin Corp. of OH 1.05 1.24 17.49 17.39 193.95
FGHC First Georgia Hold. Corp of GA 0.32 0.25 4.21 3.86 51.24
FSPG First Home Bancorp of NJ 1.74 1.70 13.31 13.11 193.90
FFSL First Independence Corp. of KS 0.73 0.73 11.79 11.79 115.05
FISB First Indiana Corp. of IN 1.62 1.33 14.13 13.96 146.49
FKFS First Keystone Fin. Corp of PA 2.15 1.97 20.16 20.16 304.10
FLKY First Lancaster Bncshrs of KY 0.53 0.53 14.62 14.62 49.62
FLFC First Liberty Fin. Corp. of GA 1.32 1.08 12.30 11.09 166.85
CASH First Midwest Fin. Corp. of IA 1.35 1.29 16.11 14.31 149.90
FMBD First Mutual Bancorp of IL 0.35 0.32 15.37 11.72 114.74
FMSB First Mutual SB of Bellevue WA* 1.07 1.05 7.53 7.53 110.92
FNGB First Northern Cap. Corp of WI 0.66 0.63 8.24 8.24 74.29
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of November 28, 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)
- ---------------------------------------
FFPB First Palm Beach Bancorp of FL 38.75 5,048 195.6 40.56 23.00 38.87 -0.31 N.A. 64.06
FSLA First SB SLA MHC of NJ (47.5)(8) 40.37 8,007 137.4 47.50 16.36 41.00 -1.54 303.70 140.01
SOPN First SB, SSB, Moore Co. of NC 24.37 3,687 89.9 25.00 17.87 24.37 0.00 N.A. 29.97
FWWB First Savings Bancorp of WA* 25.25 10,247 258.7 26.37 18.00 24.37 3.61 N.A. 37.45
FSFF First SecurityFed Fin of IL 16.06 6,408 102.9 16.06 15.00 15.75 1.97 N.A. N.A.
SHEN First Shenango Bancorp of PA 33.75 2,069 69.8 35.00 21.75 33.75 0.00 N.A. 50.00
FSFC First So.east Fin. Corp. of SC(8) 15.12 4,388 66.3 16.75 9.25 15.12 0.00 N.A. 61.19
FBNW FirstBank Corp of Clarkston WA 17.62 1,984 35.0 19.00 15.50 17.31 1.79 N.A. N.A.
FFDB FirstFed Bancorp of AL 22.00 1,151 25.3 22.75 12.50 22.00 0.00 N.A. 76.00
FSPT FirstSpartan Fin. Corp. of SC 37.50 4,430 166.1 39.00 35.00 38.12 -1.63 N.A. N.A.
FLAG Flag Financial Corp of GA 18.50 2,037 37.7 19.87 10.25 18.00 2.78 88.78 72.09
FLGS Flagstar Bancorp, Inc of MI 18.25 13,670 249.5 21.75 13.00 19.00 -3.95 N.A. N.A.
FFIC Flushing Fin. Corp. of NY* 22.25 7,983 177.6 24.00 17.37 22.25 0.00 N.A. 22.79
FBHC Fort Bend Holding Corp. of TX 19.62 1,656 32.5 24.00 11.00 19.37 1.29 N.A. 53.88
FTSB Fort Thomas Fin. Corp. of KY 14.75 1,495 22.1 14.75 9.25 14.00 5.36 N.A. 0.89
FKKY Frankfort First Bancorp of KY 9.25 3,280 30.3 12.25 8.00 9.62 -3.85 N.A. -18.65
FTNB Fulton Bancorp of MO 20.25 1,719 34.8 26.50 14.12 19.75 2.53 N.A. 31.75
GFSB GFS Bancorp of Grinnell IA 16.87 988 16.7 17.62 10.12 17.25 -2.20 N.A. 58.85
GUPB GFSB Bancorp of Gallup NM 20.25 801 16.2 22.25 14.75 20.25 0.00 N.A. 27.60
GSLA GS Financial Corp. of LA 17.75 3,438 61.0 18.75 13.37 17.25 2.90 N.A. N.A.
GOSB GSB Financial Corp. of NY 15.63 2,248 35.1 16.75 14.25 15.50 0.84 N.A. N.A.
GWBC Gateway Bancorp of KY(8) 19.62 1,076 21.1 19.62 14.00 19.56 0.31 N.A. 37.68
GBCI Glacier Bancorp of MT 20.75 6,816 141.4 22.50 15.33 21.37 -2.90 329.61 27.07
GFCO Glenway Financial Corp. of OH 19.00 2,280 43.3 19.00 9.50 18.25 4.11 N.A. 85.37
GTPS Great American Bancorp of IL 19.00 1,697 32.2 19.50 14.25 19.00 0.00 N.A. 28.29
GTFN Great Financial Corp. of KY(8) 48.00 13,823 663.5 48.12 29.12 46.50 3.23 N.A. 64.84
GSBC Great Southern Bancorp of MO 21.88 8,080 176.8 22.12 16.00 22.12 -1.08 649.32 22.85
GDVS Greater DV SB,MHC of PA (19.9)* 31.00 3,272 20.2 32.50 9.75 31.00 0.00 N.A. 198.94
GSFC Green Street Fin. Corp. of NC 18.50 4,298 79.5 20.75 15.12 18.37 0.71 N.A. 19.35
GFED Guarnty FS&LA,MHC of MO (31.0)(8) 23.75 3,125 23.0 27.87 10.75 24.62 -3.53 N.A. 96.93
HCBB HCB Bancshares of AR 13.62 2,645 36.0 14.25 12.62 13.87 -1.80 N.A. N.A.
HEMT HF Bancorp of Hemet CA 16.75 6,282 105.2 17.12 10.75 16.25 3.08 N.A. 50.63
HFFC HF Financial Corp. of SD 26.00 2,803 72.9 27.00 16.25 25.03 3.88 420.00 50.20
HFNC HFNC Financial Corp. of NC 14.87 17,192 255.6 22.06 13.94 14.87 0.00 N.A. -16.79
HMNF HMN Financial, Inc. of MN 25.87 4,212 109.0 26.50 17.87 26.50 -2.38 N.A. 42.77
HALL Hallmark Capital Corp. of WI 15.25 2,886 44.0 15.37 8.50 14.69 3.81 N.A. 71.93
HARB Harbor FSB, MHC of FL (46.6)(8) 65.00 4,973 150.5 69.75 32.00 64.00 1.56 N.A. 81.82
HRBF Harbor Federal Bancorp of MD 21.75 1,693 36.8 23.50 15.00 21.25 2.35 117.50 38.10
HFSA Hardin Bancorp of Hardin MO 17.50 859 15.0 18.62 12.00 17.50 0.00 N.A. 40.00
HARL Harleysville SA of PA 29.37 1,662 48.8 30.25 14.60 30.25 -2.91 65.46 85.89
HFGI Harrington Fin. Group of IN 12.37 3,257 40.3 13.75 9.75 12.37 0.00 N.A. 15.07
HARS Harris SB, MHC of PA (24.3) 19.00 33,779 51.7 20.75 6.00 20.75 -8.43 N.A. 212.50
HFFB Harrodsburg 1st Fin Bcrp of KY 17.12 2,025 34.7 18.87 14.75 16.62 3.01 N.A. -9.27
HHFC Harvest Home Fin. Corp. of OH 14.75 915 13.5 14.75 9.25 14.25 3.51 N.A. 51.28
HAVN Haven Bancorp of Woodhaven NY 43.00 4,386 188.6 45.37 27.87 43.00 0.00 N.A. 50.24
HTHR Hawthorne Fin. Corp. of CA 21.00 3,088 64.8 21.00 7.37 19.75 6.33 -23.64 158.30
HMLK Hemlock Fed. Fin. Corp. of IL 17.25 2,076 35.8 17.50 12.50 17.25 0.00 N.A. N.A.
HBNK Highland Federal Bank of CA 32.00 2,300 73.6 32.75 17.00 32.00 0.00 N.A. 88.24
HIFS Hingham Inst. for Sav. of MA* 27.12 1,303 35.3 29.00 17.50 27.25 -0.48 494.74 44.64
HBEI Home Bancorp of Elgin IL 18.00 6,856 123.4 19.31 12.75 18.00 0.00 N.A. 33.33
HBFW Home Bancorp of Fort Wayne IN 27.37 2,525 69.1 27.37 18.50 26.06 5.03 N.A. 44.05
HBBI Home Building Bancorp of IN 21.25 312 6.6 23.75 18.00 21.25 0.00 N.A. 7.59
HCFC Home City Fin. Corp. of OH 18.00 905 16.3 18.00 12.00 17.62 2.16 N.A. 35.85
HOMF Home Fed Bancorp of Seymour IN 27.50 5,102 140.3 27.50 15.22 25.90 6.18 314.78 60.16
HWEN Home Financial Bancorp of IN 16.44 465 7.6 17.25 12.75 17.12 -3.97 N.A. 28.94
<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)
- ---------------------------------------
FFPB First Palm Beach Bancorp of FL 1.85 1.55 22.39 21.87 358.24
FSLA First SB SLA MHC of NJ (47.5)(8) 1.14 1.19 12.39 11.26 130.45
SOPN First SB, SSB, Moore Co. of NC 1.32 1.32 18.43 18.43 80.10
FWWB First Savings Bancorp of WA* 0.91 0.86 14.51 13.34 98.33
FSFF First SecurityFed Fin of IL 0.61 0.61 12.80 12.80 47.35
SHEN First Shenango Bancorp of PA 2.26 2.25 22.55 22.55 194.02
FSFC First So.east Fin. Corp. of SC(8) 0.81 0.81 8.20 8.20 79.77
FBNW FirstBank Corp of Clarkston WA 0.33 0.15 14.73 14.73 89.65
FFDB FirstFed Bancorp of AL 1.59 1.55 14.77 13.51 153.31
FSPT FirstSpartan Fin. Corp. of SC 1.25 1.25 29.17 29.17 108.87
FLAG Flag Financial Corp of GA 1.01 0.84 10.66 10.66 117.07
FLGS Flagstar Bancorp, Inc of MI 1.66 0.83 8.89 8.54 148.74
FFIC Flushing Fin. Corp. of NY* 0.99 1.04 17.08 16.40 120.27
FBHC Fort Bend Holding Corp. of TX 1.23 1.03 11.88 11.09 192.88
FTSB Fort Thomas Fin. Corp. of KY 0.76 0.76 10.56 10.56 65.45
FKKY Frankfort First Bancorp of KY 0.03 0.26 6.84 6.84 40.63
FTNB Fulton Bancorp of MO 0.73 0.63 14.88 14.88 60.33
GFSB GFS Bancorp of Grinnell IA 1.15 1.15 11.01 11.01 95.64
GUPB GFSB Bancorp of Gallup NM 0.97 0.97 17.60 17.60 137.28
GSLA GS Financial Corp. of LA 0.41 0.41 16.44 16.44 38.12
GOSB GSB Financial Corp. of NY 0.52 0.44 13.78 13.78 50.92
GWBC Gateway Bancorp of KY(8) 0.59 0.59 16.14 16.14 58.19
GBCI Glacier Bancorp of MT 1.22 1.25 8.41 8.21 84.21
GFCO Glenway Financial Corp. of OH 0.99 0.96 12.17 12.03 128.62
GTPS Great American Bancorp of IL 0.42 0.47 16.80 16.80 82.24
GTFN Great Financial Corp. of KY(8) 2.20 1.62 21.08 20.23 209.33
GSBC Great Southern Bancorp of MO 1.57 1.48 7.79 7.79 90.04
GDVS Greater DV SB,MHC of PA (19.9)* 0.68 0.68 8.85 8.85 76.04
GSFC Green Street Fin. Corp. of NC 0.65 0.65 14.65 14.65 41.41
GFED Guarnty FS&LA,MHC of MO (31.0)(8) 0.62 0.60 8.76 8.76 67.24
HCBB HCB Bancshares of AR 0.09 0.10 14.27 13.73 75.75
HEMT HF Bancorp of Hemet CA 0.05 0.28 13.26 11.05 167.20
HFFC HF Financial Corp. of SD 2.05 1.88 19.33 19.33 205.10
HFNC HFNC Financial Corp. of NC 0.62 0.53 9.48 9.48 50.42
HMNF HMN Financial, Inc. of MN 1.34 1.13 20.09 20.09 135.05
HALL Hallmark Capital Corp. of WI 0.91 0.89 10.59 10.59 145.00
HARB Harbor FSB, MHC of FL (46.6)(8) 2.68 2.66 19.47 18.85 227.43
HRBF Harbor Federal Bancorp of MD 0.91 0.91 16.75 16.75 128.29
HFSA Hardin Bancorp of Hardin MO 0.94 0.89 15.76 15.76 136.63
HARL Harleysville SA of PA 2.05 2.06 13.76 13.76 207.73
HFGI Harrington Fin. Group of IN 0.67 0.56 7.74 7.74 159.98
HARS Harris SB, MHC of PA (24.3) 0.52 0.43 5.12 4.53 62.47
HFFB Harrodsburg 1st Fin Bcrp of KY 0.55 0.73 14.49 14.49 53.80
HHFC Harvest Home Fin. Corp. of OH 0.23 0.50 11.35 11.35 90.82
HAVN Haven Bancorp of Woodhaven NY 2.63 2.64 25.07 24.99 417.99
HTHR Hawthorne Fin. Corp. of CA 2.37 2.28 14.01 14.01 288.59
HMLK Hemlock Fed. Fin. Corp. of IL 0.28 0.61 15.06 15.06 77.99
HBNK Highland Federal Bank of CA 2.41 1.83 17.20 17.20 224.34
HIFS Hingham Inst. for Sav. of MA* 1.98 1.98 16.11 16.11 165.96
HBEI Home Bancorp of Elgin IL 0.43 0.43 13.77 13.77 49.96
HBFW Home Bancorp of Fort Wayne IN 0.72 1.15 17.62 17.62 132.62
HBBI Home Building Bancorp of IN 1.05 1.03 18.89 18.89 133.80
HCFC Home City Fin. Corp. of OH 0.92 0.93 15.19 15.19 77.47
HOMF Home Fed Bancorp of Seymour IN 1.74 1.58 11.78 11.43 136.05
HWEN Home Financial Bancorp of IN 0.74 0.64 15.59 15.59 88.84
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of November 28, 1997
<TABLE>
<CAPTION>
Price Change Data
Market Capitalization -----------------------------------------------
----------------------- 52 Week (1) % Change From
Shares Market --------------- -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- -------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
HPBC Home Port Bancorp, Inc. of MA* 24.00 1,842 44.2 25.00 16.12 23.87 0.54 200.00 45.45
HMCI Homecorp, Inc. of Rockford IL(8) 25.00 1,708 42.7 25.00 11.83 23.75 5.26 150.00 96.08
HZFS Horizon Fin'l. Services of IA 11.00 851 9.4 13.00 7.25 11.75 -6.38 N.A. 45.50
HRZB Horizon Financial Corp. of WA* 16.56 7,434 123.1 18.00 10.65 16.50 0.36 45.01 41.06
IBSF IBS Financial Corp. of NJ 17.44 10,949 191.0 18.75 12.94 17.62 -1.02 N.A. 28.33
ISBF ISB Financial Corp. of LA 26.25 6,901 181.2 28.00 17.12 25.62 2.46 N.A. 45.83
ITLA Imperial Thrift & Loan of CA* 18.00 7,847 141.2 21.25 14.00 18.62 -3.33 N.A. 20.00
IFSB Independence FSB of DC 13.78 1,281 17.7 15.12 7.37 13.75 0.22 589.00 72.25
INCB Indiana Comm. Bank, SB of IN(8) 20.50 922 18.9 20.50 15.00 20.37 0.64 N.A. 26.15
INBI Industrial Bancorp of OH 18.00 5,173 93.1 18.25 12.00 17.25 4.35 N.A. 41.18
IWBK Interwest SB of Oak Harbor WA 39.50 8,050 318.0 43.25 27.62 38.75 1.94 295.00 22.48
IPSW Ipswich SB of Ipswich MA* 12.87 2,378 30.6 14.12 5.50 12.75 0.94 N.A. 114.50
JXVL Jacksonville Bancorp of TX 18.75 2,490 46.7 19.50 13.25 19.50 -3.85 N.A. 28.25
JXSB Jcksnville SB,MHC of IL (45.6) 26.75 1,272 15.5 29.50 12.00 26.75 0.00 N.A. 101.89
JSBA Jefferson Svgs Bancorp of MO 43.25 5,006 216.5 44.00 22.75 43.25 0.00 N.A. 66.35
JOAC Joachim Bancorp of MO 14.75 722 10.6 15.63 14.00 14.75 0.00 N.A. 1.72
KSAV KS Bancorp of Kenly NC 22.50 885 19.9 25.50 14.81 22.50 0.00 N.A. 50.91
KSBK KSB Bancorp of Kingfield ME(8)* 15.25 1,238 18.9 16.00 7.67 15.12 0.86 N.A. 98.83
KFBI Klamath First Bancorp of OR 21.88 10,019 219.2 24.25 14.75 20.62 6.11 N.A. 38.92
LSBI LSB Fin. Corp. of Lafayette IN 26.00 916 23.8 27.37 17.62 27.00 -3.70 N.A. 40.01
LVSB Lakeview SB of Paterson NJ 24.12 4,509 108.8 26.00 11.50 24.87 -3.02 N.A. 93.89
LARK Landmark Bancshares of KS 24.00 1,689 40.5 27.25 16.50 24.00 0.00 N.A. 33.33
LARL Laurel Capital Group of PA 27.75 1,446 40.1 28.00 15.87 27.75 0.00 116.80 68.18
LSBX Lawrence Savings Bank of MA* 13.87 4,284 59.4 16.37 7.94 13.75 0.87 303.20 70.60
LFED Leeds FSB, MHC of MD (36.3) 21.50 5,182 40.5 22.75 10.00 21.50 0.00 N.A. 101.50
LXMO Lexington B&L Fin. Corp. of MO 16.75 1,138 19.1 17.25 12.50 16.75 0.00 N.A. 24.07
LIFB Life Bancorp of Norfolk VA(8) 31.12 9,848 306.5 31.12 16.75 30.19 3.08 N.A. 72.89
LFBI Little Falls Bancorp of NJ 20.00 2,608 52.2 20.00 12.19 19.00 5.26 N.A. 56.86
LOGN Logansport Fin. Corp. of IN 15.25 1,261 19.2 16.00 11.12 15.75 -3.17 N.A. 35.56
LONF London Financial Corp. of OH 14.75 515 7.6 21.00 13.00 15.50 -4.84 N.A. 4.46
LISB Long Island Bancorp, Inc of NY 47.12 24,023 1,132.0 47.50 30.62 44.87 5.01 N.A. 34.63
MAFB MAF Bancorp of IL 32.50 15,249 495.6 34.75 22.25 33.50 -2.99 282.35 40.27
MBLF MBLA Financial Corp. of MO 27.00 1,268 34.2 27.00 19.00 25.25 6.93 N.A. 42.11
MFBC MFB Corp. of Mishawaka IN 23.25 1,651 38.4 23.75 16.50 23.05 0.87 N.A. 39.89
MLBC ML Bancorp of Villanova PA(8) 28.75 11,866 341.1 29.06 13.75 28.75 0.00 N.A. 103.61
MSBF MSB Financial Corp. of MI 19.50 1,234 24.1 19.50 9.25 19.50 0.00 N.A. 105.26
MARN Marion Capital Holdings of IN 26.50 1,776 47.1 28.13 19.25 27.00 -1.85 N.A. 37.66
MRKF Market Fin. Corp. of OH 15.25 1,336 20.4 15.75 12.25 15.25 0.00 N.A. N.A.
MFCX Marshalltown Fin. Corp. of IA(8) 17.25 1,411 24.3 17.25 14.25 17.12 0.76 N.A. 16.01
MFSL Maryland Fed. Bancorp of MD 26.62 6,467 172.2 26.62 16.37 24.69 7.82 407.05 53.25
MASB MassBank Corp. of Reading MA* 45.00 3,561 160.2 47.75 27.37 45.62 -1.36 356.39 57.40
MFLR Mayflower Co-Op. Bank of MA* 24.44 890 21.8 26.25 14.75 24.44 0.00 388.80 43.76
MECH Mechanics SB of Hartford CT* 25.62 5,293 135.6 27.25 15.37 25.75 -0.50 N.A. 62.67
MDBK Medford Bank of Medford, MA* 37.00 4,541 168.0 38.50 24.50 36.50 1.37 428.57 43.69
MERI Meritrust FSB of Thibodaux LA(8) 51.22 774 39.6 51.22 31.50 51.22 0.00 N.A. 61.99
MWBX MetroWest Bank of MA* 8.25 13,956 115.1 9.00 4.38 8.25 0.00 100.24 53.63
MCBS Mid Continent Bancshares of KS(8) 41.25 1,958 80.8 43.25 22.37 39.75 3.77 N.A. 76.51
MIFC Mid Iowa Financial Corp. of IA 10.62 1,678 17.8 11.00 6.25 10.62 0.00 112.40 66.72
MCBN Mid-Coast Bancorp of ME 28.75 233 6.7 29.00 18.50 29.00 -0.86 403.50 51.32
MWBI Midwest Bancshares, Inc. of IA 18.50 1,018 18.8 19.50 8.83 18.00 2.78 455.56 109.51
MWFD Midwest Fed. Fin. Corp of WI(8) 26.50 1,628 43.1 27.50 16.75 27.00 -1.85 430.00 43.24
MFFC Milton Fed. Fin. Corp. of OH 15.00 2,305 34.6 15.94 13.25 15.00 0.00 N.A. 3.45
MIVI Miss. View Hold. Co. of MN 18.25 740 13.5 19.75 11.75 17.37 5.07 N.A. 52.08
MBSP Mitchell Bancorp of NC* 17.50 931 16.3 18.00 13.25 17.50 0.00 N.A. 22.81
MBBC Monterey Bay Bancorp of CA 19.00 3,230 61.4 20.50 14.62 19.00 0.00 N.A. 28.81
<CAPTION>
Current Per Share Financials
----------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- -------- ------- ------- ------- -------
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
HPBC Home Port Bancorp, Inc. of MA* 1.75 1.74 11.65 11.65 109.13
HMCI Homecorp, Inc. of Rockford IL(8) 0.99 0.80 13.07 13.07 191.38
HZFS Horizon Fin'l. Services of IA 0.77 0.62 10.27 10.27 103.15
HRZB Horizon Financial Corp. of WA* 1.09 1.07 11.17 11.17 71.43
IBSF IBS Financial Corp. of NJ 0.53 0.53 11.69 11.69 67.11
ISBF ISB Financial Corp. of LA 0.75 1.03 16.52 14.06 137.24
ITLA Imperial Thrift & Loan of CA* 1.52 1.52 12.32 12.27 114.89
IFSB Independence FSB of DC 0.65 0.54 13.89 12.28 201.76
INCB Indiana Comm. Bank, SB of IN(8) 0.53 0.53 12.38 12.38 104.22
INBI Industrial Bancorp of OH 0.98 1.03 11.76 11.76 68.45
IWBK Interwest SB of Oak Harbor WA 2.52 2.32 16.13 15.84 254.25
IPSW Ipswich SB of Ipswich MA* 0.88 0.70 4.78 4.78 85.16
JXVL Jacksonville Bancorp of TX 0.90 1.18 13.55 13.55 90.84
JXSB Jcksnville SB,MHC of IL (45.6) 0.80 0.80 13.63 13.63 129.12
JSBA Jefferson Svgs Bancorp of MO 0.69 1.63 21.23 16.17 259.07
JOAC Joachim Bancorp of MO 0.39 0.39 13.67 13.67 48.58
KSAV KS Bancorp of Kenly NC 1.40 1.39 16.45 16.44 124.22
KSBK KSB Bancorp of Kingfield ME(8)* 1.08 1.10 8.46 8.00 117.84
KFBI Klamath First Bancorp of OR 0.55 0.83 14.20 14.20 72.65
LSBI LSB Fin. Corp. of Lafayette IN 1.61 1.42 18.88 18.88 218.63
LVSB Lakeview SB of Paterson NJ 1.34 0.97 13.71 11.74 112.19
LARK Landmark Bancshares of KS 1.14 1.35 18.62 18.62 135.05
LARL Laurel Capital Group of PA 2.09 2.02 15.20 15.20 145.21
LSBX Lawrence Savings Bank of MA* 1.42 1.41 7.84 7.84 82.39
LFED Leeds FSB, MHC of MD (36.3) 0.64 0.64 9.16 9.16 55.08
LXMO Lexington B&L Fin. Corp. of MO 0.55 0.71 14.74 14.74 52.05
LIFB Life Bancorp of Norfolk VA(8) 1.35 1.25 16.17 15.73 150.93
LFBI Little Falls Bancorp of NJ 0.66 0.60 14.53 13.40 124.40
LOGN Logansport Fin. Corp. of IN 0.91 0.95 12.86 12.86 68.04
LONF London Financial Corp. of OH 0.48 0.73 14.60 14.60 74.25
LISB Long Island Bancorp, Inc of NY 2.06 1.74 22.74 22.53 246.88
MAFB MAF Bancorp of IL 2.48 2.46 17.22 15.13 221.04
MBLF MBLA Financial Corp. of MO 1.45 1.48 22.36 22.36 176.67
MFBC MFB Corp. of Mishawaka IN 1.21 1.21 20.30 20.30 155.01
MLBC ML Bancorp of Villanova PA(8) 1.20 0.86 13.51 12.61 195.16
MSBF MSB Financial Corp. of MI 0.86 0.83 10.32 10.32 62.41
MARN Marion Capital Holdings of IN 1.67 1.65 22.22 22.22 101.25
MRKF Market Fin. Corp. of OH 0.38 0.38 14.89 14.89 42.01
MFCX Marshalltown Fin. Corp. of IA(8) 0.60 0.64 14.37 14.37 88.94
MFSL Maryland Fed. Bancorp of MD 1.08 1.56 15.00 14.81 178.98
MASB MassBank Corp. of Reading MA* 2.78 2.61 28.24 27.82 261.94
MFLR Mayflower Co-Op. Bank of MA* 1.39 1.31 13.67 13.44 141.20
MECH Mechanics SB of Hartford CT* 2.64 2.63 16.33 16.33 156.95
MDBK Medford Bank of Medford, MA* 2.49 2.32 21.96 20.58 243.63
MERI Meritrust FSB of Thibodaux LA(8) 3.42 3.42 24.90 24.90 301.44
MWBX MetroWest Bank of MA* 0.54 0.54 3.13 3.13 41.97
MCBS Mid Continent Bancshares of KS(8) 1.87 2.12 19.59 19.59 208.68
MIFC Mid Iowa Financial Corp. of IA 0.71 1.00 7.00 6.99 74.82
MCBN Mid-Coast Bancorp of ME 1.92 1.82 22.65 22.65 263.83
MWBI Midwest Bancshares, Inc. of IA 1.21 1.07 10.18 10.18 147.20
MWFD Midwest Fed. Fin. Corp of WI(8) 1.39 1.37 11.21 10.81 127.18
MFFC Milton Fed. Fin. Corp. of OH 0.60 0.53 11.45 11.45 91.09
MIVI Miss. View Hold. Co. of MN 0.66 0.97 17.80 17.80 94.29
MBSP Mitchell Bancorp of NC* 0.59 0.59 15.36 15.36 37.15
MBBC Monterey Bay Bancorp of CA 0.58 0.53 14.59 13.53 126.83
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of November 28, 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>
MONT Montgomery Fin. Corp. of IN 12.31 1,653 20.3 14.00 11.00 12.50 -1.52 N.A. -5.31
MSBK Mutual SB, FSB of Bay City MI 13.00 4,279 55.6 14.62 5.37 13.00 0.00 48.57 136.36
NHTB NH Thrift Bancshares of NH 21.00 2,075 43.6 22.75 11.62 20.75 1.20 354.55 66.40
NSLB NS&L Bancorp of Neosho MO 18.75 707 13.3 19.50 13.25 18.81 -0.32 N.A. 37.67
NMSB Newmil Bancorp. of CT* 14.25 3,835 54.6 14.50 8.50 14.37 -0.84 123.70 46.15
NASB North American SB of MO 49.94 2,229 111.3 55.62 31.00 55.62 -10.21 ***.** 45.81
NBSI North Bancshares of Chicago IL 26.50 962 25.5 27.12 15.75 26.50 0.00 N.A. 60.61
FFFD North Central Bancshares of IA 18.87 3,258 61.5 19.25 13.12 18.87 0.00 N.A. 39.16
NBN Northeast Bancorp of ME* 27.75 1,294 35.9 27.87 13.00 27.37 1.39 136.17 98.21
NEIB Northeast Indiana Bncrp of IN 20.00 1,763 35.3 21.12 13.25 21.00 -4.76 N.A. 46.84
NWEQ Northwest Equity Corp. of WI 19.00 839 15.9 19.00 11.25 19.00 0.00 N.A. 56.77
NWSB Northwest SB, MHC of PA (30.7) 14.00 46,753 100.5 16.37 6.50 16.37 -14.48 N.A. 109.27
NSSY Norwalk Savings Society of CT* 38.50 2,410 92.8 38.50 22.94 37.37 3.02 N.A. 64.74
NSSB Norwich Financial Corp. of CT* 29.75 5,432 161.6 31.62 18.00 29.50 0.85 325.00 51.63
NTMG Nutmeg FS&LA of CT 13.00 738 9.6 13.00 7.00 12.00 8.33 N.A. 73.33
OHSL OHSL Financial Corp. of OH 27.75 1,235 34.3 28.25 20.25 26.50 4.72 N.A. 29.85
OCFC Ocean Fin. Corp. of NJ 37.12 8,176 303.5 38.37 25.12 37.00 0.32 N.A. 45.57
OCN Ocwen Financial Corp. of FL 24.25 60,505 1,467.2 28.28 12.62 25.62 -5.35 N.A. 81.38
OTFC Oregon Trail Fin. Corp of OR 16.00 4,695 75.1 16.75 15.63 16.12 -0.74 N.A. N.A.
PBHC OswegoCity SB, MHC of NY (46.)* 28.50 1,917 25.1 29.50 9.38 26.00 9.62 N.A. 203.84
OFCP Ottawa Financial Corp. of MI 27.50 5,353 147.2 28.25 14.89 27.87 -1.33 N.A. 79.86
PFFB PFF Bancorp of Pomona CA 18.37 17,903 328.9 21.50 13.25 18.28 0.49 N.A. 23.54
PSFI PS Financial of Chicago IL 17.25 2,167 37.4 18.00 11.62 17.25 0.00 N.A. 46.81
PVFC PVF Capital Corp. of OH 20.50 2,590 53.1 21.75 13.18 20.25 1.23 365.91 43.16
PALM Palfed, Inc. of Aiken SC(8) 27.00 5,299 143.1 27.00 13.75 25.75 4.85 75.67 92.86
PBCI Pamrapo Bancorp, Inc. of NJ 23.87 2,843 67.9 26.75 18.50 24.00 -0.54 323.98 19.35
PFED Park Bancorp of Chicago IL 17.87 2,431 43.4 18.12 11.75 18.12 -1.38 N.A. 37.46
PVSA Parkvale Financial Corp of PA 29.75 5,106 151.9 29.75 19.60 29.37 1.29 259.30 43.03
PEEK Peekskill Fin. Corp. of NY 17.50 3,193 55.9 18.25 13.37 18.25 -4.11 N.A. 22.81
PFSB PennFed Fin. Services of NJ 33.19 4,823 160.1 33.50 19.87 32.94 0.76 N.A. 63.90
PWBC PennFirst Bancorp of PA 18.25 5,310 96.9 19.50 12.27 18.25 0.00 128.70 47.30
PWBK Pennwood SB of PA* 18.94 570 10.8 19.00 12.25 18.94 0.00 N.A. 37.75
PBKB People's SB of Brockton MA* 20.00 3,283 65.7 20.25 10.12 20.19 -0.94 236.70 88.32
PFDC Peoples Bancorp of Auburn IN 22.00 3,411 75.0 24.50 13.00 20.84 5.57 109.32 62.96
PBCT Peoples Bank, MHC of CT (40.1)* 33.69 61,126 823.8 37.37 18.00 33.50 0.57 328.08 75.01
TSBS Peoples Bcrp, MHC of NJ (35.9)(8) 34.75 9,046 112.8 39.12 15.63 34.75 0.00 N.A. 117.19
PFFC Peoples Fin. Corp. of OH 14.00 1,491 20.9 19.00 12.25 14.44 -3.05 N.A. 3.70
PHBK Peoples Heritage Fin Grp of ME* 42.62 27,475 1,171.0 43.25 24.87 42.50 0.28 178.38 52.21
PSFC Peoples Sidney Fin. Corp of OH 17.25 1,785 30.8 18.50 12.56 17.25 0.00 N.A. N.A.
PERM Permanent Bancorp of IN 25.62 2,103 53.9 27.37 18.25 25.62 0.00 N.A. 26.52
PMFI Perpetual Midwest Fin. of IA 27.00 1,873 50.6 27.50 18.50 26.00 3.85 N.A. 40.26
PERT Perpetual of SC, MHC (46.8)(8) 51.00 1,505 36.0 58.00 20.75 51.00 0.00 N.A. 110.31
PCBC Perry Co. Fin. Corp. of MO 23.25 828 19.3 25.00 17.00 23.87 -2.60 N.A. 36.76
PHFC Pittsburgh Home Fin. of PA 20.69 1,969 40.7 20.81 12.87 20.50 0.93 N.A. 54.75
PFSL Pocahnts Fed, MHC of AR (47.0)(8) 34.00 1,632 26.1 37.12 16.00 34.00 0.00 N.A. 94.29
PTRS Potters Financial Corp of OH 34.00 482 16.4 34.00 18.75 31.00 9.68 N.A. 70.00
PKPS Poughkeepsie Fin. Corp. of NY(8) 9.94 12,595 125.2 10.56 5.12 9.87 0.71 28.26 89.33
PHSB Ppls Home SB, MHC of PA (45.0) 18.62 2,760 23.1 19.75 13.62 19.12 -2.62 N.A. N.A.
PRBC Prestige Bancorp of PA 18.41 915 16.8 19.37 12.87 18.50 -0.49 N.A. 36.37
PFNC Progress Financial Corp. of PA 15.50 4,010 62.2 16.37 7.68 15.00 3.33 40.78 94.24
PSBK Progressive Bank, Inc. of NY* 33.75 3,828 129.2 38.00 22.67 34.50 -2.17 152.43 48.35
PROV Provident Fin. Holdings of CA 20.00 4,836 96.7 21.12 13.62 20.25 -1.23 N.A. 42.86
PULB Pulaski SB, MHC of MO (29.8) 30.50 2,094 19.0 32.50 14.12 30.50 0.00 N.A. 110.34
PLSK Pulaski SB, MHC of NJ (46.0) 18.75 2,070 17.9 24.50 11.50 18.87 -0.64 N.A. N.A.
PULS Pulse Bancorp of S. River NJ 24.50 3,081 75.5 29.75 15.75 25.75 -4.85 98.06 55.56
<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>
MONT Montgomery Fin. Corp. of IN 0.42 0.42 11.81 11.81 61.70
MSBK Mutual SB, FSB of Bay City MI 0.15 0.08 9.73 9.73 152.87
NHTB NH Thrift Bancshares of NH 0.99 0.80 12.04 10.34 153.90
NSLB NS&L Bancorp of Neosho MO 0.41 0.64 16.52 16.52 84.46
NMSB Newmil Bancorp. of CT* 0.70 0.67 8.42 8.42 82.77
NASB North American SB of MO 4.10 3.86 25.37 24.52 330.46
NBSI North Bancshares of Chicago IL 0.79 0.69 17.04 17.04 126.90
FFFD North Central Bancshares of IA 1.16 1.16 15.13 15.13 66.03
NBN Northeast Bancorp of ME* 1.37 1.13 14.27 12.61 205.13
NEIB Northeast Indiana Bncrp of IN 1.18 1.18 15.51 15.51 107.95
NWEQ Northwest Equity Corp. of WI 1.17 1.13 13.51 13.51 115.56
NWSB Northwest SB, MHC of PA (30.7) 0.41 0.41 4.33 4.09 44.93
NSSY Norwalk Savings Society of CT* 2.42 2.76 20.64 19.90 256.17
NSSB Norwich Financial Corp. of CT* 1.47 1.36 15.05 13.67 129.02
NTMG Nutmeg FS&LA of CT 0.39 0.45 7.72 7.72 138.80
OHSL OHSL Financial Corp. of OH 1.65 1.60 20.74 20.74 189.96
OCFC Ocean Fin. Corp. of NJ 0.04 1.56 28.79 28.79 177.12
OCN Ocwen Financial Corp. of FL 1.34 0.75 6.91 6.73 48.86
OTFC Oregon Trail Fin. Corp of OR 0.59 0.59 13.29 13.29 55.34
PBHC OswegoCity SB, MHC of NY (46.)* 1.05 0.94 12.02 10.10 100.68
OFCP Ottawa Financial Corp. of MI 1.29 1.26 14.15 11.43 161.96
PFFB PFF Bancorp of Pomona CA 0.65 0.66 14.69 14.53 146.09
PSFI PS Financial of Chicago IL 0.72 0.73 14.76 14.76 39.55
PVFC PVF Capital Corp. of OH 1.90 1.82 10.63 10.63 147.98
PALM Palfed, Inc. of Aiken SC(8) 0.49 0.84 10.74 10.74 126.16
PBCI Pamrapo Bancorp, Inc. of NJ 1.73 1.71 16.89 16.77 130.83
PFED Park Bancorp of Chicago IL 0.80 0.83 16.61 16.61 71.79
PVSA Parkvale Financial Corp of PA 2.05 2.05 15.20 15.10 196.91
PEEK Peekskill Fin. Corp. of NY 0.66 0.66 14.81 14.81 56.76
PFSB PennFed Fin. Services of NJ 2.14 2.14 20.72 17.54 282.80
PWBC PennFirst Bancorp of PA 0.95 0.95 12.96 11.53 154.87
PWBK Pennwood SB of PA* 0.83 0.91 15.33 15.33 83.59
PBKB People's SB of Brockton MA* 1.27 0.75 9.38 8.98 167.16
PFDC Peoples Bancorp of Auburn IN 0.92 1.21 12.82 12.82 84.30
PBCT Peoples Bank, MHC of CT (40.1)* 1.44 0.93 11.41 11.40 126.48
TSBS Peoples Bcrp, MHC of NJ (35.9)(8) 0.87 0.61 11.97 10.77 70.63
PFFC Peoples Fin. Corp. of OH 0.53 0.53 15.78 15.78 58.01
PHBK Peoples Heritage Fin Grp of ME* 2.51 2.51 16.42 14.01 220.42
PSFC Peoples Sidney Fin. Corp of OH 0.56 0.56 14.57 14.57 57.61
PERM Permanent Bancorp of IN 1.26 1.25 19.51 19.25 206.17
PMFI Perpetual Midwest Fin. of IA 0.84 0.68 18.24 18.24 214.45
PERT Perpetual of SC, MHC (46.8)(8) 1.17 1.58 20.13 20.13 170.24
PCBC Perry Co. Fin. Corp. of MO 0.90 1.04 18.80 18.80 97.95
PHFC Pittsburgh Home Fin. of PA 1.01 0.90 14.63 14.48 138.80
PFSL Pocahnts Fed, MHC of AR (47.0)(8) 1.46 1.44 14.86 14.86 234.94
PTRS Potters Financial Corp of OH 2.40 2.35 22.43 22.43 254.60
PKPS Poughkeepsie Fin. Corp. of NY(8) 0.37 0.37 5.91 5.91 70.19
PHSB Ppls Home SB, MHC of PA (45.0) 0.56 0.54 10.22 10.22 74.79
PRBC Prestige Bancorp of PA 0.85 0.85 16.88 16.88 150.64
PFNC Progress Financial Corp. of PA 0.90 0.71 5.81 5.18 108.91
PSBK Progressive Bank, Inc. of NY* 2.20 2.16 20.18 18.17 231.09
PROV Provident Fin. Holdings of CA 0.94 0.44 17.66 17.66 132.47
PULB Pulaski SB, MHC of MO (29.8) 0.68 0.90 11.23 11.23 86.07
PLSK Pulaski SB, MHC of NJ (46.0) 0.54 0.54 10.36 10.36 86.47
PULS Pulse Bancorp of S. River NJ 1.84 1.86 14.02 14.02 170.73
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of November 28, 1997
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)
- ---------------------------------------
QCFB QCF Bancorp of Virginia MN 28.50 1,382 39.4 28.50 16.00 28.25 0.88 N.A. 56.16
QCBC Quaker City Bancorp of CA 20.50 4,673 95.8 24.56 13.00 20.50 0.00 173.33 34.87
QCSB Queens County Bancorp of NY* 35.00 15,108 528.8 37.75 20.22 35.00 0.00 N.A. 66.27
RARB Raritan Bancorp. of Raritan NJ* 27.25 2,372 64.6 28.62 15.33 27.25 0.00 323.14 75.81
REDF RedFed Bancorp of Redlands CA 20.00 7,179 143.6 21.12 12.37 20.37 -1.82 N.A. 48.15
RELY Reliance Bancorp, Inc. of NY 33.12 8,712 288.5 33.50 18.50 33.00 0.36 N.A. 69.85
RELI Reliance Bancshares Inc of WI* 8.87 2,472 21.9 9.00 6.50 8.75 1.37 N.A. 31.41
RIVR River Valley Bancorp of IN 18.75 1,190 22.3 18.87 13.25 18.75 0.00 N.A. 36.36
RVSB Riverview Bancorp of WA 15.00 6,128 91.9 15.00 5.83 14.06 6.69 N.A. 139.23
RSLN Roslyn Bancorp, Inc. of NY* 21.75 43,642 949.2 24.31 15.00 21.12 2.98 N.A. N.A.
SCCB S. Carolina Comm. Bnshrs of SC 23.00 699 16.1 25.25 15.00 23.87 -3.64 N.A. 53.33
SBFL SB Fngr Lakes MHC of NY (33.1) 29.25 1,785 17.3 29.50 12.75 29.25 0.00 N.A. 112.73
SFED SFS Bancorp of Schenectady NY 22.12 1,231 27.2 24.50 14.75 22.50 -1.69 N.A. 49.97
SGVB SGV Bancorp of W. Covina CA 17.12 2,342 40.1 19.37 10.75 18.00 -4.89 N.A. 52.18
SHSB SHS Bancorp, Inc. of PA 16.00 820 13.1 16.37 14.75 16.37 -2.26 N.A. N.A.
SISB SIS Bancorp Inc of MA* 33.62 5,581 187.6 37.00 22.37 34.25 -1.84 N.A. 47.00
SWCB Sandwich Co-Op. Bank of MA* 41.75 1,919 80.1 42.00 27.25 41.00 1.83 384.34 40.34
SFSL Security First Corp. of OH 19.50 7,591 148.0 19.50 10.17 17.62 10.67 87.50 61.42
SFNB Security First Netwrk Bk of GA(8) 8.00 8,620 69.0 13.87 5.50 7.62 4.99 N.A. -21.95
SMFC Sho-Me Fin. Corp. of MO(8) 47.00 1,499 70.5 48.00 21.62 47.00 0.00 N.A. 116.09
SOBI Sobieski Bancorp of S. Bend IN 19.62 779 15.3 19.62 13.75 19.62 0.00 N.A. 35.31
SOSA Somerset Savings Bank of MA(8)* 4.87 16,652 81.1 5.94 1.94 5.12 -4.88 -4.88 147.21
SSFC South Street Fin. Corp. of NC* 17.50 4,496 78.7 20.00 13.75 17.25 1.45 N.A. 25.00
SCBS Southern Commun. Bncshrs of AL 18.19 1,137 20.7 18.50 13.00 18.19 0.00 N.A. 37.28
SMBC Southern Missouri Bncrp of MO 19.00 1,612 30.6 19.50 14.00 18.37 3.43 N.A. 26.67
SWBI Southwest Bancshares of IL 25.50 2,657 67.8 26.00 18.00 25.50 0.00 155.00 39.73
SVRN Sovereign Bancorp of PA 18.94 89,275 1,690.9 19.25 10.62 19.00 -0.32 323.71 73.13
STFR St. Francis Cap. Corp. of WI 38.25 5,238 200.4 41.25 26.00 38.00 0.66 N.A. 47.12
SPBC St. Paul Bancorp, Inc. of IL 24.50 34,133 836.3 28.50 14.73 24.50 0.00 120.13 56.35
SFFC StateFed Financial Corp. of IA 13.50 1,557 21.0 14.12 8.25 13.50 0.00 N.A. 63.64
SFIN Statewide Fin. Corp. of NJ 21.50 4,591 98.7 22.62 13.62 21.25 1.18 N.A. 49.62
STSA Sterling Financial Corp. of WA 21.12 7,567 159.8 22.50 13.50 21.25 -0.61 132.34 49.58
SFSB SuburbFed Fin. Corp. of IL 34.87 1,263 44.0 34.87 19.00 34.50 1.07 422.79 83.53
ROSE T R Financial Corp. of NY* 32.87 17,592 578.2 33.50 14.69 32.37 1.54 N.A. 85.18
THRD TF Financial Corp. of PA 28.00 4,088 114.5 28.00 15.87 26.25 6.67 N.A. 72.31
TPNZ Tappan Zee Fin., Inc. of NY 19.75 1,488 29.4 22.62 13.62 20.50 -3.66 N.A. 45.01
ESBK The Elmira SB FSB of Elmira NY* 30.00 706 21.2 31.00 16.00 30.00 0.00 108.77 64.38
TRIC Tri-County Bancorp of WY 27.50 584 16.1 29.00 18.00 27.50 0.00 N.A. 52.78
TWIN Twin City Bancorp of TN 13.62 1,272 17.3 14.50 11.50 13.62 0.00 N.A. 18.43
UFRM United FS&LA of Rocky Mount NC 11.50 3,074 35.4 12.75 7.75 11.25 2.22 253.85 35.29
UBMT United Fin. Corp. of MT 27.00 1,223 33.0 27.00 18.75 26.00 3.85 157.14 40.26
VABF Va. Beach Fed. Fin. Corp of VA 16.62 4,979 82.8 17.62 9.00 16.37 1.53 254.37 76.06
VFFC Virginia First Savings of VA(8) 25.25 5,814 146.8 25.25 12.37 24.87 1.53 ***.** 98.04
WHGB WHG Bancshares of MD 16.25 1,462 23.8 16.50 12.62 15.75 3.17 N.A. 23.86
WSFS WSFS Financial Corp. of DE* 19.62 12,442 244.1 20.00 9.87 20.00 -1.90 170.62 92.54
WVFC WVS Financial Corp. of PA* 31.50 1,748 55.1 34.00 23.00 31.75 -0.79 N.A. 27.94
WRNB Warren Bancorp of Peabody MA* 20.62 3,798 78.3 21.37 14.75 20.00 3.10 511.87 37.47
WFSL Washington FS&LA of Seattle WA 32.19 47,509 1,529.3 33.31 22.39 32.75 -1.71 120.63 33.62
WAMU Washington Mutual Inc. of WA(8)* 69.12 257,176 17,776.0 72.37 38.62 66.50 3.94 272.41 59.59
WYNE Wayne Bancorp of NJ 22.75 2,014 45.8 24.87 14.00 21.75 4.60 N.A. 49.18
WAYN Wayne S&L Co. MHC of OH (47.8) 31.00 2,255 33.3 32.00 15.17 31.00 0.00 N.A. 89.83
WCFB Wbstr Cty FSB MHC of IA (45.2) 20.25 2,100 19.2 22.00 12.75 20.25 0.00 N.A. 47.27
WBST Webster Financial Corp. of CT 62.66 13,554 849.3 66.00 35.12 63.00 -0.54 563.77 70.50
WEFC Wells Fin. Corp. of Wells MN 17.75 1,959 34.8 19.00 12.50 18.12 -2.04 N.A. 35.29
WCBI WestCo Bancorp of IL 27.50 2,474 68.0 29.25 20.00 27.75 -0.90 175.00 27.91
<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)
- ---------------------------------------
QCFB QCF Bancorp of Virginia MN 1.46 1.46 19.84 19.84 113.41
QCBC Quaker City Bancorp of CA 1.20 1.15 15.33 15.33 181.26
QCSB Queens County Bancorp of NY* 1.44 1.45 11.44 11.44 102.00
RARB Raritan Bancorp. of Raritan NJ* 1.63 1.61 12.65 12.45 171.70
REDF RedFed Bancorp of Redlands CA 1.28 1.28 11.21 11.17 134.74
RELY Reliance Bancorp, Inc. of NY 1.96 2.07 19.29 14.17 233.56
RELI Reliance Bancshares Inc of WI* 0.25 0.26 9.18 9.18 19.01
RIVR River Valley Bancorp of IN 0.46 0.62 14.63 14.41 118.02
RVSB Riverview Bancorp of WA 0.47 0.45 9.56 9.20 46.06
RSLN Roslyn Bancorp, Inc. of NY* 0.73 0.93 14.04 13.97 79.61
SCCB S. Carolina Comm. Bnshrs of SC 0.75 0.75 17.35 17.35 65.26
SBFL SB Fngr Lakes MHC of NY (33.1) 0.44 0.51 11.92 11.92 127.71
SFED SFS Bancorp of Schenectady NY 0.94 0.94 17.64 17.64 141.42
SGVB SGV Bancorp of W. Covina CA 0.65 0.71 12.99 12.79 174.63
SHSB SHS Bancorp, Inc. of PA 0.41 0.41 13.83 13.83 109.44
SISB SIS Bancorp Inc of MA* 2.05 2.03 19.16 19.16 260.35
SWCB Sandwich Co-Op. Bank of MA* 2.44 2.39 21.16 20.34 266.68
SFSL Security First Corp. of OH 1.14 1.15 8.31 8.18 89.69
SFNB Security First Netwrk Bk of GA(8) -3.30 -3.38 3.02 2.97 9.12
SMFC Sho-Me Fin. Corp. of MO(8) 2.71 2.57 20.77 20.77 230.05
SOBI Sobieski Bancorp of S. Bend IN 0.64 0.59 15.99 15.99 108.19
SOSA Somerset Savings Bank of MA(8)* 0.32 0.31 2.06 2.06 31.25
SSFC South Street Fin. Corp. of NC* 0.63 0.65 13.73 13.73 53.50
SCBS Southern Commun. Bncshrs of AL 0.33 0.54 13.20 13.20 61.89
SMBC Southern Missouri Bncrp of MO 0.94 0.90 16.36 16.36 101.30
SWBI Southwest Bancshares of IL 1.50 1.45 16.01 16.01 141.14
SVRN Sovereign Bancorp of PA 0.51 0.74 7.23 5.91 163.55
STFR St. Francis Cap. Corp. of WI 1.79 1.97 24.76 21.88 314.15
SPBC St. Paul Bancorp, Inc. of IL 1.39 1.39 11.98 11.95 133.26
SFFC StateFed Financial Corp. of IA 0.69 0.69 9.86 9.86 56.22
SFIN Statewide Fin. Corp. of NJ 1.19 1.19 14.34 14.31 153.15
STSA Sterling Financial Corp. of WA 1.04 0.94 12.98 11.88 247.19
SFSB SuburbFed Fin. Corp. of IL 1.23 1.79 21.90 21.82 337.85
ROSE T R Financial Corp. of NY* 1.88 1.69 13.09 13.09 209.84
THRD TF Financial Corp. of PA 1.22 1.05 17.79 15.71 152.97
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* 1.34 1.08 20.54 20.00 323.33
TRIC Tri-County Bancorp of WY 1.55 1.58 23.12 23.12 150.98
TWIN Twin City Bancorp of TN 0.71 0.60 10.88 10.88 84.07
UFRM United FS&LA of Rocky Mount NC 0.63 0.50 6.82 6.82 92.96
UBMT United Fin. Corp. of MT 1.22 1.21 20.24 20.24 84.29
VABF Va. Beach Fed. Fin. Corp of VA 0.75 0.61 8.70 8.70 121.61
VFFC Virginia First Savings of VA(8) 0.88 0.76 11.44 11.05 147.64
WHGB WHG Bancshares of MD 0.34 0.34 14.16 14.16 68.56
WSFS WSFS Financial Corp. of DE* 1.31 1.30 6.66 6.62 120.21
WVFC WVS Financial Corp. of PA* 2.08 2.09 19.38 19.38 161.46
WRNB Warren Bancorp of Peabody MA* 2.04 1.81 10.21 10.21 95.87
WFSL Washington FS&LA of Seattle WA 2.21 2.20 15.11 13.87 120.39
WAMU Washington Mutual Inc. of WA(8)* 0.01 1.51 19.65 18.20 371.76
WYNE Wayne Bancorp of NJ 1.07 1.07 16.49 16.49 132.71
WAYN Wayne S&L Co. MHC of OH (47.8) 0.81 0.76 10.58 10.58 110.97
WCFB Wbstr Cty FSB MHC of IA (45.2) 0.64 0.64 10.52 10.52 44.99
WBST Webster Financial Corp. of CT 1.79 2.99 26.82 23.10 502.51
WEFC Wells Fin. Corp. of Wells MN 1.09 1.06 14.86 14.86 104.52
WCBI WestCo Bancorp of IL 1.88 1.78 19.41 19.41 124.93
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of November 28, 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)
- ---------------------------------------
WSTR WesterFed Fin. Corp. of MT 23.56 5,577 131.4 27.00 17.62 24.00 -1.83 N.A. 29.10
WOFC Western Ohio Fin. Corp. of OH 25.75 2,356 60.7 29.25 20.25 26.25 -1.90 N.A. 18.39
WWFC Westwood Fin. Corp. of NJ(8) 27.62 645 17.8 28.00 15.25 27.62 0.00 N.A. 67.39
WEHO Westwood Hmstd Fin Corp of OH 17.50 2,782 48.7 18.00 11.50 17.94 -2.45 N.A. 44.39
WFI Winton Financial Corp. of OH 20.00 1,986 39.7 20.50 11.50 19.75 1.27 N.A. 73.91
FFWD Wood Bancorp of OH 18.50 2,119 39.2 18.75 10.50 18.62 -0.64 N.A. 63.28
YFCB Yonkers Fin. Corp. of NY 18.50 3,021 55.9 22.00 12.12 19.37 -4.49 N.A. 43.75
YFED York Financial Corp. of PA 26.50 8,806 233.4 27.25 12.80 25.12 5.49 180.42 103.85
<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)
- ---------------------------------------
WSTR WesterFed Fin. Corp. of MT 1.16 1.11 19.03 15.35 179.16
WOFC Western Ohio Fin. Corp. of OH 0.52 0.71 23.21 21.63 168.29
WWFC Westwood Fin. Corp. of NJ(8) 1.20 1.28 15.95 14.27 171.20
WEHO Westwood Hmstd Fin Corp of OH 0.47 0.54 14.20 14.20 51.36
WFI Winton Financial Corp. of OH 1.60 1.34 11.36 11.12 159.81
FFWD Wood Bancorp of OH 1.07 0.98 9.77 9.77 78.58
YFCB Yonkers Fin. Corp. of NY 0.98 0.99 14.52 14.52 103.59
YFED York Financial Corp. of PA 1.26 1.06 11.62 11.62 131.24
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1
Weekly Thrift Market Line - Part Two
Prices As Of November 28, 1997
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
---------------------------------------------------------- -----------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- --------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
Market Averages. SAIF-Insured Thrifts(no MHCs)
- ----------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts(300) 13.08 12.85 0.88 8.00 4.70 0.88 7.85 0.80 121.00 0.78
NYSE Traded Companies(10) 7.75 7.54 0.96 14.43 6.20 0.86 13.52 1.14 75.98 1.19
AMEX Traded Companies(16) 14.68 14.57 0.62 3.68 2.99 0.79 4.91 0.66 142.41 0.71
NASDAQ Listed OTC Companies(274) 13.20 12.96 0.90 8.01 4.74 0.89 7.80 0.79 121.73 0.77
California Companies(21) 7.42 7.18 0.62 9.48 5.19 0.56 8.83 1.72 69.82 1.26
Florida Companies(5) 8.55 8.12 1.20 14.66 5.35 0.80 9.61 1.62 86.80 0.76
Mid-Atlantic Companies(59) 11.16 10.83 0.83 8.57 4.86 0.84 8.76 0.81 90.99 0.91
Mid-West Companies(144) 14.26 14.09 0.92 7.42 4.64 0.92 7.28 0.64 135.50 0.66
New England Companies(9) 8.05 7.78 0.56 7.36 4.22 0.66 8.73 0.57 141.95 1.04
North-West Companies(8) 17.00 16.78 0.94 8.22 4.05 0.98 7.99 0.51 205.79 0.59
South-East Companies(41) 15.99 15.80 0.95 7.15 4.05 0.97 7.02 0.86 139.05 0.81
South-West Companies(7) 10.52 10.27 0.87 10.21 6.80 0.88 10.00 0.77 66.48 0.72
Western Companies (Excl CA)(6) 16.12 15.71 1.21 8.16 5.09 1.21 8.18 0.34 130.33 0.71
Thrift Strategy(241) 14.34 14.14 0.90 7.23 4.60 0.92 7.32 0.73 121.60 0.72
Mortgage Banker Strategy(36) 7.47 7.03 0.76 11.01 5.30 0.69 10.05 1.00 123.68 1.01
Real Estate Strategy(9) 7.26 7.08 0.89 12.43 6.65 0.83 11.56 1.23 98.78 1.32
Diversified Strategy(10) 8.42 8.18 1.31 16.29 5.97 1.04 13.51 1.36 117.46 1.05
Retail Banking Strategy(4) 6.62 6.33 -0.24 -0.25 -3.13 -0.29 -1.06 0.73 132.47 0.95
Companies Issuing Dividends(253) 13.38 13.13 0.92 8.10 4.84 0.92 7.99 0.70 121.94 0.75
Companies Without Dividends(47) 11.40 11.27 0.69 7.47 3.91 0.65 7.07 1.33 115.72 0.98
Equity/Assets less than 6%(23) 5.05 4.72 0.67 13.29 5.87 0.63 12.74 1.39 75.96 1.07
Equity/Assets 6-12%(142) 8.76 8.46 0.81 9.64 5.23 0.78 9.28 0.80 131.01 0.87
Equity/Assets greater than 12%(135) 18.48 18.35 0.99 5.58 4.01 1.01 5.70 0.68 119.57 0.66
Converted Last 3 Mths (no MHC)(3) 21.23 21.23 0.91 4.06 3.35 0.91 4.06 0.98 127.30 0.73
Actively Traded Companies(39) 8.95 8.71 1.00 12.43 5.68 0.99 12.41 0.98 123.47 0.95
Market Value Below $20 Million(50) 14.68 14.66 0.82 5.81 4.50 0.85 6.03 0.72 106.60 0.63
Holding Company Structure(266) 13.54 13.33 0.88 7.66 4.58 0.88 7.56 0.79 118.75 0.77
Assets Over $1 Billion(60) 7.92 7.42 0.86 11.85 5.33 0.82 11.30 0.96 107.07 0.98
Assets $500 Million-$1 Billion(48) 10.52 10.21 0.89 9.14 4.87 0.84 8.62 0.86 146.87 0.91
Assets $250-$500 Million(66) 11.77 11.51 0.86 8.05 4.94 0.86 7.95 0.70 134.03 0.73
Assets less than $250 Million(126) 17.13 17.08 0.90 5.76 4.22 0.93 5.91 0.74 110.12 0.67
Goodwill Companies(121) 9.09 8.52 0.85 10.09 5.27 0.81 9.59 0.89 103.36 0.87
Non-Goodwill Companies(178) 15.67 15.67 0.91 6.65 4.34 0.93 6.74 0.73 133.06 0.73
Acquirors of FSLIC Cases(10) 7.27 6.84 0.84 12.30 5.83 0.83 12.06 1.08 60.52 0.82
<CAPTION>
Pricing Ratios Dividend Data(6)
----------------------------------------- -----------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
- --------------------- ------- ------- ------- ------- ------- ------- ------- -------
(X) (%) (%) (%) (x) ($) (%) (%)
Market Averages. SAIF-Insured Thrifts(no MHCs)
- ---------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts(300) 19.10 152.22 18.55 157.68 19.92 0.36 1.58 29.98
NYSE Traded Companies(10) 16.40 196.03 14.92 208.05 16.87 0.44 1.09 16.58
AMEX Traded Companies(16) 22.00 129.56 18.94 130.93 19.78 0.32 1.87 38.91
NASDAQ Listed OTC Companies(274) 19.11 152.00 18.67 157.47 20.05 0.36 1.58 30.14
California Companies(21) 18.01 165.14 11.49 173.42 18.44 0.16 0.48 7.42
Florida Companies(5) 20.23 181.36 19.99 205.60 25.54 0.20 0.75 14.79
Mid-Atlantic Companies(59) 19.10 155.53 16.64 163.34 19.49 0.37 1.45 28.56
Mid-West Companies(144) 18.77 145.40 19.28 148.80 19.61 0.36 1.68 31.21
New England Companies(9) 18.35 163.91 12.84 173.00 20.66 0.44 1.51 33.55
North-West Companies(8) 19.42 160.93 24.07 166.44 21.52 0.35 1.34 25.04
South-East Companies(41) 21.45 161.50 23.30 165.93 22.26 0.45 2.04 42.67
South-West Companies(7) 16.89 134.62 13.46 142.12 16.99 0.35 1.66 29.63
Western Companies (Excl CA)(6) 19.84 152.63 22.89 158.97 19.88 0.60 2.60 45.88
Thrift Strategy(241) 19.68 144.41 19.54 148.37 20.06 0.37 1.69 32.62
Mortgage Banker Strategy(36) 17.26 186.70 13.40 203.05 20.55 0.32 1.12 20.79
Real Estate Strategy(9) 15.57 176.93 12.74 180.06 16.75 0.14 0.70 10.26
Diversified Strategy(10) 17.00 220.58 20.71 228.72 17.27 0.47 1.44 23.67
Retail Banking Strategy(4) 17.78 145.45 9.18 150.56 20.54 0.14 0.81 22.88
Companies Issuing Dividends(253) 19.06 153.69 19.01 159.50 19.96 0.42 1.85 35.48
Companies Without Dividends(47) 19.40 143.60 15.94 147.04 19.58 0.00 0.00 0.00
Equity/Assets less than 6%(23) 16.89 196.94 10.56 215.89 19.34 0.22 0.67 13.32
Equity/Assets 6-12%(142) 17.91 167.89 14.38 175.07 18.61 0.37 1.46 26.28
Equity/Assets greater than 12%(135) 21.09 130.16 23.81 131.82 21.58 0.37 1.84 37.42
Converted Last 3 Mths (no MHC)(3) 26.72 120.52 25.82 120.52 26.72 0.00 0.00 0.00
Actively Traded Companies(39) 17.44 197.63 16.84 207.98 18.09 0.49 1.53 26.03
Market Value Below $20 Million(50) 19.07 122.93 17.66 123.24 20.34 0.33 1.88 35.21
Holding Company Structure(266) 19.37 150.21 18.98 155.24 20.11 0.37 1.63 30.96
Assets Over $1 Billion(60) 17.91 191.55 15.28 208.49 19.47 0.41 1.17 20.73
Assets $500 Million-$1 Billion(48) 17.66 166.51 16.94 172.27 19.14 0.36 1.49 29.00
Assets $250-$500 Million(66) 19.84 152.59 17.18 157.20 19.90 0.35 1.51 28.21
Assets less than $250 Million(126) 20.06 128.93 21.39 129.60 20.55 0.34 1.84 36.42
Goodwill Companies(121) 18.08 171.78 15.18 185.63 19.30 0.38 1.40 25.44
Non-Goodwill Companies(178) 19.88 139.50 20.73 139.50 20.37 0.35 1.70 33.13
Acquirors of FSLIC Cases(10) 17.44 197.40 13.79 212.75 18.04 0.42 1.29 21.70
</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.
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of November 28, 1997
Key Financial Ratios Asset Quality Ratios
---------------------------------------------------------- -----------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- --------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
Market Averages. BIF-Insured Thrifts(no MHCs)
- ---------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BIF-Insured Thrifts(60) 12.71 12.32 1.15 11.53 6.02 1.12 10.99 0.81 153.52 1.42
NYSE Traded Companies(2) 7.56 5.18 0.89 11.54 5.22 0.87 11.31 1.95 40.15 1.04
AMEX Traded Companies(6) 12.96 12.11 0.76 7.66 4.25 0.68 6.69 1.08 279.72 1.45
NASDAQ Listed OTC Companies(52) 12.90 12.65 1.20 11.94 6.24 1.18 11.43 0.74 147.05 1.44
California Companies(1) 10.72 10.68 1.45 13.02 8.44 1.45 13.02 1.54 79.64 1.45
Mid-Atlantic Companies(15) 11.19 10.50 0.87 8.90 4.42 0.88 8.70 0.85 136.53 1.35
Mid-West Companies(2) 36.66 35.98 0.82 1.90 2.05 0.95 2.33 0.56 57.14 0.56
New England Companies(33) 9.28 9.00 1.29 14.90 7.55 1.21 13.96 0.84 166.83 1.68
North-West Companies(4) 12.39 12.00 1.22 10.54 5.35 1.18 10.27 0.17 241.66 1.04
South-East Companies(5) 27.45 27.45 1.25 4.72 3.74 1.26 4.72 0.69 145.62 0.74
Thrift Strategy(43) 13.77 13.35 1.16 10.91 5.90 1.12 10.35 0.83 150.66 1.36
Mortgage Banker Strategy(7) 9.02 8.82 0.91 11.72 5.52 0.94 11.57 0.48 171.40 1.35
Real Estate Strategy(5) 10.69 10.66 1.80 17.32 9.17 1.68 16.10 1.35 88.34 1.59
Diversified Strategy(5) 6.94 6.42 1.04 15.06 6.34 1.00 14.56 0.76 196.07 2.08
Companies Issuing Dividends(52) 12.06 11.65 1.07 10.62 5.38 1.03 10.03 0.77 158.08 1.36
Companies Without Dividends(8) 17.04 16.83 1.71 17.66 10.34 1.72 17.46 1.10 120.84 1.80
Equity/Assets less than 6%(5) 5.55 5.41 0.95 17.01 6.31 0.81 14.41 0.92 98.61 1.42
Equity/Assets 6-12%(39) 8.81 8.30 1.23 14.11 7.19 1.18 13.49 0.90 135.17 1.61
Equity/Assets greater than 12%(16) 22.80 22.59 1.02 4.68 3.45 1.06 4.83 0.56 209.83 1.04
Actively Traded Companies(18) 9.11 8.68 1.22 13.88 6.90 1.15 13.03 0.73 138.50 1.49
Market Value Below $20 Million(5) 23.62 23.28 1.77 14.62 10.41 1.81 14.46 1.49 57.79 1.18
Holding Company Structure(40) 14.50 14.13 1.21 11.12 5.97 1.19 10.71 0.73 151.62 1.48
Assets Over $1 Billion(14) 9.15 8.43 1.05 12.21 5.50 1.03 11.88 0.82 154.48 1.49
Assets $500 Million-$1 Billion(16) 9.51 8.94 1.16 12.80 6.54 1.11 12.06 0.86 146.60 1.56
Assets $250-$500 Million(13) 11.60 11.44 1.04 10.47 5.24 0.99 9.96 0.67 162.47 1.65
Assets less than $250 Million(17) 19.64 19.51 1.31 10.56 6.54 1.29 10.04 0.87 151.97 1.06
Goodwill Companies(30) 9.58 8.81 0.96 11.23 5.65 0.93 10.61 0.88 136.86 1.46
Non-Goodwill Companies(30) 15.83 15.83 1.34 11.83 6.39 1.30 11.38 0.74 172.35 1.39
<CAPTION>
Pricing Ratios Dividend Data(6)
----------------------------------------- -------------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
- --------------------- ------- ------- ------- ------- -------- ------- ------- --------
(X) (%) (%) (%) (x) ($) (%) (%)
Market Averages. BIF-Insured Thrifts(no MHCs)
- ---------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BIF-Insured Thrifts(60) 17.45 177.62 19.92 184.65 18.19 0.49 1.63 30.52
NYSE Traded Companies(2) 19.18 229.23 17.23 245.45 19.57 0.58 1.08 20.95
AMEX Traded Companies(6) 14.81 153.87 19.03 184.67 16.79 0.56 1.75 40.49
NASDAQ Listed OTC Companies(52) 17.49 177.95 20.12 183.35 18.20 0.48 1.65 30.07
California Companies(1) 11.84 146.10 15.67 146.70 11.84 0.00 0.00 0.00
Mid-Atlantic Companies(15) 20.06 185.22 18.80 195.81 19.96 0.50 1.68 33.58
Mid-West Companies(2) 0.00 96.46 35.38 99.25 0.00 0.00 0.00 0.00
New England Companies(33) 14.94 189.24 17.05 196.75 16.24 0.52 1.72 28.04
North-West Companies(4) 20.00 188.21 21.77 193.30 20.74 0.31 1.62 29.94
South-East Companies(5) 25.34 122.15 32.85 122.15 25.29 0.68 1.99 55.08
Thrift Strategy(43) 17.73 170.78 20.76 177.04 18.68 0.52 1.71 32.87
Mortgage Banker Strategy(7) 19.25 200.61 16.97 206.96 18.55 0.36 1.23 23.42
Real Estate Strategy(5) 10.97 174.03 18.59 174.33 11.62 0.26 1.26 12.75
Diversified Strategy(5) 15.82 224.15 15.23 241.73 16.52 0.47 1.51 24.22
Companies Issuing Dividends(52) 18.33 180.72 19.72 188.71 19.15 0.56 1.88 35.27
Companies Without Dividends(8) 9.87 156.79 21.23 157.93 9.94 0.00 0.00 0.00
Equity/Assets less than 6%(5) 16.00 252.67 14.02 258.45 19.77 0.18 0.95 15.15
Equity/Assets 6-12%(39) 15.69 191.79 16.84 201.99 16.57 0.55 1.73 28.62
Equity/Assets greater than 12%(16) 23.23 128.73 27.92 130.42 22.49 0.43 1.60 38.79
Actively Traded Companies(18) 15.15 188.42 16.74 199.32 16.40 0.58 1.88 28.95
Market Value Below $20 Million(5) 18.52 115.97 26.64 117.37 17.89 0.18 0.99 26.59
Holding Company Structure(40) 18.02 171.24 21.69 180.71 18.44 0.50 1.70 32.52
Assets Over $1 Billion(14) 19.24 216.37 19.06 225.55 19.41 0.54 1.57 29.72
Assets $500 Million-$1 Billion(16) 15.39 180.55 16.65 197.01 16.55 0.54 1.70 26.78
Assets $250-$500 Million(13) 16.66 175.63 18.95 179.54 17.48 0.44 1.73 33.41
Assets less than $250 Million(17) 18.70 145.27 24.64 146.37 19.50 0.43 1.55 32.53
Goodwill Companies(30) 17.74 183.69 16.60 198.26 18.84 0.52 1.57 27.33
Non-Goodwill Companies(30) 17.13 171.54 23.23 171.54 17.50 0.46 1.70 33.70
</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.
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of November 28, 1997
Key Financial Ratios Asset Quality Ratios
---------------------------------------------------------- -----------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- --------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Market Averages, MHC Institutions
- ---------------------------------
SAIF-Insured Thrifts(20) 12.20 12.09 0.77 6.97 2.67 0.79 7.08 0.47 142.94 0.71
BIF-Insured Thrifts(3) 10.87 10.23 1.05 10.29 3.38 0.87 8.36 1.16 74.62 1.11
NASDAQ Listed OTC Companies(23) 11.97 11.76 0.82 7.56 2.79 0.80 7.30 0.60 130.13 0.78
Florida Companies(3) 9.86 9.83 0.59 5.60 2.43 0.67 6.50 0.38 76.69 0.46
Mid-Atlantic Companies(11) 12.16 11.79 0.81 7.62 2.63 0.79 7.33 0.73 109.28 0.89
Mid-West Companies(7) 13.05 13.04 0.87 7.00 2.94 0.91 7.26 0.46 181.63 0.52
New England Companies(1) 9.02 9.01 1.16 13.69 4.27 0.75 8.84 0.76 146.25 1.66
Thrift Strategy(22) 12.15 11.93 0.80 7.17 2.70 0.81 7.21 0.59 129.05 0.72
Diversified Strategy(1) 9.02 9.01 1.16 13.69 4.27 0.75 8.84 0.76 146.25 1.66
Companies Issuing Dividends(22) 11.86 11.64 0.83 7.60 2.78 0.81 7.35 0.61 128.93 0.74
Companies Without Dividends(1) 13.66 13.66 0.73 6.80 3.01 0.71 6.55 0.45 148.08 1.37
Equity/Assets 6-12%(16) 10.02 9.73 0.78 8.05 2.86 0.73 7.54 0.70 84.77 0.81
Equity/Assets greater than 12%(7) 16.63 16.63 0.93 6.38 2.63 0.98 6.73 0.31 266.20 0.71
Holding Company Structure(2) 11.94 10.03 1.06 9.22 3.68 0.95 8.25 0.91 43.96 0.67
Assets Over $1 Billion(5) 8.95 8.46 1.01 11.55 3.31 0.82 9.29 0.74 97.60 1.16
Assets $500 Million-$1 Billion(3) 9.86 9.83 0.59 5.60 2.43 0.67 6.50 0.38 76.69 0.46
Assets $250-$500 Million(5) 11.63 11.61 0.88 7.97 3.10 0.86 7.73 0.29 188.56 0.43
Assets less than $250 Million(10) 13.55 13.34 0.79 6.52 2.60 0.81 6.68 0.73 133.77 0.84
Goodwill Companies(9) 9.32 8.73 0.87 9.47 3.19 0.79 8.54 0.61 97.45 0.83
Non-Goodwill Companies(14) 13.41 13.41 0.80 6.51 2.58 0.81 6.63 0.60 149.74 0.75
MHC Institutions(23) 11.97 11.76 0.82 7.56 2.79 0.80 7.30 0.60 130.13 0.78
<CAPTION>
Pricing Ratios Dividend Data(6)
----------------------------------------- -----------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
- --------------------- ------- ------- ------- ------- ------- ------- ------- -------
(X) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Market Averages, MHC Institutions
- ---------------------------------
SAIF-Insured Thrifts(20) 27.01 228.50 28.01 230.23 27.71 0.51 1.97 37.93
BIF-Insured Thrifts(3) 25.27 266.19 31.90 288.85 0.00 0.47 1.47 44.13
NASDAQ Listed OTC Companies(23) 25.85 233.52 28.69 238.05 27.71 0.50 1.88 39.99
Florida Companies(3) 0.00 223.57 22.01 224.40 0.00 0.90 2.90 0.00
Mid-Atlantic Companies(11) 27.14 225.82 29.81 234.96 0.00 0.28 1.27 36.08
Mid-West Companies(7) 27.01 235.94 29.77 236.33 27.71 0.68 2.51 45.34
New England Companies(1) 23.40 295.27 26.64 295.53 0.00 0.76 2.26 52.78
Thrift Strategy(22) 27.08 229.11 28.82 233.94 27.71 0.48 1.86 38.40
Diversified Strategy(1) 23.40 295.27 26.64 295.53 0.00 0.76 2.26 52.78
Companies Issuing Dividends(22) 25.85 237.19 28.93 242.04 27.71 0.53 2.00 44.99
Companies Without Dividends(1) 0.00 182.19 24.90 182.19 0.00 0.00 0.00 0.00
Equity/Assets 6-12%(16) 25.85 244.48 26.19 251.27 27.71 0.48 1.71 44.99
Equity/Assets greater than 12%(7) 0.00 211.60 34.70 211.60 0.00 0.54 2.31 0.00
Holding Company Structure(2) 27.14 237.10 28.31 282.18 0.00 0.28 0.98 26.67
Assets Over $1 Billion(5) 23.40 309.30 29.40 318.91 0.00 0.38 1.52 44.70
Assets $500 Million-$1 Billion(3) 0.00 223.57 22.01 224.40 0.00 0.90 2.90 0.00
Assets $250-$500 Million(5) 27.01 251.36 28.91 252.01 27.71 0.54 1.96 40.68
Assets less than $250 Million(10) 27.14 210.38 29.87 216.01 0.00 0.44 1.75 37.03
Goodwill Companies(9) 25.85 261.51 25.86 275.09 27.71 0.47 1.71 40.29
Non-Goodwill Companies(14) 0.00 219.53 30.24 219.53 0.00 0.52 1.98 39.62
MHC Institutions(23) 25.85 233.52 28.69 238.05 27.71 0.50 1.88 39.99
</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.
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700 Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of November 28, 1997
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
---------------------------------------------------------- -----------------------
Tang.
Equity/ Equity/ Reported Earnings Core Earnings 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 4.07 3.46 0.76 19.09 6.62 0.65 16.33 1.86 43.81 1.22
CSA Coast Savings Financial of CA 5.20 5.14 0.62 12.51 4.90 0.66 13.36 1.23 75.26 1.37
CFB Commercial Federal Corp. of NE 6.17 5.52 0.94 16.03 6.28 0.94 16.03 0.88 75.53 0.90
DME Dime Bancorp, Inc. of NY* 5.43 5.17 0.68 12.66 5.36 0.67 12.46 1.02 51.61 0.81
DSL Downey Financial Corp. of CA 7.13 7.04 0.73 9.96 5.42 0.70 9.56 0.95 55.50 0.58
FED FirstFed Fin. Corp. of CA 5.16 5.11 0.56 11.73 6.00 0.56 11.68 1.20 168.73 2.57
GSB Glendale Fed. Bk, FSB of CA 5.65 5.05 0.57 10.24 5.28 0.68 12.27 1.36 70.96 1.30
GDW Golden West Fin. Corp. of CA 6.56 6.56 0.88 13.91 6.62 0.86 13.68 1.18 47.94 0.67
GPT GreenPoint Fin. Corp. of NY* 9.69 5.19 1.09 10.41 5.07 1.06 10.17 2.88 28.68 1.26
JSB JSB Financial, Inc. of NY 23.22 23.22 1.93 8.61 6.37 1.71 7.65 1.07 35.16 0.61
NYB New York Bancorp, Inc. of NY 5.21 5.21 1.62 31.66 6.79 1.66 32.45 0.88 65.33 0.92
WES Westcorp Inc. of Orange CA 9.08 9.06 0.99 10.57 7.71 0.20 2.18 0.76 121.61 1.78
AMEX Traded Companies
- ---------------------
ANA Acadiana Bancshares of LA* 17.37 17.37 0.59 3.85 2.44 0.59 3.85 0.50 201.03 1.32
ANE Alliance Bancorp of New Englan* 7.36 7.18 0.79 11.65 6.57 0.73 10.74 1.99 62.80 2.00
BKC American Bank of Waterbury CT* 8.81 8.49 1.30 15.51 6.94 1.10 13.09 1.77 48.58 1.48
BFD BostonFed Bancorp of MA 8.52 8.20 0.73 7.68 5.69 0.66 6.95 0.34 184.11 0.76
CFX CFX Corp of NH(8)* 8.71 8.40 0.73 8.91 2.09 0.99 11.98 0.55 137.87 1.10
CNY Carver Bancorp, Inc. of NY 8.40 8.07 -0.15 -1.74 -1.52 0.01 0.13 1.31 47.60 1.07
CBK Citizens First Fin.Corp. of IL 13.75 13.75 0.60 4.13 3.45 0.54 3.67 0.61 38.86 0.28
ESX Essex Bancorp of VA(8) 0.02 -0.08 0.12 NM 4.00 0.10 NM 2.11 51.58 1.27
FCB Falmouth Co-Op Bank of MA* 23.86 23.86 0.84 3.43 2.57 0.79 3.23 0.07 806.45 0.98
FAB FirstFed America Bancorp of MA 12.20 12.20 0.05 0.56 0.29 0.48 5.03 0.39 259.57 1.16
GAF GA Financial Corp. of PA 14.63 14.49 1.09 6.28 4.88 1.05 6.08 0.24 63.36 0.41
KNK Kankakee Bancorp of IL 11.43 10.78 0.89 8.28 6.35 0.87 8.12 1.05 60.22 0.90
KYF Kentucky First Bancorp of KY 16.70 16.70 1.16 6.52 5.38 1.14 6.43 0.09 457.83 0.76
MBB MSB Bancorp of Middletown NY* 7.39 3.63 0.27 3.87 2.72 0.18 2.55 NA NA NA
PDB Piedmont Bancorp of NC 16.43 16.43 -0.24 -1.28 -1.06 0.55 2.91 0.89 75.98 0.81
SSB Scotland Bancorp of NC 22.62 22.62 1.86 5.47 6.44 1.83 5.39 NA NA 0.53
SZB SouthFirst Bancshares of AL 14.00 14.00 -0.03 -0.19 -0.16 0.23 1.62 0.75 39.15 0.40
SRN Southern Banc Company of AL 17.01 16.83 0.14 0.79 0.71 0.50 2.84 NA NA 0.20
SSM Stone Street Bancorp of NC 29.57 29.57 1.54 4.69 4.25 1.54 4.69 0.23 229.34 0.62
TSH Teche Holding Company of LA 13.14 13.14 0.69 5.03 3.56 0.96 6.96 0.27 304.97 0.96
FTF Texarkana Fst. Fin. Corp of AR 15.70 15.70 1.41 8.40 5.29 1.74 10.38 0.46 145.12 0.79
THR Three Rivers Fin. Corp. of MI 13.46 13.41 0.57 4.02 3.14 0.82 5.83 0.87 59.98 0.77
WSB Washington SB, FSB of MD 8.38 8.38 0.42 5.04 3.39 0.59 7.06 1.53 30.34 1.01
NASDAQ Listed OTC Companies
- ---------------------------
FBCV 1st Bancorp of Vincennes IN 8.65 8.49 0.72 8.75 6.90 0.36 4.34 1.30 34.59 0.65
AFED AFSALA Bancorp, Inc. of NY 13.47 13.47 0.79 6.46 4.29 0.79 6.46 0.45 150.77 1.43
ALBK ALBANK Fin. Corp. of Albany NY 9.24 8.14 1.04 11.41 6.25 1.04 11.33 0.94 75.89 0.97
AMFC AMB Financial Corp. of IN 13.94 13.94 1.02 6.29 6.13 0.72 4.43 0.32 118.29 0.51
ASBP ASB Financial Corp. of OH 15.57 15.57 0.97 5.70 4.88 0.91 5.35 0.96 75.72 1.07
ABBK Abington Savings Bank of MA* 7.13 6.46 0.85 12.38 6.36 0.76 11.03 0.16 269.74 0.71
AABC Access Anytime Bancorp of NM 8.65 8.65 1.44 22.38 12.45 1.34 20.78 1.58 31.35 0.95
AFBC Advance Fin. Bancorp of WV 15.40 15.40 0.89 6.41 4.68 0.87 6.25 0.74 38.01 0.33
AADV Advantage Bancorp of WI(8) 9.54 8.88 1.04 11.55 5.30 0.93 10.36 0.48 117.02 1.02
AFCB Affiliated Comm BC, Inc of MA 9.78 9.72 0.96 9.75 5.33 1.09 11.16 0.34 218.65 1.18
ALBC Albion Banc Corp. of Albion NY 8.57 8.57 0.50 5.53 4.52 0.49 5.45 0.12 321.43 0.53
ABCL Allied Bancorp of IL 9.42 9.30 0.79 8.70 4.04 0.88 9.69 0.21 184.61 0.54
ATSB AmTrust Capital Corp. of IN 10.93 10.82 0.40 3.86 3.86 0.23 2.21 2.20 33.49 1.03
<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 15.10 294.99 12.00 347.34 17.66 0.88 1.48 22.34
CSA Coast Savings Financial of CA 20.41 238.00 12.37 240.77 19.11 0.00 0.00 0.00
CFB Commercial Federal Corp. of NE 15.91 233.41 14.39 260.91 15.91 0.33 0.69 10.93
DME Dime Bancorp, Inc. of NY* 18.65 233.62 12.68 245.45 18.95 0.16 0.66 12.31
DSL Downey Financial Corp. of CA 18.46 176.17 12.57 178.46 19.23 0.32 1.16 21.48
FED FirstFed Fin. Corp. of CA 16.67 182.41 9.41 184.16 16.74 0.00 0.00 0.00
GSB Glendale Fed. Bk, FSB of CA 18.93 181.13 10.23 202.37 15.79 0.00 0.00 0.00
GDW Golden West Fin. Corp. of CA 15.11 197.57 12.97 197.57 15.37 0.50 0.56 8.43
GPT GreenPoint Fin. Corp. of NY* 19.71 224.84 21.79 NM 20.19 1.00 1.50 29.59
JSB JSB Financial, Inc. of NY 15.70 129.82 30.14 129.82 17.66 1.40 3.00 47.14
NYB New York Bancorp, Inc. of NY 14.74 NM 23.24 NM 14.38 0.60 1.70 25.00
WES Westcorp Inc. of Orange CA 12.98 130.77 11.88 131.07 NM 0.40 2.35 30.53
AMEX Traded Companies
- ---------------------
ANA Acadiana Bancshares of LA* NM 138.08 23.99 138.08 NM 0.36 1.52 62.07
ANE Alliance Bancorp of New Englan* 15.22 159.82 11.77 163.86 16.51 0.20 1.14 17.39
BKC American Bank of Waterbury CT* 14.41 202.84 17.87 210.55 17.07 1.44 3.06 44.04
BFD BostonFed Bancorp of MA 17.56 140.68 11.98 146.13 19.40 0.28 1.37 24.14
CFX CFX Corp of NH(8)* NM 270.73 23.58 280.87 NM 0.88 3.17 NM
CNY Carver Bancorp, Inc. of NY NM 113.06 9.50 117.66 NM 0.00 0.00 NM
CBK Citizens First Fin.Corp. of IL 28.97 123.39 16.97 123.39 NM 0.00 0.00 0.00
ESX Essex Bancorp of VA(8) 25.00 NM 2.76 NM 27.78 0.00 0.00 0.00
FCB Falmouth Co-Op Bank of MA* NM 131.49 31.37 131.49 NM 0.20 0.99 38.46
FAB FirstFed America Bancorp of MA NM 142.01 17.33 142.01 NM 0.00 0.00 0.00
GAF GA Financial Corp. of PA 20.48 130.77 19.13 132.03 21.15 0.48 2.49 51.06
KNK Kankakee Bancorp of IL 15.75 124.29 14.21 131.84 16.05 0.48 1.42 22.33
KYF Kentucky First Bancorp of KY 18.59 128.43 21.45 128.43 18.83 0.50 3.45 64.10
MBB MSB Bancorp of Middletown NY* NM 137.12 10.13 279.38 NM 0.60 2.07 NM
PDB Piedmont Bancorp of NC NM 137.17 22.54 137.17 NM 0.40 3.86 NM
SSB Scotland Bancorp of NC 15.53 134.69 30.46 134.69 15.77 0.30 2.93 45.45
SZB SouthFirst Bancshares of AL NM 118.31 16.56 118.31 NM 0.50 2.63 NM
SRN Southern Banc Company of AL NM 115.71 19.68 116.91 NM 0.35 2.07 NM
SSM Stone Street Bancorp of NC 23.55 124.08 36.68 124.08 23.55 0.45 2.22 52.33
TSH Teche Holding Company of LA 28.05 140.89 18.52 140.89 20.26 0.50 2.29 64.10
FTF Texarkana Fst. Fin. Corp of AR 18.89 164.67 25.85 164.67 15.28 0.56 2.26 42.75
THR Three Rivers Fin. Corp. of MI NM 127.09 17.11 127.58 21.94 0.40 2.03 64.52
WSB Washington SB, FSB of MD 29.48 142.83 11.96 142.83 21.06 0.10 1.36 40.00
NASDAQ Listed OTC Companies
- ---------------------------
FBCV 1st Bancorp of Vincennes IN 14.49 122.62 10.61 125.00 29.20 0.42 1.05 15.22
AFED AFSALA Bancorp, Inc. of NY 23.32 129.72 17.48 129.72 23.32 0.24 1.26 29.27
ALBK ALBANK Fin. Corp. of Albany NY 16.00 173.29 16.02 196.72 16.11 0.72 1.56 24.91
AMFC AMB Financial Corp. of IN 16.33 107.02 14.92 107.02 23.19 0.28 1.75 28.57
ASBP ASB Financial Corp. of OH 20.50 127.38 19.83 127.38 21.87 0.40 3.05 62.50
ABBK Abington Savings Bank of MA* 15.72 185.28 13.21 204.43 17.65 0.40 1.11 17.47
AABC Access Anytime Bancorp of NM 8.03 134.75 11.66 134.75 8.65 0.00 0.00 0.00
AFBC Advance Fin. Bancorp of WV 21.39 118.18 18.20 118.18 21.91 0.32 1.80 38.55
AADV Advantage Bancorp of WI(8) 18.86 203.50 19.42 218.73 21.03 0.40 0.64 12.12
AFCB Affiliated Comm BC, Inc of MA 18.75 173.57 16.97 174.53 16.38 0.60 2.11 39.47
ALBC Albion Banc Corp. of Albion NY 22.14 119.54 10.24 119.54 22.48 0.32 1.10 24.43
ABCL Allied Bancorp of IL 24.76 163.04 15.35 165.09 22.25 0.44 1.68 41.51
ATSB AmTrust Capital Corp. of IN 25.93 96.69 10.57 97.70 NM 0.20 1.43 37.04
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of November 28, 1997
Key Financial Ratios Asset Quality Ratios
---------------------------------------------------------- -----------------------
Tang.
Equity/ Equity/ Reported Earnings Core Earnings 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)
- ---------------------------------------
AHCI Ambanc Holding Co., Inc. of NY* 12.94 12.94 -0.59 -4.24 -3.82 -0.61 -4.43 0.73 107.99 1.48
ASBI Ameriana Bancorp of IN 11.21 11.21 0.92 8.35 5.79 0.83 7.53 0.52 53.03 0.37
AFFFZ America First Fin. Fund of CA(8) 8.37 8.28 1.99 24.83 15.51 2.01 25.10 0.35 94.92 0.48
ABCW Anchor Bancorp Wisconsin of WI 6.40 6.29 0.99 16.08 6.63 0.93 15.00 0.98 115.36 1.44
ANDB Andover Bancorp, Inc. of MA* 8.12 8.12 1.05 13.16 6.65 1.03 12.85 0.91 107.23 1.33
ASFC Astoria Financial Corp. of NY 7.72 6.53 0.81 10.37 5.37 0.77 9.81 0.46 39.39 0.43
AVND Avondale Fin. Corp. of IL 7.72 7.72 -1.93 -21.53 -21.06 -1.97 -21.92 1.11 86.78 1.65
BKCT Bancorp Connecticut of CT* 10.75 10.75 1.36 12.96 5.58 1.24 11.85 1.04 118.74 2.00
BPLS Bank Plus Corp. of CA 4.52 4.51 0.36 7.51 5.85 0.30 6.24 2.21 67.35 2.02
BWFC Bank West Fin. Corp. of MI 14.14 14.14 1.03 6.69 4.00 0.56 3.65 0.21 69.91 0.21
BANC BankAtlantic Bancorp of FL 5.50 4.55 1.04 18.10 8.49 0.54 9.50 0.92 108.06 1.42
BKUNA BankUnited SA of FL 3.12 2.46 0.31 7.68 3.79 0.28 6.90 0.62 27.63 0.21
BVCC Bay View Capital Corp. of CA 5.82 4.86 0.55 9.13 4.21 0.62 10.22 0.63 195.87 1.62
FSNJ Bayonne Banchsares of NJ 15.62 15.62 0.37 3.86 2.08 0.52 5.41 1.12 47.67 1.38
BFSB Bedford Bancshares of VA 14.10 14.10 1.20 8.41 4.92 1.19 8.35 0.52 92.88 0.58
BFFC Big Foot Fin. Corp. of IL 17.48 17.48 0.15 1.22 0.65 0.44 3.67 0.09 150.75 0.31
BSBC Branford SB of CT(8)* 9.65 9.65 1.12 12.06 5.17 1.12 12.06 1.56 131.46 3.09
BYFC Broadway Fin. Corp. of CA 10.01 10.01 -0.11 -1.03 -1.23 0.21 1.94 1.62 52.84 1.02
CBES CBES Bancorp of MO 16.92 16.92 1.23 6.90 5.79 1.12 6.26 0.59 81.11 0.53
CCFH CCF Holding Company of GA 10.66 10.66 0.14 1.03 0.80 -0.16 -1.16 0.20 288.02 0.70
CENF CENFED Financial Corp. of CA 5.56 5.55 0.64 12.26 5.91 0.58 11.04 0.97 76.38 1.07
CFSB CFSB Bancorp of Lansing MI 7.71 7.71 1.20 15.75 5.58 1.13 14.80 0.19 283.10 0.61
CKFB CKF Bancorp of Danville KY 23.67 23.67 1.83 7.53 6.59 1.37 5.61 1.20 16.62 0.22
CNSB CNS Bancorp of MO 24.33 24.33 0.79 3.21 2.35 0.79 3.21 0.50 80.20 0.58
CSBF CSB Financial Group Inc of IL* 25.03 23.66 0.32 1.22 1.28 0.52 1.98 0.56 57.14 0.57
CBCI Calumet Bancorp of Chicago IL 16.21 16.21 1.45 9.07 7.12 1.42 8.91 1.27 96.64 1.55
CAFI Camco Fin. Corp. of OH 9.59 8.88 1.20 12.96 7.21 1.01 10.94 0.60 41.84 0.29
CMRN Cameron Fin. Corp. of MO 21.69 21.69 1.07 4.43 3.98 1.33 5.51 0.73 111.82 0.97
CAPS Capital Savings Bancorp of MO(8) 9.14 9.14 0.95 10.96 5.36 0.94 10.78 0.37 84.67 0.39
CFNC Carolina Fincorp of NC* 22.59 22.59 1.17 5.03 4.03 1.14 4.89 0.16 226.67 0.50
CASB Cascade SB of Everett WA(8) 6.64 6.64 0.60 9.62 5.10 0.60 9.62 0.28 332.14 1.12
CATB Catskill Fin. Corp. of NY* 24.78 24.78 1.39 5.20 4.77 1.41 5.26 0.40 162.15 1.50
CNIT Cenit Bancorp of Norfolk VA 6.95 6.36 0.80 11.30 4.99 0.74 10.50 0.52 103.38 0.77
CEBK Central Co-Op. Bank of MA* 9.93 8.88 0.87 8.67 5.47 0.88 8.79 0.53 151.19 1.15
CENB Century Bancshares of NC* 30.29 30.29 1.69 5.60 5.24 1.70 5.62 0.25 219.37 0.85
CBSB Charter Financial Inc. of IL(8) 14.47 12.80 1.13 7.49 4.77 1.59 10.49 0.56 104.84 0.79
COFI Charter One Financial of OH 7.05 6.48 1.26 18.64 6.14 1.23 18.23 0.27 159.82 0.68
CVAL Chester Valley Bancorp of PA 8.66 8.66 0.98 11.29 5.18 0.93 10.79 0.53 173.12 1.12
CTZN CitFed Bancorp of Dayton OH 6.27 5.70 0.86 13.53 5.87 0.86 13.53 0.40 136.26 0.86
CLAS Classic Bancshares of KY 14.90 12.61 0.56 3.44 2.98 0.75 4.66 0.67 93.71 0.94
CMSB Cmnwealth Bancorp of PA 9.28 7.24 0.75 7.49 5.01 0.63 6.32 0.47 85.46 0.71
CBSA Coastal Bancorp of Houston TX 3.47 2.92 0.41 12.41 8.31 0.43 12.77 0.62 38.71 0.54
CFCP Coastal Fin. Corp. of SC 6.56 6.56 1.21 19.41 5.43 1.05 16.77 0.10 966.86 1.18
CMSV Commty. Svgs, MHC of FL (48.5) 11.34 11.34 0.80 7.04 3.06 0.73 6.45 0.41 90.57 0.62
CFTP Community Fed. Bancorp of MS 26.73 26.73 1.47 4.77 3.86 1.45 4.70 0.50 54.53 0.46
CFFC Community Fin. Corp. of VA 13.71 13.71 1.01 7.32 5.33 1.28 9.26 0.56 105.58 0.67
CFBC Community First Bnkg Co. of GA 17.80 17.57 0.74 4.46 3.36 0.74 4.46 2.19 25.76 0.75
CIBI Community Inv. Bancorp of OH 11.75 11.75 0.97 8.31 6.41 0.97 8.31 0.53 94.97 0.59
COOP Cooperative Bk.for Svgs. of NC 7.69 7.69 0.63 8.30 4.20 0.63 8.30 0.21 109.36 0.29
CRZY Crazy Woman Creek Bncorp of WY 23.70 23.70 1.27 4.66 4.68 1.29 4.72 0.38 134.22 1.04
DNFC D&N Financial Corp. of MI 5.25 5.20 0.89 15.92 6.97 0.82 14.69 0.35 178.16 0.83
DCBI Delphos Citizens Bancorp of OH 26.64 26.64 1.54 6.13 4.69 1.54 6.13 0.45 21.81 0.13
DIME Dime Community Bancorp of NY 13.50 11.63 1.09 6.91 4.73 1.06 6.72 0.60 135.05 1.39
DIBK Dime Financial Corp. of CT* 8.14 7.91 1.94 23.83 9.68 1.94 23.75 0.37 353.73 3.21
EGLB Eagle BancGroup of IL 11.85 11.85 0.32 2.61 2.33 0.25 2.04 1.48 35.66 0.73
EBSI Eagle Bancshares of Tucker GA 8.17 8.17 0.65 7.67 4.57 0.65 7.75 1.26 54.76 0.94
<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)
- ---------------------------------------
AHCI Ambanc Holding Co., Inc. of NY* NM 116.68 15.09 116.68 NM 0.20 1.18 NM
ASBI Ameriana Bancorp of IN 17.26 143.07 16.03 143.07 19.12 0.64 3.28 56.64
AFFFZ America First Fin. Fund of CA(8) 6.45 150.45 12.59 152.05 6.38 1.60 3.40 21.89
ABCW Anchor Bancorp Wisconsin of WI 15.07 227.93 14.59 231.96 16.15 0.32 1.02 15.31
ANDB Andover Bancorp, Inc. of MA* 15.04 186.88 15.18 186.88 15.41 0.76 2.01 30.28
ASFC Astoria Financial Corp. of NY 18.62 186.78 14.41 220.83 19.69 0.60 1.09 20.27
AVND Avondale Fin. Corp. of IL NM 121.40 9.37 121.40 NM 0.00 0.00 NM
BKCT Bancorp Connecticut of CT* 17.94 223.21 24.00 223.21 19.61 1.00 2.50 44.84
BPLS Bank Plus Corp. of CA 17.11 121.40 5.49 121.53 20.59 0.00 0.00 0.00
BWFC Bank West Fin. Corp. of MI 25.00 165.41 23.39 165.41 NM 0.32 1.45 36.36
BANC BankAtlantic Bancorp of FL 11.78 204.41 11.25 247.33 22.45 0.13 0.90 10.66
BKUNA BankUnited SA of FL 26.41 184.07 5.75 234.00 29.41 0.00 0.00 0.00
BVCC Bay View Capital Corp. of CA 23.77 227.89 13.26 272.84 21.23 0.32 0.95 22.54
FSNJ Bayonne Banchsares of NJ NM 113.42 17.72 113.42 NM 0.17 1.42 68.00
BFSB Bedford Bancshares of VA 20.32 164.44 23.18 164.44 20.47 0.56 1.98 40.29
BFFC Big Foot Fin. Corp. of IL NM 123.58 21.61 123.58 NM 0.00 0.00 0.00
BSBC Branford SB of CT(8)* 19.35 223.05 21.52 223.05 19.35 0.08 1.33 25.81
BYFC Broadway Fin. Corp. of CA NM 88.32 8.84 88.32 NM 0.20 1.54 NM
CBES CBES Bancorp of MO 17.26 115.74 19.58 115.74 19.04 0.40 1.96 33.90
CCFH CCF Holding Company of GA NM 140.75 15.00 140.75 NM 0.55 2.75 NM
CENF CENFED Financial Corp. of CA 16.91 189.45 10.54 189.71 18.78 0.36 0.88 14.94
CFSB CFSB Bancorp of Lansing MI 17.93 272.45 21.00 272.45 19.09 0.68 1.92 34.34
CKFB CKF Bancorp of Danville KY 15.16 117.91 27.90 117.91 20.33 0.50 2.70 40.98
CNSB CNS Bancorp of MO NM 139.47 33.94 139.47 NM 0.24 1.20 51.06
CSBF CSB Financial Group Inc of IL* NM 96.30 24.11 101.87 NM 0.00 0.00 0.00
CBCI Calumet Bancorp of Chicago IL 14.04 127.43 20.66 127.43 14.29 0.00 0.00 0.00
CAFI Camco Fin. Corp. of OH 13.87 160.21 15.36 173.04 16.44 0.52 2.17 30.06
CMRN Cameron Fin. Corp. of MO 25.15 114.20 24.77 114.20 20.23 0.28 1.43 35.90
CAPS Capital Savings Bancorp of MO(8) 18.64 191.20 17.47 191.20 18.96 0.24 1.07 20.00
CFNC Carolina Fincorp of NC* 24.81 124.78 28.18 124.78 25.54 0.24 1.38 34.29
CASB Cascade SB of Everett WA(8) 19.62 152.51 10.12 152.51 19.62 0.00 0.00 0.00
CATB Catskill Fin. Corp. of NY* 20.98 114.34 28.33 114.34 20.73 0.32 1.82 38.10
CNIT Cenit Bancorp of Norfolk VA 20.06 230.74 16.03 251.95 21.59 1.00 1.47 29.50
CEBK Central Co-Op. Bank of MA* 18.28 152.30 15.12 170.20 18.03 0.32 1.21 22.07
CENB Century Bancshares of NC* 19.09 106.50 32.26 106.50 19.05 2.00 2.50 47.73
CBSB Charter Financial Inc. of IL(8) 20.95 160.47 23.22 181.37 14.97 0.32 1.45 30.48
COFI Charter One Financial of OH 16.28 273.93 19.32 298.34 16.64 1.00 1.69 27.47
CVAL Chester Valley Bancorp of PA 19.30 205.88 17.83 205.88 20.19 0.44 1.68 32.35
CTZN CitFed Bancorp of Dayton OH 17.04 211.98 13.30 233.27 17.04 0.36 0.71 12.12
CLAS Classic Bancshares of KY NM 114.67 17.09 135.55 24.81 0.28 1.64 54.90
CMSB Cmnwealth Bancorp of PA 19.97 156.45 14.52 200.69 23.69 0.28 1.37 27.45
CBSA Coastal Bancorp of Houston TX 12.03 141.80 4.92 168.63 11.69 0.48 1.66 20.00
CFCP Coastal Fin. Corp. of SC 18.40 329.99 21.63 329.99 21.30 0.36 1.57 28.80
CMSV Commty. Svgs, MHC of FL (48.5) NM 221.66 25.14 221.66 NM 0.90 2.57 NM
CFTP Community Fed. Bancorp of MS 25.94 137.29 36.70 137.29 26.34 0.30 1.75 45.45
CFFC Community Fin. Corp. of VA 18.75 131.23 17.99 131.23 14.82 0.56 2.26 42.42
CFBC Community First Bnkg Co. of GA 29.74 131.86 23.48 133.65 29.74 0.60 1.56 46.51
CIBI Community Inv. Bancorp of OH 15.59 130.17 15.29 130.17 15.59 0.32 2.03 31.68
COOP Cooperative Bk.for Svgs. of NC 23.79 187.38 14.41 187.38 23.79 0.00 0.00 0.00
CRZY Crazy Woman Creek Bncorp of WY 21.35 103.29 24.48 103.29 21.05 0.40 2.60 55.56
DNFC D&N Financial Corp. of MI 14.36 215.74 11.34 218.08 15.56 0.20 0.83 11.90
DCBI Delphos Citizens Bancorp of OH 21.34 119.45 31.82 119.45 21.34 0.00 0.00 0.00
DIME Dime Community Bancorp of NY 21.14 156.99 21.19 182.21 21.73 0.24 1.03 21.82
DIBK Dime Financial Corp. of CT* 10.33 216.64 17.65 223.09 10.36 0.44 1.40 14.43
EGLB Eagle BancGroup of IL NM 115.97 13.74 115.97 NM 0.00 0.00 0.00
EBSI Eagle Bancshares of Tucker GA 21.88 152.90 12.50 152.90 21.63 0.60 3.12 68.18
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of November 28, 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)
- ---------------------------------------
EGFC Eagle Financial Corp. of CT(8) 6.90 5.49 0.34 4.79 1.74 0.48 6.91 0.53 87.59 0.86
ETFS East Texas Fin. Serv. of TX 18.01 18.01 0.68 3.68 3.75 0.63 3.43 0.27 88.06 0.48
EMLD Emerald Financial Corp of OH 7.80 7.69 1.05 13.70 6.23 0.97 12.67 0.24 115.15 0.36
EIRE Emerald Island Bancorp, MA(8)* 6.99 6.99 0.86 12.46 4.96 0.92 13.24 0.17 416.26 0.97
EFBC Empire Federal Bancorp of MT 34.89 34.89 0.83 2.37 2.12 1.09 3.12 0.05 357.14 0.45
EFBI Enterprise Fed. Bancorp of OH 11.43 11.42 0.92 7.43 4.29 0.77 6.18 0.07 297.93 0.30
EQSB Equitable FSB of Wheaton MD 5.04 5.04 0.46 9.09 4.89 0.74 14.50 0.49 36.72 0.26
FCBF FCB Fin. Corp. of Neenah WI 14.64 14.64 0.74 4.48 2.24 0.57 3.45 0.24 277.72 0.85
FFBS FFBS Bancorp of Columbus MS 16.70 16.70 1.41 7.48 5.16 1.41 7.48 0.58 72.88 0.59
FFDF FFD Financial Corp. of OH 24.34 24.34 1.94 7.84 6.31 0.95 3.85 NA NA 0.46
FFLC FFLC Bancorp of Leesburg FL 13.73 13.73 1.00 6.81 4.18 0.94 6.44 0.18 226.46 0.52
FFFC FFVA Financial Corp. of VA 13.31 13.04 1.40 10.28 5.09 1.35 9.86 0.16 361.92 0.99
FFWC FFW Corporation of Wabash IN 9.70 8.81 1.04 10.57 6.44 1.02 10.35 0.18 217.37 0.60
FFYF FFY Financial Corp. of OH 13.70 13.70 1.29 8.85 6.29 1.27 8.70 0.66 72.24 0.63
FMCO FMS Financial Corp. of NJ 6.49 6.39 1.02 15.82 7.97 1.01 15.69 1.15 43.53 0.94
FFHH FSF Financial Corp. of MN 11.17 11.17 0.85 7.05 5.20 0.84 6.98 0.15 148.95 0.33
FOBC Fed One Bancorp of Wheeling WV 11.18 10.68 0.94 8.21 5.55 0.94 8.21 0.45 91.97 0.88
FBCI Fidelity Bancorp of Chicago IL 10.48 10.46 0.81 7.86 6.06 0.81 7.86 0.41 22.74 0.12
FSBI Fidelity Bancorp, Inc. of PA 6.75 6.75 0.51 7.38 4.06 0.81 11.68 NA NA NA
FFFL Fidelity FSB, MHC of FL (47.7) 8.38 8.31 0.38 4.15 1.79 0.60 6.56 0.34 62.82 0.29
FFED Fidelity Fed. Bancorp of IN 6.11 6.11 0.75 14.32 6.70 0.73 13.89 0.13 626.40 0.96
FFOH Fidelity Financial of OH 13.02 11.56 0.91 6.59 5.07 1.02 7.37 0.29 106.32 0.37
FIBC Financial Bancorp, Inc. of NY 9.05 9.00 0.91 9.52 5.88 0.97 10.18 1.75 27.02 0.91
FBSI First Bancshares of MO 13.92 13.92 1.19 8.36 6.63 1.08 7.54 0.67 45.57 0.36
FBBC First Bell Bancorp of PA 10.53 10.53 1.15 9.44 6.84 1.12 9.20 0.09 116.26 0.13
FBER First Bergen Bancorp of NJ 13.65 13.65 0.77 4.97 3.81 0.77 4.97 0.84 127.66 2.47
SKBO First Carnegie,MHC of PA(45.0) 16.45 16.45 0.52 5.53 1.77 0.52 5.53 NA NA 0.83
FSTC First Citizens Corp of GA 10.12 7.98 1.96 20.65 9.04 1.75 18.46 NA NA 1.43
FCME First Coastal Corp. of ME* 9.75 9.75 4.17 48.29 32.59 4.01 46.37 1.65 108.25 2.49
FFBA First Colorado Bancorp of Co 13.08 12.91 1.21 8.92 4.88 1.20 8.84 0.20 141.52 0.39
FDEF First Defiance Fin.Corp. of OH 19.67 19.67 1.03 4.82 4.13 1.00 4.67 0.45 99.07 0.59
FESX First Essex Bancorp of MA* 7.40 6.48 0.90 12.27 6.69 0.77 10.52 0.58 149.29 1.43
FFES First FS&LA of E. Hartford CT 6.63 6.63 0.53 8.37 5.19 0.60 9.51 0.31 87.85 1.44
FFSX First FS&LA. MHC of IA (46.1) 8.73 8.66 0.73 8.79 3.70 0.71 8.56 0.22 185.09 0.53
BDJI First Fed. Bancorp. of MN 10.71 10.71 0.65 5.81 3.75 0.63 5.70 0.32 120.28 0.79
FFBH First Fed. Bancshares of AR 14.89 14.89 1.06 6.78 5.29 1.01 6.48 0.96 23.38 0.29
FTFC First Fed. Capital Corp. of WI 6.73 6.35 1.08 16.76 6.46 0.89 13.87 0.13 395.30 0.64
FFKY First Fed. Fin. Corp. of KY 13.70 12.93 1.64 11.95 6.64 1.62 11.87 0.49 94.29 0.53
FFBZ First Federal Bancorp of OH 7.67 7.66 1.01 13.33 6.49 1.02 13.43 0.52 172.30 1.03
FFCH First Fin. Holdings Inc. of SC 6.12 6.12 0.87 14.24 5.15 0.85 13.86 1.49 45.68 0.82
FFBI First Financial Bancorp of IL 8.92 8.92 -0.07 -0.84 -0.79 0.43 5.28 0.33 178.83 0.87
FFHS First Franklin Corp. of OH 9.02 8.97 0.56 6.21 4.04 0.66 7.33 0.47 90.77 0.64
FGHC First Georgia Hold. Corp of GA 8.22 7.53 0.66 7.98 3.82 0.51 6.23 3.10 20.52 0.75
FSPG First Home Bancorp of NJ 6.86 6.76 0.93 13.99 7.33 0.91 13.67 0.77 95.63 1.36
FFSL First Independence Corp. of KS 10.25 10.25 0.65 5.99 4.87 0.65 5.99 1.25 47.61 0.89
FISB First Indiana Corp. of IN 9.65 9.53 1.14 12.04 6.17 0.93 9.89 1.39 103.20 1.70
FKFS First Keystone Fin. Corp of PA 6.63 6.63 0.82 11.30 6.72 0.75 10.35 1.11 39.39 0.84
FLKY First Lancaster Bncshrs of KY 29.46 29.46 1.23 3.65 3.37 1.23 3.65 2.28 13.93 0.35
FLFC First Liberty Fin. Corp. of GA 7.37 6.65 0.88 12.11 4.74 0.72 9.91 0.81 110.00 1.29
CASH First Midwest Fin. Corp. of IA 10.75 9.55 0.96 8.44 6.59 0.91 8.06 0.75 78.49 0.93
FMBD First Mutual Bancorp of IL 13.40 10.21 0.32 2.12 1.73 0.30 1.94 0.26 138.78 0.47
FMSB First Mutual SB of Bellevue WA* 6.79 6.79 1.02 15.29 5.86 1.00 15.00 0.06 NA 1.31
FNGB First Northern Cap. Corp of WI 11.09 11.09 0.93 8.21 4.89 0.89 7.84 0.08 574.86 0.53
FFPB First Palm Beach Bancorp of FL 6.25 6.10 0.58 8.65 4.77 0.49 7.25 0.57 58.39 0.53
FSLA First SB SLA MHC of NJ (47.5)(8) 9.50 8.63 0.90 9.64 2.82 0.94 10.06 0.54 105.63 1.04
SOPN First SB, SSB, Moore Co. of NC 23.01 23.01 1.75 7.26 5.42 1.75 7.26 0.29 70.15 0.31
<CAPTION>
Pricing Ratios Dividend Data(6)
----------------------------------------- -----------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
- --------------------- ------- ------- ------- ------- ------- ------- ------- -------
(X) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
EGFC Eagle Financial Corp. of CT(8) NM 225.88 15.59 283.87 NM 1.00 1.93 NM
ETFS East Texas Fin. Serv. of TX 26.67 98.28 17.70 98.28 28.57 0.20 1.00 26.67
EMLD Emerald Financial Corp of OH 16.04 207.44 16.18 210.38 17.34 0.24 1.25 20.00
EIRE Emerald Island Bancorp, MA(8)* 20.16 234.20 16.36 234.20 18.97 0.28 0.87 17.50
EFBC Empire Federal Bancorp of MT NM 111.79 39.01 111.79 NM 0.30 1.82 NM
EFBI Enterprise Fed. Bancorp of OH 23.32 175.41 20.05 175.52 28.03 1.00 3.60 NM
EQSB Equitable FSB of Wheaton MD 20.45 174.42 8.79 174.42 12.82 0.00 0.00 0.00
FCBF FCB Fin. Corp. of Neenah WI NM 138.04 20.20 138.04 NM 0.80 2.94 NM
FFBS FFBS Bancorp of Columbus MS 19.40 156.90 26.21 156.90 19.40 0.50 2.22 43.10
FFDF FFD Financial Corp. of OH 15.84 123.62 30.09 123.62 NM 0.30 1.63 25.86
FFLC FFLC Bancorp of Leesburg FL 23.94 163.87 22.51 163.87 25.28 0.29 1.29 30.85
FFFC FFVA Financial Corp. of VA 19.63 199.82 26.60 203.97 20.47 0.48 1.44 28.24
FFWC FFW Corporation of Wabash IN 15.53 153.27 14.87 168.83 15.86 0.72 1.91 29.63
FFYF FFY Financial Corp. of OH 15.91 146.55 20.07 146.55 16.17 0.80 2.69 42.78
FMCO FMS Financial Corp. of NJ 12.55 185.89 12.06 188.63 12.66 0.28 0.95 11.97
FFHH FSF Financial Corp. of MN 19.23 138.79 15.51 138.79 19.42 0.50 2.50 48.08
FOBC Fed One Bancorp of Wheeling WV 18.02 147.60 16.50 154.47 18.02 0.62 2.49 44.93
FBCI Fidelity Bancorp of Chicago IL 16.49 124.60 13.05 124.80 16.49 0.32 1.38 22.70
FSBI Fidelity Bancorp, Inc. of PA 24.65 168.69 11.39 168.69 15.57 0.36 1.35 33.33
FFFL Fidelity FSB, MHC of FL (47.7) NM 225.49 18.88 227.14 NM 0.90 3.23 NM
FFED Fidelity Fed. Bancorp of IN 14.93 194.17 11.86 194.17 15.38 0.40 4.00 59.70
FFOH Fidelity Financial of OH 19.74 121.56 15.83 136.99 17.65 0.28 1.87 36.84
FIBC Financial Bancorp, Inc. of NY 16.99 157.92 14.29 158.73 15.90 0.00 0.00 0.00
FBSI First Bancshares of MO 15.09 126.63 17.63 126.63 16.72 0.20 0.76 11.49
FBBC First Bell Bancorp of PA 14.62 156.53 16.49 156.53 15.00 0.40 2.32 33.90
FBER First Bergen Bancorp of NJ 26.23 137.21 18.73 137.21 26.23 0.20 1.07 28.17
SKBO First Carnegie,MHC of PA(45.0) NM 177.00 29.11 177.00 NM 0.30 1.61 NM
FSTC First Citizens Corp of GA 11.06 192.93 19.52 244.65 12.37 0.29 1.21 13.36
FCME First Coastal Corp. of ME* 3.07 130.11 12.69 130.11 3.20 0.00 0.00 0.00
FFBA First Colorado Bancorp of Co 20.50 189.58 24.79 191.98 20.68 0.48 2.11 43.24
FDEF First Defiance Fin.Corp. of OH 24.21 120.94 23.78 120.94 25.00 0.32 2.10 50.79
FESX First Essex Bancorp of MA* 14.94 166.97 12.36 190.87 17.43 0.48 2.42 36.09
FFES First FS&LA of E. Hartford CT 19.27 151.64 10.05 151.64 16.97 0.60 1.62 31.25
FFSX First FS&LA. MHC of IA (46.1) 27.01 226.35 19.76 228.30 27.71 0.48 1.51 40.68
BDJI First Fed. Bancorp. of MN 26.67 157.84 16.90 157.84 27.18 0.00 0.00 0.00
FFBH First Fed. Bancshares of AR 18.91 128.43 19.12 128.43 19.79 0.24 1.12 21.24
FTFC First Fed. Capital Corp. of WI 15.48 243.19 16.38 258.06 18.70 0.48 1.72 26.67
FFKY First Fed. Fin. Corp. of KY 15.07 174.60 23.92 185.03 15.17 0.56 2.55 38.36
FFBZ First Federal Bancorp of OH 15.40 194.05 14.88 194.25 15.28 0.24 1.25 19.20
FFCH First Fin. Holdings Inc. of SC 19.42 262.13 16.03 262.13 19.96 0.84 1.95 37.84
FFBI First Financial Bancorp of IL NM 104.97 9.36 104.97 20.21 0.00 0.00 NM
FFHS First Franklin Corp. of OH 24.76 148.66 13.41 149.51 20.97 0.40 1.54 38.10
FGHC First Georgia Hold. Corp of GA 26.16 198.81 16.33 216.84 NM 0.05 0.60 15.63
FSPG First Home Bancorp of NJ 13.65 178.44 12.25 181.16 13.97 0.40 1.68 22.99
FFSL First Independence Corp. of KS 20.55 127.23 13.04 127.23 20.55 0.25 1.67 34.25
FISB First Indiana Corp. of IN 16.20 185.77 17.92 188.04 19.74 0.48 1.83 29.63
FKFS First Keystone Fin. Corp of PA 14.88 158.73 10.52 158.73 16.24 0.20 0.63 9.30
FLKY First Lancaster Bncshrs of KY 29.72 107.73 31.74 107.73 29.72 0.50 3.17 NM
FLFC First Liberty Fin. Corp. of GA 21.11 226.59 16.70 251.31 25.81 0.44 1.58 33.33
CASH First Midwest Fin. Corp. of IA 15.19 127.25 13.68 143.26 15.89 0.48 2.34 35.56
FMBD First Mutual Bancorp of IL NM 131.75 17.65 172.78 NM 0.32 1.58 NM
FMSB First Mutual SB of Bellevue WA* 17.06 242.36 16.45 242.36 17.38 0.20 1.10 18.69
FNGB First Northern Cap. Corp of WI 20.45 163.83 18.17 163.83 21.43 0.32 2.37 48.48
FFPB First Palm Beach Bancorp of FL 20.95 173.07 10.82 177.18 25.00 0.60 1.55 32.43
FSLA First SB SLA MHC of NJ (47.5)(8) NM 325.83 30.95 NM NM 0.48 1.19 42.11
SOPN First SB, SSB, Moore Co. of NC 18.46 132.23 30.42 132.23 18.46 0.88 3.61 66.67
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of November 28, 1997
Key Financial Ratios Asset Quality Ratios
---------------------------------------------------------- -----------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ----------------------- --------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
FWWB First Savings Bancorp of WA* 14.76 13.57 1.05 6.22 3.60 0.99 5.88 0.27 241.66 0.97
FSFF First SecurityFed Fin of IL 27.03 27.03 1.29 4.77 3.80 1.29 4.77 1.44 40.86 0.92
SHEN First Shenango Bancorp of PA 11.62 11.62 1.17 10.45 6.70 1.16 10.40 0.51 149.56 1.17
FSFC First So.east Fin. Corp. of SC(8) 10.28 10.28 1.05 10.32 5.36 1.05 10.32 0.24 164.77 0.50
FBNW FirstBank Corp of Clarkston WA 16.43 16.43 0.39 3.23 1.87 0.18 1.47 1.70 33.83 0.76
FFDB FirstFed Bancorp of AL 9.63 8.81 1.03 10.63 7.23 1.01 10.36 1.31 33.87 0.63
FSPT FirstSpartan Fin. Corp. of SC 26.79 26.79 0.96 6.28 3.33 0.96 6.28 0.69 56.19 0.49
FLAG Flag Financial Corp of GA 9.11 9.11 0.91 9.84 5.46 0.75 8.19 3.92 49.66 2.82
FLGS Flagstar Bancorp, Inc of MI 5.98 5.74 1.41 22.77 9.10 0.70 11.39 3.04 8.02 0.27
FFIC Flushing Fin. Corp. of NY* 14.20 13.64 0.95 5.92 4.45 0.99 6.22 0.39 172.94 1.12
FBHC Fort Bend Holding Corp. of TX 6.16 5.75 0.64 10.48 6.27 0.53 8.77 0.56 89.94 1.08
FTSB Fort Thomas Fin. Corp. of KY 16.13 16.13 1.21 7.27 5.15 1.21 7.27 1.98 24.60 0.53
FKKY Frankfort First Bancorp of KY 16.83 16.83 0.08 0.34 0.32 0.65 2.92 0.09 80.00 0.08
FTNB Fulton Bancorp of MO 24.66 24.66 1.25 5.02 3.60 1.08 4.34 1.62 57.19 1.06
GFSB GFS Bancorp of Grinnell IA 11.51 11.51 1.27 11.03 6.82 1.27 11.03 0.98 67.81 0.78
GUPB GFSB Bancorp of Gallup NM 12.82 12.82 0.86 5.43 4.79 0.86 5.43 0.29 115.79 0.63
GSLA GS Financial Corp. of LA 43.13 43.13 1.25 3.81 2.31 1.25 3.81 0.14 211.96 0.81
GOSB GSB Financial Corp. of NY 27.06 27.06 1.02 3.77 3.33 0.86 3.19 NA NA NA
GWBC Gateway Bancorp of KY(8) 27.74 27.74 0.97 3.68 3.01 0.97 3.68 0.90 14.39 0.38
GBCI Glacier Bancorp of MT 9.99 9.75 1.50 15.56 5.88 1.53 15.94 0.25 243.94 0.84
GFCO Glenway Financial Corp. of OH 9.46 9.35 0.79 8.36 5.21 0.77 8.11 0.25 123.32 0.37
GTPS Great American Bancorp of IL 20.43 20.43 0.53 2.39 2.21 0.59 2.67 0.26 126.83 0.42
GTFN Great Financial Corp. of KY(8) 10.07 9.66 1.04 10.82 4.58 0.76 7.96 3.11 16.32 0.74
GSBC Great Southern Bancorp of MO 8.65 8.65 1.84 20.39 7.18 1.74 19.22 1.91 115.21 2.58
GDVS Greater DV SB,MHC of PA (19.9)* 11.64 11.64 0.93 7.97 2.19 0.93 7.97 1.82 33.64 1.00
GSFC Green Street Fin. Corp. of NC 35.38 35.38 1.59 4.45 3.51 1.59 4.45 0.10 147.40 0.20
GFED Guarnty FS&LA,MHC of MO (31.0)(8) 13.03 13.03 0.99 7.17 2.61 0.96 6.94 0.64 162.46 1.29
HCBB HCB Bancshares of AR 18.84 18.13 0.13 0.92 0.66 0.14 1.02 NA NA 1.44
HEMT HF Bancorp of Hemet CA 7.93 6.61 0.03 0.39 0.30 0.17 2.17 1.65 24.89 0.81
HFFC HF Financial Corp. of SD 9.42 9.42 1.02 11.06 7.88 0.94 10.15 0.48 173.70 1.08
HFNC HFNC Financial Corp. of NC 18.80 18.80 1.23 5.43 4.17 1.05 4.64 0.92 92.55 1.06
HMNF HMN Financial, Inc. of MN 14.88 14.88 1.00 6.87 5.18 0.85 5.79 0.10 465.21 0.71
HALL Hallmark Capital Corp. of WI 7.30 7.30 0.65 9.11 5.97 0.64 8.91 0.13 355.91 0.67
HARB Harbor FSB, MHC of FL (46.6)(8) 8.56 8.29 1.22 14.68 4.12 1.21 14.58 0.43 238.88 1.38
HRBF Harbor Federal Bancorp of MD 13.06 13.06 0.71 5.50 4.18 0.71 5.50 0.10 189.19 0.28
HFSA Hardin Bancorp of Hardin MO 11.53 11.53 0.79 5.83 5.37 0.74 5.52 0.09 195.33 0.36
HARL Harleysville SA of PA 6.62 6.62 1.03 16.07 6.98 1.03 16.14 0.02 NA 0.78
HFGI Harrington Fin. Group of IN 4.84 4.84 0.43 8.95 5.42 0.36 7.48 0.20 20.13 0.21
HARS Harris SB, MHC of PA (24.3) 8.20 7.25 0.92 11.11 2.74 0.76 9.19 0.68 60.65 0.96
HFFB Harrodsburg 1st Fin Bcrp of KY 26.93 26.93 1.03 3.77 3.21 1.36 5.01 0.47 59.81 0.38
HHFC Harvest Home Fin. Corp. of OH 12.50 12.50 0.27 1.87 1.56 0.58 4.07 0.11 117.00 0.26
HAVN Haven Bancorp of Woodhaven NY 6.00 5.98 0.68 11.32 6.12 0.68 11.36 0.76 85.85 1.12
HTHR Hawthorne Fin. Corp. of CA 4.85 4.85 0.86 19.13 11.29 0.82 18.40 8.07 18.43 1.70
HMLK Hemlock Fed. Fin. Corp. of IL 19.31 19.31 0.37 2.51 1.62 0.81 5.47 NA NA 1.22
HBNK Highland Federal Bank of CA 7.67 7.67 1.13 15.28 7.53 0.86 11.60 2.52 63.92 2.00
HIFS Hingham Inst. for Sav. of MA* 9.71 9.71 1.25 13.03 7.30 1.25 13.03 0.89 78.90 0.91
HBEI Home Bancorp of Elgin IL 27.56 27.56 0.83 3.02 2.39 0.83 3.02 0.35 85.96 0.35
HBFW Home Bancorp of Fort Wayne IN 13.29 13.29 0.56 3.93 2.63 0.89 6.27 0.05 835.54 0.51
HBBI Home Building Bancorp of IN 14.12 14.12 0.74 5.77 4.94 0.73 5.66 0.44 44.51 0.28
HCFC Home City Fin. Corp. of OH 19.61 19.61 1.24 6.77 5.11 1.26 6.84 0.82 77.27 0.73
HOMF Home Fed Bancorp of Seymour IN 8.66 8.40 1.34 15.88 6.33 1.21 14.42 0.48 112.57 0.63
HWEN Home Financial Bancorp of IN 17.55 17.55 0.86 4.60 4.50 0.74 3.98 1.70 36.51 0.73
HPBC Home Port Bancorp, Inc. of MA* 10.68 10.68 1.67 15.71 7.29 1.66 15.62 0.13 NA 1.54
HMCI Homecorp, Inc. of Rockford IL(8) 6.83 6.83 0.51 7.94 3.96 0.41 6.42 2.16 22.97 0.61
HZFS Horizon Fin'l. Services of IA 9.96 9.96 0.81 7.86 7.00 0.65 6.33 0.94 44.31 0.67
HRZB Horizon Financial Corp. of WA* 15.64 15.64 1.58 10.12 6.58 1.55 9.94 NA NA 0.85
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)
- ---------------------------------------
FWWB First Savings Bancorp of WA* 27.75 174.02 25.68 189.28 29.36 0.28 1.11 30.77
FSFF First SecurityFed Fin of IL 26.33 125.47 33.92 125.47 26.33 0.00 0.00 0.00
SHEN First Shenango Bancorp of PA 14.93 149.67 17.40 149.67 15.00 0.60 1.78 26.55
FSFC First So.east Fin. Corp. of SC(8) 18.67 184.39 18.95 184.39 18.67 0.24 1.59 29.63
FBNW FirstBank Corp of Clarkston WA NM 119.62 19.65 119.62 NM 0.28 1.59 NM
FFDB FirstFed Bancorp of AL 13.84 148.95 14.35 162.84 14.19 0.50 2.27 31.45
FSPT FirstSpartan Fin. Corp. of SC 30.00 128.56 34.44 128.56 30.00 0.60 1.60 48.00
FLAG Flag Financial Corp of GA 18.32 173.55 15.80 173.55 22.02 0.34 1.84 33.66
FLGS Flagstar Bancorp, Inc of MI 10.99 205.29 12.27 213.70 21.99 0.00 0.00 0.00
FFIC Flushing Fin. Corp. of NY* 22.47 130.27 18.50 135.67 21.39 0.24 1.08 24.24
FBHC Fort Bend Holding Corp. of TX 15.95 165.15 10.17 176.92 19.05 0.40 2.04 32.52
FTSB Fort Thomas Fin. Corp. of KY 19.41 139.68 22.54 139.68 19.41 0.25 1.69 32.89
FKKY Frankfort First Bancorp of KY NM 135.23 22.77 135.23 NM 0.36 3.89 NM
FTNB Fulton Bancorp of MO 27.74 136.09 33.57 136.09 NM 0.20 0.99 27.40
GFSB GFS Bancorp of Grinnell IA 14.67 153.22 17.64 153.22 14.67 0.26 1.54 22.61
GUPB GFSB Bancorp of Gallup NM 20.88 115.06 14.75 115.06 20.88 0.40 1.98 41.24
GSLA GS Financial Corp. of LA NM 107.97 46.56 107.97 NM 0.28 1.58 68.29
GOSB GSB Financial Corp. of NY NM 113.43 30.70 113.43 NM 0.00 0.00 0.00
GWBC Gateway Bancorp of KY(8) NM 121.56 33.72 121.56 NM 0.40 2.04 67.80
GBCI Glacier Bancorp of MT 17.01 246.73 24.64 252.74 16.60 0.48 2.31 39.34
GFCO Glenway Financial Corp. of OH 19.19 156.12 14.77 157.94 19.79 0.40 2.11 40.40
GTPS Great American Bancorp of IL NM 113.10 23.10 113.10 NM 0.40 2.11 NM
GTFN Great Financial Corp. of KY(8) 21.82 227.70 22.93 237.27 29.63 0.60 1.25 27.27
GSBC Great Southern Bancorp of MO 13.94 280.87 24.30 280.87 14.78 0.44 2.01 28.03
GDVS Greater DV SB,MHC of PA (19.9)* NM NM 40.77 NM NM 0.36 1.16 52.94
GSFC Green Street Fin. Corp. of NC 28.46 126.28 44.68 126.28 28.46 0.44 2.38 67.69
GFED Guarnty FS&LA,MHC of MO (31.0)(8) NM 271.12 35.32 271.12 NM 0.44 1.85 70.97
HCBB HCB Bancshares of AR NM 95.44 17.98 99.20 NM 0.00 0.00 0.00
HEMT HF Bancorp of Hemet CA NM 126.32 10.02 151.58 NM 0.00 0.00 0.00
HFFC HF Financial Corp. of SD 12.68 134.51 12.68 134.51 13.83 0.42 1.62 20.49
HFNC HFNC Financial Corp. of NC 23.98 156.86 29.49 156.86 28.06 0.28 1.88 45.16
HMNF HMN Financial, Inc. of MN 19.31 128.77 19.16 128.77 22.89 0.00 0.00 0.00
HALL Hallmark Capital Corp. of WI 16.76 144.00 10.52 144.00 17.13 0.00 0.00 0.00
HARB Harbor FSB, MHC of FL (46.6)(8) 24.25 333.85 28.58 344.83 24.44 1.40 2.15 52.24
HRBF Harbor Federal Bancorp of MD 23.90 129.85 16.95 129.85 23.90 0.48 2.21 52.75
HFSA Hardin Bancorp of Hardin MO 18.62 111.04 12.81 111.04 19.66 0.48 2.74 51.06
HARL Harleysville SA of PA 14.33 213.44 14.14 213.44 14.26 0.44 1.50 21.46
HFGI Harrington Fin. Group of IN 18.46 159.82 7.73 159.82 22.09 0.12 0.97 17.91
HARS Harris SB, MHC of PA (24.3) NM NM 30.41 NM NM 0.22 1.16 42.31
HFFB Harrodsburg 1st Fin Bcrp of KY NM 118.15 31.82 118.15 23.45 0.40 2.34 72.73
HHFC Harvest Home Fin. Corp. of OH NM 129.96 16.24 129.96 29.50 0.44 2.98 NM
HAVN Haven Bancorp of Woodhaven NY 16.35 171.52 10.29 172.07 16.29 0.60 1.40 22.81
HTHR Hawthorne Fin. Corp. of CA 8.86 149.89 7.28 149.89 9.21 0.00 0.00 0.00
HMLK Hemlock Fed. Fin. Corp. of IL NM 114.54 22.12 114.54 28.28 0.24 1.39 NM
HBNK Highland Federal Bank of CA 13.28 186.05 14.26 186.05 17.49 0.00 0.00 0.00
HIFS Hingham Inst. for Sav. of MA* 13.70 168.34 16.34 168.34 13.70 0.48 1.77 24.24
HBEI Home Bancorp of Elgin IL NM 130.72 36.03 130.72 NM 0.40 2.22 NM
HBFW Home Bancorp of Fort Wayne IN NM 155.33 20.64 155.33 23.80 0.20 0.73 27.78
HBBI Home Building Bancorp of IN 20.24 112.49 15.88 112.49 20.63 0.30 1.41 28.57
HCFC Home City Fin. Corp. of OH 19.57 118.50 23.23 118.50 19.35 0.36 2.00 39.13
HOMF Home Fed Bancorp of Seymour IN 15.80 233.45 20.21 240.59 17.41 0.35 1.27 20.11
HWEN Home Financial Bancorp of IN 22.22 105.45 18.51 105.45 25.69 0.20 1.22 27.03
HPBC Home Port Bancorp, Inc. of MA* 13.71 206.01 21.99 206.01 13.79 0.80 3.33 45.71
HMCI Homecorp, Inc. of Rockford IL(8) 25.25 191.28 13.06 191.28 NM 0.00 0.00 0.00
HZFS Horizon Fin'l. Services of IA 14.29 107.11 10.66 107.11 17.74 0.18 1.64 23.38
HRZB Horizon Financial Corp. of WA* 15.19 148.25 23.18 148.25 15.48 0.44 2.66 40.37
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of November 28, 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)
- ---------------------------------------
IBSF IBS Financial Corp. of NJ 17.42 17.42 0.78 4.41 3.04 0.78 4.41 0.13 110.72 0.50
ISBF ISB Financial Corp. of LA 12.04 10.24 0.62 4.52 2.86 0.85 6.21 0.27 196.73 0.80
ITLA Imperial Thrift & Loan of CA* 10.72 10.68 1.45 13.02 8.44 1.45 13.02 1.54 79.64 1.45
IFSB Independence FSB of DC 6.88 6.09 0.32 4.85 4.72 0.27 4.03 NA NA 0.36
INCB Indiana Comm. Bank, SB of IN(8) 11.88 11.88 0.53 4.32 2.59 0.53 4.32 NA NA 0.93
INBI Industrial Bancorp of OH 17.18 17.18 1.51 8.26 5.44 1.58 8.68 0.25 193.84 0.54
IWBK Interwest SB of Oak Harbor WA 6.34 6.23 1.12 16.91 6.38 1.03 15.57 0.58 73.44 0.77
IPSW Ipswich SB of Ipswich MA* 5.61 5.61 1.20 20.28 6.84 0.95 16.13 0.84 97.31 1.09
JXVL Jacksonville Bancorp of TX 14.92 14.92 1.02 6.45 4.80 1.34 8.46 0.78 67.63 0.70
JXSB Jcksnville SB,MHC of IL (45.6) 10.56 10.56 0.65 6.02 2.99 0.65 6.02 0.79 56.34 0.56
JSBA Jefferson Svgs Bancorp of MO 8.19 6.24 0.30 3.91 1.60 0.70 9.25 0.67 101.16 0.89
JOAC Joachim Bancorp of MO 28.14 28.14 0.80 2.74 2.64 0.80 2.74 0.24 95.24 0.32
KSAV KS Bancorp of Kenly NC 13.24 13.23 1.21 8.81 6.22 1.20 8.74 0.53 55.44 0.35
KSBK KSB Bancorp of Kingfield ME(8)* 7.18 6.79 0.97 13.74 7.08 0.99 13.99 1.59 52.04 1.07
KFBI Klamath First Bancorp of OR 19.55 19.55 0.81 3.67 2.51 1.23 5.54 0.03 510.24 0.23
LSBI LSB Fin. Corp. of Lafayette IN 8.64 8.64 0.78 8.67 6.19 0.69 7.65 1.05 69.89 0.83
LVSB Lakeview SB of Paterson NJ 12.22 10.46 1.26 12.10 5.56 0.92 8.76 1.13 59.43 1.50
LARK Landmark Bancshares of KS 13.79 13.79 0.88 5.93 4.75 1.05 7.02 NA NA NA
LARL Laurel Capital Group of PA 10.47 10.47 1.46 14.04 7.53 1.41 13.57 0.43 201.97 1.25
LSBX Lawrence Savings Bank of MA* 9.52 9.52 1.76 20.06 10.24 1.75 19.92 0.66 156.71 2.35
LFED Leeds FSB, MHC of MD (36.3) 16.63 16.63 1.18 7.24 2.98 1.18 7.24 0.06 315.29 0.30
LXMO Lexington B&L Fin. Corp. of MO 28.32 28.32 1.03 3.49 3.28 1.33 4.50 0.48 78.37 0.49
LIFB Life Bancorp of Norfolk VA(8) 10.71 10.42 0.92 8.70 4.34 0.85 8.05 0.41 141.46 1.32
LFBI Little Falls Bancorp of NJ 11.68 10.77 0.57 4.32 3.30 0.52 3.93 0.90 38.49 0.77
LOGN Logansport Fin. Corp. of IN 18.90 18.90 1.41 7.25 5.97 1.48 7.57 0.49 55.66 0.39
LONF London Financial Corp. of OH 19.66 19.66 0.66 3.18 3.25 1.00 4.83 0.80 61.11 0.63
LISB Long Island Bancorp, Inc of NY 9.21 9.13 0.86 9.35 4.37 0.73 7.90 0.91 63.07 0.92
MAFB MAF Bancorp of IL 7.79 6.84 1.16 14.90 7.63 1.15 14.78 0.42 128.75 0.69
MBLF MBLA Financial Corp. of MO 12.66 12.66 0.83 6.49 5.37 0.85 6.62 0.57 50.27 0.50
MFBC MFB Corp. of Mishawaka IN 13.10 13.10 0.84 5.76 5.20 0.84 5.76 0.10 141.76 0.18
MLBC ML Bancorp of Villanova PA(8) 6.92 6.46 0.70 9.91 4.17 0.50 7.10 0.43 178.98 1.71
MSBF MSB Financial Corp. of MI 16.54 16.54 1.49 8.38 4.41 1.44 8.09 1.02 40.20 0.45
MARN Marion Capital Holdings of IN 21.95 21.95 1.69 7.48 6.30 1.67 7.39 1.08 104.36 1.32
MRKF Market Fin. Corp. of OH 35.44 35.44 0.98 3.41 2.49 0.98 3.41 0.34 27.23 0.20
MFCX Marshalltown Fin. Corp. of IA(8) 16.16 16.16 0.67 4.27 3.48 0.72 4.56 NA NA 0.19
MFSL Maryland Fed. Bancorp of MD 8.38 8.27 0.62 7.43 4.06 0.89 10.73 0.47 85.54 0.46
MASB MassBank Corp. of Reading MA* 10.78 10.62 1.10 10.61 6.18 1.03 9.96 0.21 113.84 0.84
MFLR Mayflower Co-Op. Bank of MA* 9.68 9.52 1.03 10.64 5.69 0.97 10.03 0.96 92.14 1.52
MECH Mechanics SB of Hartford CT* 10.40 10.40 1.79 17.75 10.30 1.78 17.69 0.91 188.34 2.53
MDBK Medford Bank of Medford, MA* 9.01 8.45 1.07 11.98 6.73 1.00 11.16 0.27 219.01 1.12
MERI Meritrust FSB of Thibodaux LA(8) 8.26 8.26 1.15 14.65 6.68 1.15 14.65 0.39 70.30 0.52
MWBX MetroWest Bank of MA* 7.46 7.46 1.38 18.49 6.55 1.38 18.49 0.90 131.24 1.55
MCBS Mid Continent Bancshares of KS(8) 9.39 9.39 1.02 9.79 4.53 1.16 11.10 0.15 71.76 0.19
MIFC Mid Iowa Financial Corp. of IA 9.36 9.34 1.00 10.77 6.69 1.40 15.17 NA NA 0.45
MCBN Mid-Coast Bancorp of ME 8.59 8.59 0.76 8.81 6.68 0.72 8.35 0.64 82.14 0.64
MWBI Midwest Bancshares, Inc. of IA 6.92 6.92 0.87 12.62 6.54 0.77 11.16 0.81 59.23 0.79
MWFD Midwest Fed. Fin. Corp of WI(8) 8.81 8.50 1.15 13.20 5.25 1.13 13.01 NA NA 1.02
MFFC Milton Fed. Fin. Corp. of OH 12.57 12.57 0.73 4.95 4.00 0.65 4.38 0.29 91.98 0.44
MIVI Miss. View Hold. Co. of MN 18.88 18.88 0.70 3.78 3.62 1.03 5.55 NA NA NA
MBSP Mitchell Bancorp of NC* 41.35 41.35 1.61 3.77 3.37 1.61 3.77 2.25 23.36 0.63
MBBC Monterey Bay Bancorp of CA 11.50 10.67 0.47 4.06 3.05 0.43 3.71 0.76 51.39 0.60
MONT Montgomery Fin. Corp. of IN 19.14 19.14 0.68 3.57 3.41 0.68 3.57 0.73 24.43 0.20
MSBK Mutual SB, FSB of Bay City MI 6.36 6.36 0.10 1.59 1.15 0.05 0.85 0.05 650.66 0.64
NHTB NH Thrift Bancshares of NH 7.82 6.72 0.70 9.26 4.71 0.56 7.48 0.61 151.10 1.14
NSLB NS&L Bancorp of Neosho MO 19.56 19.56 0.49 2.37 2.19 0.77 3.71 0.03 210.00 0.13
NMSB Newmil Bancorp. of CT* 10.17 10.17 0.85 8.36 4.91 0.82 8.00 1.36 128.18 3.26
<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)
- ---------------------------------------
IBSF IBS Financial Corp. of NJ NM 149.19 25.99 149.19 NM 0.40 2.29 NM
ISBF ISB Financial Corp. of LA NM 158.90 19.13 186.70 25.49 0.50 1.90 66.67
ITLA Imperial Thrift & Loan of CA* 11.84 146.10 15.67 146.70 11.84 0.00 0.00 0.00
IFSB Independence FSB of DC 21.20 99.21 6.83 112.21 25.52 0.22 1.60 33.85
INCB Indiana Comm. Bank, SB of IN(8) NM 165.59 19.67 165.59 NM 0.36 1.76 67.92
INBI Industrial Bancorp of OH 18.37 153.06 26.30 153.06 17.48 0.56 3.11 57.14
IWBK Interwest SB of Oak Harbor WA 15.67 244.89 15.54 249.37 17.03 0.64 1.62 25.40
IPSW Ipswich SB of Ipswich MA* 14.63 269.25 15.11 269.25 18.39 0.12 0.93 13.64
JXVL Jacksonville Bancorp of TX 20.83 138.38 20.64 138.38 15.89 0.50 2.67 55.56
JXSB Jcksnville SB,MHC of IL (45.6) NM 196.26 20.72 196.26 NM 0.40 1.50 50.00
JSBA Jefferson Svgs Bancorp of MO NM 203.72 16.69 267.47 26.53 0.56 1.29 NM
JOAC Joachim Bancorp of MO NM 107.90 30.36 107.90 NM 0.50 3.39 NM
KSAV KS Bancorp of Kenly NC 16.07 136.78 18.11 136.86 16.19 0.60 2.67 42.86
KSBK KSB Bancorp of Kingfield ME(8)* 14.12 180.26 12.94 190.63 13.86 0.08 0.52 7.41
KFBI Klamath First Bancorp of OR NM 154.08 30.12 154.08 26.36 0.32 1.46 58.18
LSBI LSB Fin. Corp. of Lafayette IN 16.15 137.71 11.89 137.71 18.31 0.34 1.31 21.12
LVSB Lakeview SB of Paterson NJ 18.00 175.93 21.50 205.45 24.87 0.13 0.54 9.70
LARK Landmark Bancshares of KS 21.05 128.89 17.77 128.89 17.78 0.40 1.67 35.09
LARL Laurel Capital Group of PA 13.28 182.57 19.11 182.57 13.74 0.52 1.87 24.88
LSBX Lawrence Savings Bank of MA* 9.77 176.91 16.83 176.91 9.84 0.00 0.00 0.00
LFED Leeds FSB, MHC of MD (36.3) NM 234.72 39.03 234.72 NM 0.51 2.37 NM
LXMO Lexington B&L Fin. Corp. of MO NM 113.64 32.18 113.64 23.59 0.30 1.79 54.55
LIFB Life Bancorp of Norfolk VA(8) 23.05 192.46 20.62 197.84 24.90 0.48 1.54 35.56
LFBI Little Falls Bancorp of NJ NM 137.65 16.08 149.25 NM 0.20 1.00 30.30
LOGN Logansport Fin. Corp. of IN 16.76 118.58 22.41 118.58 16.05 0.40 2.62 43.96
LONF London Financial Corp. of OH NM 101.03 19.87 101.03 20.21 0.24 1.63 50.00
LISB Long Island Bancorp, Inc of NY 22.87 207.21 19.09 209.14 27.08 0.60 1.27 29.13
MAFB MAF Bancorp of IL 13.10 188.73 14.70 214.81 13.21 0.28 0.86 11.29
MBLF MBLA Financial Corp. of MO 18.62 120.75 15.28 120.75 18.24 0.40 1.48 27.59
MFBC MFB Corp. of Mishawaka IN 19.21 114.53 15.00 114.53 19.21 0.32 1.38 26.45
MLBC ML Bancorp of Villanova PA(8) 23.96 212.81 14.73 227.99 NM 0.40 1.39 33.33
MSBF MSB Financial Corp. of MI 22.67 188.95 31.24 188.95 23.49 0.28 1.44 32.56
MARN Marion Capital Holdings of IN 15.87 119.26 26.17 119.26 16.06 0.88 3.32 52.69
MRKF Market Fin. Corp. of OH NM 102.42 36.30 102.42 NM 0.28 1.84 73.68
MFCX Marshalltown Fin. Corp. of IA(8) 28.75 120.04 19.40 120.04 26.95 0.00 0.00 0.00
MFSL Maryland Fed. Bancorp of MD 24.65 177.47 14.87 179.74 17.06 0.42 1.58 38.89
MASB MassBank Corp. of Reading MA* 16.19 159.35 17.18 161.75 17.24 0.96 2.13 34.53
MFLR Mayflower Co-Op. Bank of MA* 17.58 178.79 17.31 181.85 18.66 0.68 2.78 48.92
MECH Mechanics SB of Hartford CT* 9.70 156.89 16.32 156.89 9.74 0.00 0.00 0.00
MDBK Medford Bank of Medford, MA* 14.86 168.49 15.19 179.79 15.95 0.72 1.95 28.92
MERI Meritrust FSB of Thibodaux LA(8) 14.98 205.70 16.99 205.70 14.98 0.70 1.37 20.47
MWBX MetroWest Bank of MA* 15.28 263.58 19.66 263.58 15.28 0.12 1.45 22.22
MCBS Mid Continent Bancshares of KS(8) 22.06 210.57 19.77 210.57 19.46 0.40 0.97 21.39
MIFC Mid Iowa Financial Corp. of IA 14.96 151.71 14.19 151.93 10.62 0.08 0.75 11.27
MCBN Mid-Coast Bancorp of ME 14.97 126.93 10.90 126.93 15.80 0.52 1.81 27.08
MWBI Midwest Bancshares, Inc. of IA 15.29 181.73 12.57 181.73 17.29 0.24 1.30 19.83
MWFD Midwest Fed. Fin. Corp of WI(8) 19.06 236.40 20.84 245.14 19.34 0.34 1.28 24.46
MFFC Milton Fed. Fin. Corp. of OH 25.00 131.00 16.47 131.00 28.30 0.60 4.00 NM
MIVI Miss. View Hold. Co. of MN 27.65 102.53 19.36 102.53 18.81 0.16 0.88 24.24
MBSP Mitchell Bancorp of NC* 29.66 113.93 47.11 113.93 29.66 0.40 2.29 67.80
MBBC Monterey Bay Bancorp of CA NM 130.23 14.98 140.43 NM 0.12 0.63 20.69
MONT Montgomery Fin. Corp. of IN 29.31 104.23 19.95 104.23 29.31 0.22 1.79 52.38
MSBK Mutual SB, FSB of Bay City MI NM 133.61 8.50 133.61 NM 0.00 0.00 0.00
NHTB NH Thrift Bancshares of NH 21.21 174.42 13.65 203.09 26.25 0.50 2.38 50.51
NSLB NS&L Bancorp of Neosho MO NM 113.50 22.20 113.50 29.30 0.50 2.67 NM
NMSB Newmil Bancorp. of CT* 20.36 169.24 17.22 169.24 21.27 0.32 2.25 45.71
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of November 28, 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)
- ---------------------------------------
NASB North American SB of MO 7.68 7.42 1.26 17.18 8.21 1.19 16.18 3.11 27.16 0.98
NBSI North Bancshares of Chicago IL 13.43 13.43 0.64 4.40 2.98 0.56 3.85 NA NA 0.27
FFFD North Central Bancshares of IA 22.91 22.91 1.83 7.47 6.15 1.83 7.47 0.22 446.43 1.16
NBN Northeast Bancorp of ME* 6.96 6.15 0.71 10.01 4.94 0.59 8.26 1.03 93.77 1.22
NEIB Northeast Indiana Bncrp of IN 14.37 14.37 1.20 7.72 5.90 1.20 7.72 0.17 350.00 0.67
NWEQ Northwest Equity Corp. of WI 11.69 11.69 1.02 8.65 6.16 0.99 8.36 1.43 33.84 0.59
NWSB Northwest SB, MHC of PA (30.7) 9.64 9.10 0.96 9.86 2.93 0.96 9.86 0.77 85.90 0.87
NSSY Norwalk Savings Society of CT* 8.06 7.77 0.97 12.53 6.29 1.11 14.29 1.49 69.87 1.54
NSSB Norwich Financial Corp. of CT* 11.66 10.60 1.14 10.24 4.94 1.06 9.48 1.20 158.13 2.71
NTMG Nutmeg FS&LA of CT 5.56 5.56 0.30 5.44 3.00 0.35 6.28 1.19 40.69 0.55
OHSL OHSL Financial Corp. of OH 10.92 10.92 0.90 8.04 5.95 0.88 7.80 0.18 121.89 0.31
OCFC Ocean Fin. Corp. of NJ 16.25 16.25 0.03 0.15 0.11 0.98 5.94 0.52 83.85 0.86
OCN Ocwen Financial Corp. of FL 14.14 13.77 3.10 32.06 5.53 1.73 17.94 5.79 13.48 1.11
OTFC Oregon Trail Fin. Corp of OR 24.02 24.02 1.07 4.44 3.69 1.07 4.44 0.07 307.09 0.54
PBHC OswegoCity SB, MHC of NY (46.)* 11.94 10.03 1.06 9.22 3.68 0.95 8.25 0.91 43.96 0.67
OFCP Ottawa Financial Corp. of MI 8.74 7.06 0.81 9.10 4.69 0.79 8.89 0.35 106.15 0.43
PFFB PFF Bancorp of Pomona CA 10.06 9.95 0.45 4.25 3.54 0.46 4.32 1.62 64.39 1.44
PSFI PS Financial of Chicago IL 37.32 37.32 1.96 4.86 4.17 1.99 4.92 0.68 31.79 0.52
PVFC PVF Capital Corp. of OH 7.18 7.18 1.36 19.67 9.27 1.31 18.84 1.17 57.57 0.72
PALM Palfed, Inc. of Aiken SC(8) 8.51 8.51 0.39 4.82 1.81 0.67 8.26 2.04 53.36 1.30
PBCI Pamrapo Bancorp, Inc. of NJ 12.91 12.82 1.34 9.82 7.25 1.32 9.70 2.39 28.48 1.21
PFED Park Bancorp of Chicago IL 23.14 23.14 1.10 4.80 4.48 1.14 4.98 0.24 118.76 0.72
PVSA Parkvale Financial Corp of PA 7.72 7.67 1.08 14.34 6.89 1.08 14.34 0.26 547.66 1.91
PEEK Peekskill Fin. Corp. of NY 26.09 26.09 1.14 4.30 3.77 1.14 4.30 1.24 28.37 1.35
PFSB PennFed Fin. Services of NJ 7.33 6.20 0.82 10.90 6.45 0.82 10.90 0.61 32.20 0.28
PWBC PennFirst Bancorp of PA 8.37 7.44 0.67 8.85 5.21 0.67 8.85 0.68 87.79 1.45
PWBK Pennwood SB of PA* 18.34 18.34 0.99 5.21 4.38 1.09 5.71 1.49 42.39 1.04
PBKB People's SB of Brockton MA* 5.61 5.37 0.80 14.40 6.35 0.47 8.50 0.53 110.55 1.08
PFDC Peoples Bancorp of Auburn IN 15.21 15.21 1.11 7.27 4.18 1.46 9.57 0.36 83.87 0.38
PBCT Peoples Bank, MHC of CT (40.1)* 9.02 9.01 1.16 13.69 4.27 0.75 8.84 0.76 146.25 1.66
TSBS Peoples Bcrp, MHC of NJ (35.9)(8) 16.95 15.25 1.30 7.51 2.50 0.91 5.27 0.91 55.06 0.80
PFFC Peoples Fin. Corp. of OH 27.20 27.20 0.90 3.32 3.79 0.90 3.32 NA NA 0.39
PHBK Peoples Heritage Fin Grp of ME* 7.45 6.36 1.28 16.08 5.89 1.28 16.08 0.86 121.04 1.55
PSFC Peoples Sidney Fin. Corp of OH 25.29 25.29 1.04 6.27 3.25 1.04 6.27 1.00 40.10 0.45
PERM Permanent Bancorp of IN 9.46 9.34 0.62 6.63 4.92 0.62 6.58 1.07 47.01 1.00
PMFI Perpetual Midwest Fin. of IA 8.51 8.51 0.40 4.65 3.11 0.32 3.76 0.30 240.42 0.86
PERT Perpetual of SC, MHC (46.8)(8) 11.82 11.82 0.78 6.37 2.29 1.05 8.60 0.12 502.32 0.87
PCBC Perry Co. Fin. Corp. of MO 19.19 19.19 0.93 4.93 3.87 1.07 5.70 0.03 104.17 0.19
PHFC Pittsburgh Home Fin. of PA 10.54 10.43 0.84 6.97 4.88 0.75 6.21 1.69 30.77 0.78
PFSL Pocahnts Fed, MHC of AR (47.0)(8) 6.33 6.33 0.63 10.08 4.29 0.62 9.94 0.16 274.52 1.07
PTRS Potters Financial Corp of OH 8.81 8.81 0.96 10.95 7.06 0.94 10.73 0.44 389.09 2.65
PKPS Poughkeepsie Fin. Corp. of NY(8) 8.42 8.42 0.54 6.43 3.72 0.54 6.43 4.19 23.86 1.34
PHSB Ppls Home SB, MHC of PA (45.0) 13.66 13.66 0.73 6.80 3.01 0.71 6.55 0.45 148.08 1.37
PRBC Prestige Bancorp of PA 11.21 11.21 0.63 5.12 4.62 0.63 5.12 0.33 82.34 0.40
PFNC Progress Financial Corp. of PA 5.33 4.76 0.90 17.21 5.81 0.71 13.58 2.07 37.27 1.11
PSBK Progressive Bank, Inc. of NY* 8.73 7.86 0.96 11.35 6.52 0.94 11.15 0.94 115.80 1.65
PROV Provident Fin. Holdings of CA 13.33 13.33 0.75 5.30 4.70 0.35 2.48 1.58 55.80 0.98
PULB Pulaski SB, MHC of MO (29.8) 13.05 13.05 0.80 6.20 2.23 1.06 8.20 0.64 41.41 0.33
PLSK Pulaski SB, MHC of NJ (46.0) 11.98 11.98 0.64 6.99 2.88 0.64 6.99 0.65 83.38 0.95
PULS Pulse Bancorp of S. River NJ 8.21 8.21 1.10 13.94 7.51 1.11 14.09 0.75 59.52 1.82
QCFB QCF Bancorp of Virginia MN 17.49 17.49 1.34 7.36 5.12 1.34 7.36 0.24 345.09 2.00
QCBC Quaker City Bancorp of CA 8.46 8.46 0.71 8.11 5.85 0.68 7.77 1.35 67.38 1.15
QCSB Queens County Bancorp of NY* 11.22 11.22 1.54 11.21 4.11 1.55 11.28 0.69 89.32 0.69
RARB Raritan Bancorp. of Raritan NJ* 7.37 7.25 1.02 13.34 5.98 1.01 13.18 0.39 208.57 1.26
REDF RedFed Bancorp of Redlands CA 8.32 8.29 1.01 12.28 6.40 1.01 12.28 1.80 44.74 0.92
RELY Reliance Bancorp, Inc. of NY 8.26 6.07 0.89 10.80 5.92 0.93 11.40 0.67 41.66 0.62
<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)
- ---------------------------------------
NASB North American SB of MO 12.18 196.85 15.11 203.67 12.94 0.80 1.60 19.51
NBSI North Bancshares of Chicago IL NM 155.52 20.88 155.52 NM 0.48 1.81 60.76
FFFD North Central Bancshares of IA 16.27 124.72 28.58 124.72 16.27 0.25 1.32 21.55
NBN Northeast Bancorp of ME* 20.26 194.46 13.53 220.06 24.56 0.32 1.15 23.36
NEIB Northeast Indiana Bncrp of IN 16.95 128.95 18.53 128.95 16.95 0.34 1.70 28.81
NWEQ Northwest Equity Corp. of WI 16.24 140.64 16.44 140.64 16.81 0.56 2.95 47.86
NWSB Northwest SB, MHC of PA (30.7) NM 323.33 31.16 342.30 NM 0.16 1.14 39.02
NSSY Norwalk Savings Society of CT* 15.91 186.53 15.03 193.47 13.95 0.40 1.04 16.53
NSSB Norwich Financial Corp. of CT* 20.24 197.67 23.06 217.63 21.88 0.56 1.88 38.10
NTMG Nutmeg FS&LA of CT NM 168.39 9.37 168.39 28.89 0.20 1.54 51.28
OHSL OHSL Financial Corp. of OH 16.82 133.80 14.61 133.80 17.34 0.88 3.17 53.33
OCFC Ocean Fin. Corp. of NJ NM 128.93 20.96 128.93 23.79 0.80 2.16 NM
OCN Ocwen Financial Corp. of FL 18.10 NM 49.63 NM NM 0.00 0.00 0.00
OTFC Oregon Trail Fin. Corp of OR 27.12 120.39 28.91 120.39 27.12 0.00 0.00 0.00
PBHC OswegoCity SB, MHC of NY (46.)* 27.14 237.10 28.31 282.18 NM 0.28 0.98 26.67
OFCP Ottawa Financial Corp. of MI 21.32 194.35 16.98 240.59 21.83 0.36 1.31 27.91
PFFB PFF Bancorp of Pomona CA 28.26 125.05 12.57 126.43 27.83 0.00 0.00 0.00
PSFI PS Financial of Chicago IL 23.96 116.87 43.62 116.87 23.63 0.48 2.78 66.67
PVFC PVF Capital Corp. of OH 10.79 192.85 13.85 192.85 11.26 0.00 0.00 0.00
PALM Palfed, Inc. of Aiken SC(8) NM 251.40 21.40 251.40 NM 0.12 0.44 24.49
PBCI Pamrapo Bancorp, Inc. of NJ 13.80 141.33 18.25 142.34 13.96 1.00 4.19 57.80
PFED Park Bancorp of Chicago IL 22.34 107.59 24.89 107.59 21.53 0.00 0.00 0.00
PVSA Parkvale Financial Corp of PA 14.51 195.72 15.11 197.02 14.51 0.52 1.75 25.37
PEEK Peekskill Fin. Corp. of NY 26.52 118.16 30.83 118.16 26.52 0.36 2.06 54.55
PFSB PennFed Fin. Services of NJ 15.51 160.18 11.74 189.22 15.51 0.28 0.84 13.08
PWBC PennFirst Bancorp of PA 19.21 140.82 11.78 158.28 19.21 0.36 1.97 37.89
PWBK Pennwood SB of PA* 22.82 123.55 22.66 123.55 20.81 0.32 1.69 38.55
PBKB People's SB of Brockton MA* 15.75 213.22 11.96 222.72 26.67 0.44 2.20 34.65
PFDC Peoples Bancorp of Auburn IN 23.91 171.61 26.10 171.61 18.18 0.43 1.95 46.74
PBCT Peoples Bank, MHC of CT (40.1)* 23.40 295.27 26.64 295.53 NM 0.76 2.26 52.78
TSBS Peoples Bcrp, MHC of NJ (35.9)(8) NM 290.31 49.20 322.66 NM 0.35 1.01 40.23
PFFC Peoples Fin. Corp. of OH 26.42 88.72 24.13 88.72 26.42 0.50 3.57 NM
PHBK Peoples Heritage Fin Grp of ME* 16.98 259.56 19.34 304.21 16.98 0.84 1.97 33.47
PSFC Peoples Sidney Fin. Corp of OH NM 118.39 29.94 118.39 NM 0.28 1.62 50.00
PERM Permanent Bancorp of IN 20.33 131.32 12.43 133.09 20.50 0.40 1.56 31.75
PMFI Perpetual Midwest Fin. of IA NM 148.03 12.59 148.03 NM 0.30 1.11 35.71
PERT Perpetual of SC, MHC (46.8)(8) NM 253.35 29.96 253.35 NM 1.40 2.75 NM
PCBC Perry Co. Fin. Corp. of MO 25.83 123.67 23.74 123.67 22.36 0.40 1.72 44.44
PHFC Pittsburgh Home Fin. of PA 20.49 141.42 14.91 142.89 22.99 0.24 1.16 23.76
PFSL Pocahnts Fed, MHC of AR (47.0)(8) 23.29 228.80 14.47 228.80 23.61 0.90 2.65 61.64
PTRS Potters Financial Corp of OH 14.17 151.58 13.35 151.58 14.47 0.40 1.18 16.67
PKPS Poughkeepsie Fin. Corp. of NY(8) 26.86 168.19 14.16 168.19 26.86 0.20 2.01 54.05
PHSB Ppls Home SB, MHC of PA (45.0) NM 182.19 24.90 182.19 NM 0.00 0.00 0.00
PRBC Prestige Bancorp of PA 21.66 109.06 12.22 109.06 21.66 0.12 0.65 14.12
PFNC Progress Financial Corp. of PA 17.22 266.78 14.23 299.23 21.83 0.12 0.77 13.33
PSBK Progressive Bank, Inc. of NY* 15.34 167.24 14.60 185.75 15.63 0.68 2.01 30.91
PROV Provident Fin. Holdings of CA 21.28 113.25 15.10 113.25 NM 0.00 0.00 0.00
PULB Pulaski SB, MHC of MO (29.8) NM 271.59 35.44 271.59 NM 1.10 3.61 NM
PLSK Pulaski SB, MHC of NJ (46.0) NM 180.98 21.68 180.98 NM 0.30 1.60 55.56
PULS Pulse Bancorp of S. River NJ 13.32 174.75 14.35 174.75 13.17 0.70 2.86 38.04
QCFB QCF Bancorp of Virginia MN 19.52 143.65 25.13 143.65 19.52 0.00 0.00 0.00
QCBC Quaker City Bancorp of CA 17.08 133.72 11.31 133.72 17.83 0.00 0.00 0.00
QCSB Queens County Bancorp of NY* 24.31 305.94 34.31 305.94 24.14 0.80 2.29 55.56
RARB Raritan Bancorp. of Raritan NJ* 16.72 215.42 15.87 218.88 16.93 0.48 1.76 29.45
REDF RedFed Bancorp of Redlands CA 15.63 178.41 14.84 179.05 15.63 0.00 0.00 0.00
RELY Reliance Bancorp, Inc. of NY 16.90 171.70 14.18 233.73 16.00 0.64 1.93 32.65
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of November 28, 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)
- ---------------------------------------
RELI Reliance Bancshares Inc of WI* 48.29 48.29 1.32 2.58 2.82 1.38 2.68 NA NA 0.56
RIVR River Valley Bancorp of IN 12.40 12.21 0.46 4.24 2.45 0.62 5.72 0.71 122.47 1.05
RVSB Riverview Bancorp of WA 20.76 19.97 1.22 9.14 3.13 1.17 8.75 0.14 226.93 0.58
RSLN Roslyn Bancorp, Inc. of NY* 17.64 17.55 0.96 5.10 3.36 1.22 6.50 0.27 257.00 2.60
SCCB S. Carolina Comm. Bnshrs of SC 26.59 26.59 1.15 4.34 3.26 1.15 4.34 0.87 73.62 0.81
SBFL SB Fngr Lakes MHC of NY (33.1) 9.33 9.33 0.37 3.83 1.50 0.43 4.44 0.50 103.35 1.10
SFED SFS Bancorp of Schenectady NY 12.47 12.47 0.68 5.36 4.25 0.68 5.36 0.75 57.32 0.58
SGVB SGV Bancorp of W. Covina CA 7.44 7.32 0.39 5.02 3.80 0.43 5.48 1.06 29.26 0.41
SHSB SHS Bancorp, Inc. of PA 12.64 12.64 0.37 2.96 2.56 0.37 2.96 1.43 33.94 0.74
SISB SIS Bancorp Inc of MA* 7.36 7.36 0.83 11.20 6.10 0.82 11.09 0.33 379.00 2.67
SWCB Sandwich Co-Op. Bank of MA* 7.93 7.63 0.97 11.95 5.84 0.95 11.70 0.82 93.38 1.06
SFSL Security First Corp. of OH 9.27 9.12 1.36 14.56 5.85 1.37 14.69 0.33 226.25 0.84
SFNB Security First Netwrk Bk of GA(8) 33.11 32.57 -29.36 NM NM -30.07 NM NA NA 1.28
SMFC Sho-Me Fin. Corp. of MO(8) 9.03 9.03 1.30 13.56 5.77 1.23 12.86 0.29 190.55 0.63
SOBI Sobieski Bancorp of S. Bend IN 14.78 14.78 0.62 3.85 3.26 0.57 3.55 0.13 188.68 0.31
SOSA Somerset Savings Bank of MA(8)* 6.59 6.59 1.03 17.02 6.57 1.00 16.49 5.91 24.16 1.87
SSFC South Street Fin. Corp. of NC* 25.66 25.66 1.21 5.34 3.60 1.25 5.51 0.31 57.66 0.38
SCBS Southern Commun. Bncshrs of AL 21.33 21.33 0.55 3.24 1.81 0.90 5.30 2.48 46.17 1.94
SMBC Southern Missouri Bncrp of MO 16.15 16.15 0.94 5.84 4.95 0.90 5.59 0.88 51.46 0.66
SWBI Southwest Bancshares of IL 11.34 11.34 1.06 9.81 5.88 1.02 9.48 0.20 101.05 0.28
SVRN Sovereign Bancorp of PA 4.42 3.61 0.42 10.16 2.69 0.61 14.74 0.65 99.50 0.92
STFR St. Francis Cap. Corp. of WI 7.88 6.96 0.64 7.33 4.68 0.70 8.07 NA NA 0.83
SPBC St. Paul Bancorp, Inc. of IL 8.99 8.97 1.06 12.12 5.67 1.06 12.12 0.36 210.72 1.10
SFFC StateFed Financial Corp. of IA 17.54 17.54 1.27 7.17 5.11 1.27 7.17 2.55 10.16 0.33
SFIN Statewide Fin. Corp. of NJ 9.36 9.34 0.81 8.36 5.53 0.81 8.36 0.38 104.03 0.84
STSA Sterling Financial Corp. of WA 5.25 4.81 0.48 11.12 4.92 0.43 10.05 0.47 96.70 0.82
SFSB SuburbFed Fin. Corp. of IL 6.48 6.46 0.39 5.88 3.53 0.56 8.56 NA NA 0.30
ROSE T R Financial Corp. of NY* 6.24 6.24 0.97 15.55 5.72 0.87 13.98 0.54 74.97 0.76
THRD TF Financial Corp. of PA 11.63 10.27 0.77 6.96 4.36 0.67 5.99 0.27 128.49 0.82
TPNZ Tappan Zee Fin., Inc. of NY 17.92 17.92 0.70 4.22 2.68 0.65 3.90 1.68 32.52 1.17
ESBK The Elmira SB FSB of Elmira NY* 6.35 6.19 0.42 6.66 4.47 0.34 5.37 0.64 103.23 0.86
TRIC Tri-County Bancorp of WY 15.31 15.31 1.06 6.84 5.64 1.08 6.97 NA NA 1.05
TWIN Twin City Bancorp of TN 12.94 12.94 0.85 6.65 5.21 0.72 5.62 0.16 88.17 0.20
UFRM United FS&LA of Rocky Mount NC 7.34 7.34 0.71 9.49 5.48 0.57 7.53 0.77 101.45 0.92
UBMT United Fin. Corp. of MT 24.01 24.01 1.41 6.09 4.52 1.40 6.04 0.48 15.21 0.22
VABF Va. Beach Fed. Fin. Corp of VA 7.15 7.15 0.61 8.99 4.51 0.50 7.31 1.24 59.40 0.95
VFFC Virginia First Savings of VA(8) 7.75 7.48 0.64 8.04 3.49 0.55 6.95 2.47 46.61 1.27
WHGB WHG Bancshares of MD 20.65 20.65 0.51 2.23 2.09 0.51 2.23 0.15 160.96 0.29
WSFS WSFS Financial Corp. of DE* 5.54 5.51 1.14 20.70 6.68 1.13 20.54 1.27 134.95 2.68
WVFC WVS Financial Corp. of PA* 12.00 12.00 1.30 10.59 6.60 1.31 10.64 0.19 361.83 1.21
WRNB Warren Bancorp of Peabody MA* 10.65 10.65 2.16 21.61 9.89 1.91 19.17 1.15 97.04 1.73
WFSL Washington FS&LA of Seattle WA 12.55 11.52 1.86 15.80 6.87 1.85 15.73 0.69 62.10 0.58
WAMU Washington Mutual Inc. of WA(8)* 5.29 4.90 0.00 0.09 0.01 0.70 13.63 NA NA 0.98
WYNE Wayne Bancorp of NJ 12.43 12.43 0.86 6.10 4.70 0.86 6.10 0.89 88.41 1.18
WAYN Wayne S&L Co. MHC of OH (47.8) 9.53 9.53 0.73 7.89 2.61 0.68 7.40 0.58 65.29 0.46
WCFB Wbstr Cty FSB MHC of IA (45.2) 23.38 23.38 1.43 6.14 3.16 1.43 6.14 0.07 560.00 0.72
WBST Webster Financial Corp. of CT 5.34 4.60 0.46 9.03 2.86 0.77 15.08 0.72 111.52 1.43
WEFC Wells Fin. Corp. of Wells MN 14.22 14.22 1.06 7.49 6.14 1.03 7.29 0.31 114.71 0.39
WCBI WestCo Bancorp of IL 15.54 15.54 1.50 9.72 6.84 1.42 9.20 0.21 139.06 0.37
WSTR WesterFed Fin. Corp. of MT 10.62 8.57 0.81 6.87 4.92 0.77 6.58 0.41 116.74 0.72
WOFC Western Ohio Fin. Corp. of OH 13.79 12.85 0.33 2.26 2.02 0.45 3.08 NA NA 0.66
WWFC Westwood Fin. Corp. of NJ(8) 9.32 8.34 0.73 7.79 4.34 0.78 8.31 0.13 158.78 0.58
WEHO Westwood Hmstd Fin Corp of OH 27.65 27.65 1.01 3.29 2.69 1.16 3.78 0.22 77.88 0.22
WFI Winton Financial Corp. of OH 7.11 6.96 1.00 14.08 8.00 0.84 11.80 0.30 84.06 0.29
FFWD Wood Bancorp of OH 12.43 12.43 1.41 11.10 5.78 1.29 10.17 0.35 101.19 0.44
YFCB Yonkers Fin. Corp. of NY 14.02 14.02 1.05 6.64 5.30 1.06 6.71 0.48 72.05 0.78
<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)
- ---------------------------------------
RELI Reliance Bancshares Inc of WI* NM 96.62 46.66 96.62 NM 0.00 0.00 0.00
RIVR River Valley Bancorp of IN NM 128.16 15.89 130.12 NM 0.16 0.85 34.78
RVSB Riverview Bancorp of WA NM 156.90 32.57 163.04 NM 0.00 0.00 0.00
RSLN Roslyn Bancorp, Inc. of NY* 29.79 154.91 27.32 155.69 23.39 0.28 1.29 38.36
SCCB S. Carolina Comm. Bnshrs of SC NM 132.56 35.24 132.56 NM 0.60 2.61 NM
SBFL SB Fngr Lakes MHC of NY (33.1) NM 245.39 22.90 245.39 NM 0.40 1.37 NM
SFED SFS Bancorp of Schenectady NY 23.53 125.40 15.64 125.40 23.53 0.28 1.27 29.79
SGVB SGV Bancorp of W. Covina CA 26.34 131.79 9.80 133.85 24.11 0.00 0.00 0.00
SHSB SHS Bancorp, Inc. of PA NM 115.69 14.62 115.69 NM 0.00 0.00 0.00
SISB SIS Bancorp Inc of MA* 16.40 175.47 12.91 175.47 16.56 0.56 1.67 27.32
SWCB Sandwich Co-Op. Bank of MA* 17.11 197.31 15.66 205.26 17.47 1.40 3.35 57.38
SFSL Security First Corp. of OH 17.11 234.66 21.74 238.39 16.96 0.32 1.64 28.07
SFNB Security First Netwrk Bk of GA(8) NM 264.90 87.72 269.36 NM 0.00 0.00 NM
SMFC Sho-Me Fin. Corp. of MO(8) 17.34 226.29 20.43 226.29 18.29 0.00 0.00 0.00
SOBI Sobieski Bancorp of S. Bend IN NM 122.70 18.13 122.70 NM 0.32 1.63 50.00
SOSA Somerset Savings Bank of MA(8)* 15.22 236.41 15.58 236.41 15.71 0.00 0.00 0.00
SSFC South Street Fin. Corp. of NC* 27.78 127.46 32.71 127.46 26.92 0.40 2.29 63.49
SCBS Southern Commun. Bncshrs of AL NM 137.80 29.39 137.80 NM 0.30 1.65 NM
SMBC Southern Missouri Bncrp of MO 20.21 116.14 18.76 116.14 21.11 0.50 2.63 53.19
SWBI Southwest Bancshares of IL 17.00 159.28 18.07 159.28 17.59 0.80 3.14 53.33
SVRN Sovereign Bancorp of PA NM 261.96 11.58 320.47 25.59 0.08 0.42 15.69
STFR St. Francis Cap. Corp. of WI 21.37 154.48 12.18 174.82 19.42 0.56 1.46 31.28
SPBC St. Paul Bancorp, Inc. of IL 17.63 204.51 18.39 205.02 17.63 0.40 1.63 28.78
SFFC StateFed Financial Corp. of IA 19.57 136.92 24.01 136.92 19.57 0.20 1.48 28.99
SFIN Statewide Fin. Corp. of NJ 18.07 149.93 14.04 150.24 18.07 0.44 2.05 36.97
STSA Sterling Financial Corp. of WA 20.31 162.71 8.54 177.78 22.47 0.00 0.00 0.00
SFSB SuburbFed Fin. Corp. of IL 28.35 159.22 10.32 159.81 19.48 0.32 0.92 26.02
ROSE T R Financial Corp. of NY* 17.48 251.11 15.66 251.11 19.45 0.64 1.95 34.04
THRD TF Financial Corp. of PA 22.95 157.39 18.30 178.23 26.67 0.40 1.43 32.79
TPNZ Tappan Zee Fin., Inc. of NY NM 137.63 24.67 137.63 NM 0.28 1.42 52.83
ESBK The Elmira SB FSB of Elmira NY* 22.39 146.06 9.28 150.00 27.78 0.64 2.13 47.76
TRIC Tri-County Bancorp of WY 17.74 118.94 18.21 118.94 17.41 0.80 2.91 51.61
TWIN Twin City Bancorp of TN 19.18 125.18 16.20 125.18 22.70 0.40 2.94 56.34
UFRM United FS&LA of Rocky Mount NC 18.25 168.62 12.37 168.62 23.00 0.24 2.09 38.10
UBMT United Fin. Corp. of MT 22.13 133.40 32.03 133.40 22.31 1.00 3.70 NM
VABF Va. Beach Fed. Fin. Corp of VA 22.16 191.03 13.67 191.03 27.25 0.20 1.20 26.67
VFFC Virginia First Savings of VA(8) 28.69 220.72 17.10 228.51 NM 0.10 0.40 11.36
WHGB WHG Bancshares of MD NM 114.76 23.70 114.76 NM 0.32 1.97 NM
WSFS WSFS Financial Corp. of DE* 14.98 294.59 16.32 296.37 15.09 0.00 0.00 0.00
WVFC WVS Financial Corp. of PA* 15.14 162.54 19.51 162.54 15.07 1.20 3.81 57.69
WRNB Warren Bancorp of Peabody MA* 10.11 201.96 21.51 201.96 11.39 0.52 2.52 25.49
WFSL Washington FS&LA of Seattle WA 14.57 213.04 26.74 232.08 14.63 0.92 2.86 41.63
WAMU Washington Mutual Inc. of WA(8)* NM NM 18.59 NM NM 1.12 1.62 NM
WYNE Wayne Bancorp of NJ 21.26 137.96 17.14 137.96 21.26 0.20 0.88 18.69
WAYN Wayne S&L Co. MHC of OH (47.8) NM 293.01 27.94 293.01 NM 0.62 2.00 NM
WCFB Wbstr Cty FSB MHC of IA (45.2) NM 192.49 45.01 192.49 NM 0.80 3.95 NM
WBST Webster Financial Corp. of CT NM 233.63 12.47 271.26 20.96 0.80 1.28 44.69
WEFC Wells Fin. Corp. of Wells MN 16.28 119.45 16.98 119.45 16.75 0.48 2.70 44.04
WCBI WestCo Bancorp of IL 14.63 141.68 22.01 141.68 15.45 0.60 2.18 31.91
WSTR WesterFed Fin. Corp. of MT 20.31 123.80 13.15 153.49 21.23 0.46 1.95 39.66
WOFC Western Ohio Fin. Corp. of OH NM 110.94 15.30 119.05 NM 1.00 3.88 NM
WWFC Westwood Fin. Corp. of NJ(8) 23.02 173.17 16.13 193.55 21.58 0.20 0.72 16.67
WEHO Westwood Hmstd Fin Corp of OH NM 123.24 34.07 123.24 NM 0.28 1.60 59.57
WFI Winton Financial Corp. of OH 12.50 176.06 12.51 179.86 14.93 0.46 2.30 28.75
FFWD Wood Bancorp of OH 17.29 189.36 23.54 189.36 18.88 0.40 2.16 37.38
YFCB Yonkers Fin. Corp. of NY 18.88 127.41 17.86 127.41 18.69 0.24 1.30 24.49
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of November 28, 1997
Key Financial Ratios Asset Quality Ratios
---------------------------------------------------------- -----------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- --------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
YFED York Financial Corp. of PA 8.85 8.85 0.96 11.41 4.75 0.81 9.60 2.50 23.98 0.69
<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)
- ---------------------------------------
YFED York Financial Corp. of PA 21.03 228.06 20.19 228.06 25.00 0.48 1.81 38.10
</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
Quarter 3 7945.3 947.3 1,685.7 737.5 381.7
November 28, 1997 7823.1 955.4 1,600.6 767.4 391.3
</TABLE>
(1) End of period data.
Sources: SNL Securities; Wall Street Journal.
<PAGE>
EXHIBIT IV-3
Historical Thrift Stock Indices
<PAGE>
Index Values
<TABLE>
<CAPTION>
Index Values Percent Change Since
------------------------------------------------ -------------------------------
10/31/97 1 Month YTD LTM 1 Month YTD LTM
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
All Pub. Traded Thrifts 752.4 737.5 483.6 456.7 2.03 55.58 64.74
MHC Index 1,065.7 978.2 538.0 476.5 8.94 98.08 123.67
Insurance indices
- --------------------------------------------------------------------------------------------------------------------------------
SAIF Thrifts 689.6 669.5 439.2 414.5 3.00 57.00 66.37
BIF Thrifts 949.6 945.9 616.8 583.5 0.40 53.96 62.74
Stock Exchange Indices
- --------------------------------------------------------------------------------------------------------------------------------
AMEX Thrifts 225.8 214.9 156.2 148.5 5.09 44.56 52.05
NYSE Thrifts 464.0 442.7 277.3 265.9 4.82 67.36 74.55
OTC Thrifts 855.8 847.4 569.7 533.0 0.99 50.21 60.55
Geographic Indices
- --------------------------------------------------------------------------------------------------------------------------------
Mid-Atlantic Thrifts 1,533.7 1,466.1 970.7 911.9 4.62 58.01 68.20
Midwestern Thrifts 1,645.0 1,595.0 1,159.3 1,085.4 3.13 41.89 51.56
New England Thrifts 684.3 671.4 428.9 386.6 1.93 59.55 77.02
Southeastern Thrifts 718.1 670.2 447.2 433.9 7.15 60.57 65.50
Southwestern Thrifts 455.4 478.8 315.9 298.2 -4.89 44.18 52.71
Western Thrifts 759.8 761.3 474.7 455.0 -0.19 60.06 66.97
Asset Size Indices
- --------------------------------------------------------------------------------------------------------------------------------
Less than $250M 795.7 801.0 586.6 570.6 -0.66 35.65 39.46
$250M to $500M 1,188.6 1,152.4 789.8 738.1 3.14 50.49 61.02
$500M to $1B 763.2 760.9 521.8 489.0 0.31 46.27 56.06
$18 to $58 867.3 826.0 546.0 508.9 5.01 58.84 70.44
Over $58 480.8 475.1 305.8 290.3 1.21 57.23 65.60
Comparative Indices
- --------------------------------------------------------------------------------------------------------------------------------
Dow Jones Industrials 7,442.1 7,945.3 6,448.3 6,029.4 -6.33 15.41 23.43
S&P 500 914.6 947.3 740.7 705.3 -3.45 23.47 29.68
</TABLE>
All SNL indices are market-value weighted: i.e., an institution's effect on an
index is proportionate to that institution's market capitalization. All SNL
thrift indices, except for the SNL MHC Index, began at 100 on March 30, 1984.
The SNL MHC Index began at 201.082 on Dec. 31, 1992, the level of the SNL Thrift
Index on that date. On March 30, 1984, the S&P 500 closed at 159.2 and the Dow
Jones Industrials stood at 1164.9.
Mid-Atlantic: DE, DC, MD, NJ, NY, PA, PR;
Midwest: IA, IL, IN, KS, KY, MI, MN, MO, ND, NE, OH, SD, WI;
New England: CT, MA, ME, NH, RI, VT;
Southeast: AL, AR, FL, GA, MS, NC, SC, TN, VA, WV;
Southwest: CO, LA, NM, OK, TX, UT;
West: AZ, AK, CA, HI, ID, MT, NV, OR, WA, WY
<PAGE>
EXHIBIT IV-4
Market Area Acquisition Activity
<PAGE>
RP Financial, LC.
New York Thrift Merger and Acquisition Activity 1996- Present
<TABLE>
<CAPTION>
Seller Financials at Completion (1)
-----------------------------------------------------
Total TgEq/ YTD YTD NPAs/ Rsrvs/
Ann'd Comp Assets Assts ROAA ROAE Assets NPLs
Date Date Buyer ST Seller ST ($000) (%) (%) (%) (%) (%)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C><C> <C> <C> <C> <C> <C> <C> <C>
10/23/97 Pending HUBCO, Inc NJ Poughkeepsie Finl NY 880,196 8.37 0.54 6.43 3.82 35.46
10/07/97 Pending North Fork Bancorp NY New York Bancorp NY 3,283,653 5.08 1.61 30.99 1.09 58.08
05/21/97 10/03/97 Charter One Fin'l OH RCSB Financial NY 4,032,365 7.66 0.96 12.26 0.66 132.02
04/25/97 09/10/97 Flushing Financial NY New York FSB NY 82,249 9.28 1.32 3.59 1.14 117.28
03/31/97 10/01/97 Astoria Financial Cp NY Greater New York SB NY 2,541,888 8.25 0.72 9.20 7.84 9.20
12/03/96 04/30/97 Dime Bancorp NY BFS Bankorp, Inc. NY 643,180 7.81 1.58 20.12 1.04 94.15
08/22/96 03/01/97 HSBC Holdings Plc FO First FSLA-Rochester NY 7,348,042 5.35 0.75 13.91 0.72 105.64
07/15/96 01/02/97 North Fork Bancorp NY North Side SB NY 1,580,435 7.67 1.29 17.19 0.51 121.82
11/03/95 06/26/96 Dime SB Williamsbrgh NY Conestoga Bancorp NY 485,132 15.93 0.64 3.84 0.19 19.25
09/24/95 02/29/96 Republic NewYork NY Brooklyn Bancorp NY 4,139,215 8.79 1.00 11.83 13.63 18.75
07/31/95 01/11/96 Reliance Bancorp Inc NY Sunrise Bancorp Inc NY 611,933 10.90 1.11 10.07 0.50 65.45
05/16/95 01/05/96 Independence Cmty NY Bay Ridge Bancorp NY 587,904 17.42 1.60 9.42 3.87 64.35
Average 2,184,683 9.38 1.10 12.40 2.92 70.12
Median 1,230,316 8.31 NM 10.95 1.07 64.90
</TABLE>
<TABLE>
<CAPTION>
Deal Terms and Pricing at Completion (1)
------------------------------------------------------
Deal Deal Deal Deal Pr/ Deal Pr/
Ann'd Comp Value Pr/Shr Consid Pr/Bk Tg Bk 4-Qtr
Date Date Buyer ST Seller ST ($M) ($) Type (%) (%) EPS (x)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
10/23/97 Pending HUBCO, Inc NJ Poughkeepsie Fini NY 143.5 10.61 Stock 181.42 181.42 48.24
10/07/97 Pending North Fork Bancorp NY NewYork Bancorp NY 831.6 37.11 Stock 480.13 480.13 19.95
05/21/97 10/03/97 Charter One Fin'l OH RCSB Financial NY 872.5 56.76 Stock 264.99 271.58 21.83
04/25/97 09/10/97 Flushing Financial NY New York FSB NY 13.0 272.50 Cash 169.09 169.71 12.99
03/31/97 10/01/97 Astoria Financial Cp NY Greater New York SB NY 414.9 25.16 Mixture 214.28 214.28 29.95
12/03/96 04/30/97 Dime Bancorp NY BFS Bankorp, Inc. NY 91.8 52.00 Cash 165.13 165.13 10.24
08/22/96 03/01/97 HSBC Holdings Plc FO First FSLA-Rochester NY 652.0 Cash 163.00 166.03 8.15
07/15/96 01/02/97 North Fork Bancorp NY North Side SB NY 282.4 55.43 Stock 211.01 212.79 14.40
11/03/95 06/26/96 Dime SB Williamsbrgh NY Conestoga Bancorp NY 105.4 21.31 Cash 121.22 121.22 30.01
09/24/95 02/29/96 Republic NewYork NY Brooklyn Bancorp NY 529.6 41.50 Cash 132.76 132.76 25.94
07/31/95 01/11/96 Reliance Bancorp Inc NY Sunrise Bancorp Inc NY 112.8 32.00 Cash 155.64 155.64 15.24
05/16/95 01/05/96 independence Cmty NY Bay Ridge Bancorp NY 127.8 22.06 Cash 125.20 125.20 13.70
Average 348.1 56.95 198.66 199.66 20.89
Median 213.0 37.11 167.11 167.87 17.60
</TABLE>
<TABLE>
<CAPTION>
Deal Terms and Pricing at Completion (1)
----------------------------------------
Deal Pd TgBkPr/
Ann'd Comp Assets CoreDp
Date Date Buyer ST Seller ST (%) (%)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C><C> <C> <C> <C>
10/23/97 Pending HUBCO, Inc NJ Poughkeepsie Fini NY 16.30 13.37
10/07/97 Pending North Fork Bancorp NY NewYork Bancorp NY 25.33 43.83
05/21/97 10/03/97 Charter One Fin'l OH RCSB Financial NY 21.26 26.93
04/25/97 09/10/97 Flushing Financial NY New York FSB NY 15.47 9.86
03/31/97 10/01/97 Astoria Financial Cp NY Greater New York SB NY 16.09 12.63
12/03/96 04/30/97 Dime Bancorp NY BFS Bankorp, Inc. NY 14.11 9.91
08/22/96 03/01/97 HSBC Holdings Plc FO First FSLA-Rochester NY 9.09 6.02
07/15/96 01/02/97 North Fork Bancorp NY North Side SB NY 17.23 13.33
11/03/95 06/26/96 Dime SB Williamsbrgh NY Conestoga Bancorp NY 21.32 6.83
09/24/95 02/29/96 Republic NewYork NY Brooklyn Bancorp NY 12.84 4.18
07/31/95 01/11/96 Reliance Bancorp Inc NY Sunrise Bancorp Inc NY 18.22 9.91
05/16/95 01/05/96 independence Cmty NY Bay Ridge Bancorp NY 22.20 5.58
Average 17.46 13.53
Median 16.77 9.91
</TABLE>
(1) Pending deals reflect financials, terms and pricing as of announcement date.
Source: SNL Securities, LC.
<PAGE>
EXHIBIT IV-5
Directors and Senior Management Summary Resumes
<PAGE>
EXHIBIT IV-5
Directors and Senior Management Summary Resumes
Trustees/Directors of the Bank
Gordon P. Assad has served as a Trustee of the Bank since 1995. Mr.
Assad is the President and Chief Executive Officer of Erie & Niagara Insurance
Association and has served in that position since 1972.
Christa R. Caldwell has served as a Trustee of the Bank since 1986. Ms.
Caldwell is retired and was the Director of the Lockport Public Library from
1967 to 1996.
James W. Currie has served as a Trustee of the Bank since 1987. Mr.
Currie is the President of Ag Pak. Inc., a _________________ company, and has
served in that position since __________________.
Gary B. Fitch has served as a Trustee of the Bank since 1981. Mr. Fitch
is the Owner-Manager of Ontario Orchards, Inc., and has served in that position
since 1976. Mr. Fitch also serves as the Executive Secretary of Agricultural
Affiliates, Inc. and has served in that position since 1991.
David W. Heinrich served as a Trustee of the Bank from 1969 to 1991. He
was re-elected to the Board in June of 1993. Mr. Heinrich is the President of
Heinrich Chevrolet Corp.
Daniel W. Judge has served as a Trustee of the Bank since 1992. Mr.
Judge is the President and Chief Executive Officer of I.D. ONE, Inc., a ________
company and has served in that position since 1996. Mr. Judge served as the
Executive Director of I.D. ONE, Inc., from 1993 to 1996. Mr. Judge has also
served as President and Manager of Dansam, Inc., a ___________ company since
1990.
B. Thomas Mancuso has served as a Trustee of the Bank since 1990. Mr.
Mancuso is the President of Joseph L. Mancuso & Sons, Inc., a real estate
development company.
James Miklinski has served as a Trustee of the Bank since 1996. Mr.
Miklinski is the General Manager of Niagara Milk Cooperative, and has served in
that position since 1990.
Barton G. Smith has served as a Trustee of the Bank since 1986. Mr.
Smith is retired from Paul Garrick, Inc.
William E. Swan has served as a Trustee of the Bank since 1996. Mr. Swan
is the President and Chief Executive Officer of Lockport Savings Bank, and has
served in that position since 1989.
Robert G. Weber has served as a Trustee of the Bank since 1996. Mr.
Weber is a retired Buffalo Office Managing Partner of KPMG Peat Marwick LLP
where he served from 1959 to 1995. Mr. Weber is also the Vice-President of
Finance and Development for Zacher Healthcare.
Executive Officers of the Bank Who Are Not Directors
Paul J. Kolkmeyer has served as Executive Vice President and Chief
Financial Officer of the Bank since 1995. Prior to that time, Mr. Kolkmeyer
served as Senior Vice President and Chief Financial Officer of the Bank. He has
worked for the Bank since 1990.
Kathleen P. Monti has served as Senior Vice President of Human Resources
and Administration of the Bank since 1995. From 1993 to 1995 Ms. Monti served as
Vice President of Human Resources of the Bank. Prior to 1993, she served as an
Administrative Vice President at Marine Midland Bank.
G. Gary Berner has served as Senior Vice President and Chief Lending
Officer of the Bank since 1992.
????? Allegro has been Senior Vice President of Retail Banking since
October 1997. [TEXT ILLEGIBLE] President at Rochester Community Savings Bank.
<PAGE>
EXHIBIT IV-6
Pro Forma Analysis Sheet: Fully Converted Basis
<PAGE>
EXHIBIT IV-6
PRO FORMA ANALYSIS SHEET
Lockport Savings Bank
Prices as of November 28, 1997
<TABLE>
<CAPTION>
All Savings
Peer Group New York Companies Institutions
---------------------- -------------------- ---------------
Price Multiple Symbol Subject (1) Mean Median Mean Median Mean
- -------------- ------ ----------- ---- ------ ---- ------ ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Price-earnings ratio P/E 14.27 x 21.81x 22.10x 19.55x 19.71x 18.88x
Price-book ratio = P/B 71.67% 106.76% 102.90% 146.22% 150.49% 159.78%
Price-assets ratio = P/A 16.50% 24.71% 24.82% 18.81% 16.75% 19.32%
</TABLE>
<TABLE>
<CAPTION>
Valuation Parameters
- --------------------
<S> <C> <C> <C>
Pre-Conversion Earnings (Y) $11,177,000 ESOP Stock Purchases (E) 8.00% (5)
Pre-Conversion Book Value (B) $126,620,000 Cost of ESOP Borrowings (S) 0.00% (4)
Pre-Conv. Tang. Book Value (B) $126,620,000 ESOP Amortization (T) 15.00 years
Pre-Conversion Assets (A) $1,176,451,000 RRP Amount (M) 4.00%
Reinvestment Rate (2)(R) 3.54% RRP Vesting (N) 5.00 years (5)
Est. Conversion Expenses (3)(X) 2.00% Foundation (F) 5.00%
Tax rate (TAX) 35.00% Tax Benefit (Z) 3,822,816
Percentage Sold (PCT) 100.00%
</TABLE>
<TABLE>
<CAPTION>
Calculation of Pro Forma Value After Conversion
- -----------------------------------------------
<C> <S> <C>
1. V= P/E * (Y) V= $225,000,001
----------------------------------------------------------
1 - P/E * PCT * ((1-X-E-M-F)*R - (1-TAX)*E/T -(1-TAX)*M/N)
2. V= P/B * (B+Z) V= $225,000,002
---------------------------
1 - P/B * PCT * (1-X-E-M-F)
3. V= P/A * (A+Z) V= $225,000,000
---------------------------
1 - P/A * PCT * (1-X-E-M-F)
</TABLE>
<TABLE>
<CAPTION>
Shares Aggregate
Shares Sold to Price Per Gross Offering Issued To Total Shares Market Value
Conclusion Public Share Proceeds Foundation Issued of Stock Issued
- ----------- ------ ----- -------- ---------- ------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Minimum 18,567,961 10.00 $185,679,612 557,039 19,125,000 191,250,000
Midpoint 21,844,660 10.00 218,446,602 655,340 22,500,000 225,000,000
Maximum 25,121,359 10.00 251,213,592 753,641 25,875,000 258,750,000
Supermaximum 28,889,563 10.00 288,895,631 866,687 29,756,250 297,562,500
</TABLE>
- ----------------------------------------------------------------------
(1) Pricing ratios shown reflect the midpoint value.
(2) Net return reflects a reinvestment rate of 5.44 percent, and a tax rate of
35.00 percent.
(3) Offering expenses shown at estimated midpoint value.
(4) No cost is applicable since holding company will fund the ESOP loan.
(5) ESOP and MRP amortize over 15 years and 5 years, respectively;
amortization expenses tax effected at 35.00 percent.
<PAGE>
EXHIBIT IV-7
Pro Forma Effects of Conversion Proceeds: Fully Converted Basis
<PAGE>
Exhibit IV-7
PRO FORMA EFFECT OF CONVERSION PROCEEDS
Lockport Savings Bank
At the Minimum
<TABLE>
<C> <S> <C>
1. Offering Proceeds $185,679,612
Less: Estimated Offering Expenses 3,713,592
---------
Net Conversion Proceeds $181,966,019
2. Estimated Additional Income from Conversion Proceeds
Net Conversion Proceeds $181,966,019
Less: Cash Contribution to Foundation 3,713,592
Less: Non-Cash Stock Purchases (1) 22,281,553
----------
Net Proceeds Reinvested $155,970,874
Estimated net incremental rate of return 3.54%
-----
Earnings Increase $5,515,130
Less: Estimated cost of ESOP borrowings (2) 0
Less: Amortization of ESOP borrowings (3) 643,689
Less: Recognition Plan Vesting (4) 965,534
-------
Net Earnings Increase $3,905,907
<CAPTION>
Net
Before Earnings After
3. Pro Forma Earnings Conversion Increase Conversion
---------- -------- ----------
<S> <C> <C> <C>
12 Months ended September 30, 1997 (reported) $11,177,000 $3,905,907 $15,082,907
12 Months ended September 30, 1997 (core) $10,217,000 $3,905,907 $14,122,907
<CAPTION>
Before Net Cash Tax Benefit (5) After
4. Pro Forma Net Worth Conversion Proceeds Of Contribution Conversion
---------- -------- --------------- ----------
<S> <C> <C> <C> <C>
September 30, 1997 $126,620,000 $155,970,874 $3,249,393 $285,840,267
September 30, 1997 (Tangible) $126,620,000 $155,970,874 $3,249,393 $285,840,267
<CAPTION>
Before Net Cash Tax Benefit (5) After
5. Pro Forma Assets Conversion Proceeds Of Contribution Conversion
---------- -------- --------------- ----------
<S> <C> <C> <C> <C>
September 30, 1997 $1,176,451,000 $155,970,874 $3,249,393 $1,335,671,267
</TABLE>
(1) Includes ESOP and MRP stock purchases equal to 8.0 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 35.00 percent rate.
(4) MRP is amortized over 5 years, and amortization expense is tax effected at
35.00 percent.
(5) Reflects tax benefit of stock contribution to the Foundation.
<PAGE>
Exhibit IV-7
PRO FORMA EFFECT OF CONVERSION PROCEEDS
Lockport Savings Bank
At the Midpoint
<TABLE>
<S> <C>
1. Offering Proceeds $218,446,602
Less: Estimated Offering Expenses 4,368,932
---------
Net Conversion Proceeds $214,077,670
2. Estimated Additional Income from Conversion Proceeds
Net Conversion Proceeds $214,077,670
Less: Cash Contribution to Foundation 4,368,932
Less: Non-Cash Stock Purchases (1) 26,213,592
----------
Net Proceeds Reinvested $183,495,146
Estimated net incremental rate of return 3.54%
-----
Earnings Increase $6,488,388
Less: Estimated cost of ESOP borrowings (2) 0
Less: Amortization of ESOP borrowings (3) 757,282
Less: Recognition Plan Vesting (4) 1,135,922
---------
Net Earnings Increase $4,595,184
<CAPTION>
Net
Before Earnings After
3. Pro Forma Earnings Conversion Increase Conversion
---------- -------- ----------
<S> <C> <C> <C>
12 Months ended September 30, 1997 (reported) $11,177,000 $4,595,184 $15,772,184
12 Months ended September 30, 1997 (core) $10,217,000 $4,595,184 $14,812,184
<CAPTION>
Before Net Cash Tax Benefit (5) After
4. Pro Forma Net Worth Conversion Proceeds Of Contribution Conversion
---------- -------- ----------------- ----------
<S> <C> <C> <C> <C>
September 30, 1997 $126,620,000 $183,495,146 $3,822,816 $313,937,961
September 30, 1997 (Tangible) $126,620,000 $183,495,146 $3,822,816 $313,937,961
<CAPTION>
Before Net Cash Tax Benefit (5) After
5. Pro Forma Assets Conversion Proceeds Of Contribution Conversion
---------- -------- ---------------- -----------
<S> <C> <C> <C> <C>
September 30, 1997 $1,176,451,000 $183,495,146 $3,822,816 $1,363,768,961
</TABLE>
(1) Includes ESOP and MRP stock purchases equal to 8.0 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 35.00 percent rate.
(4) MRP is amortized over 5 years, and amortization expense is tax effected at
35.00 percent.
(5) Reflects tax benefit of stock contribution to the Foundation.
<PAGE>
Exhibit IV-7
PRO FORMA EFFECT OF CONVERSION PROCEEDS
Lockport Savings Bank
At the Maximum
<TABLE>
<CAPTION>
<S> <C>
1. Offering Proceeds $251,213,592
Less: Estimated Offering Expenses 5,024,272
---------
Net Conversion Proceeds $246,189,320
2. Estimated Additional Income from Conversion Proceeds
Net Conversion Proceeds $246,189,320
Less: Cash Contribution to Foundation 5,024,272
Less: Non-Cash Stock Purchases (1) 30,145,631
----------
Net Proceeds Reinvested $211,019,417
Estimated net incremental rate of return 3.54%
-----
Earnings Increase $7,461,647
Less: Estimated cost of ESOP borrowings (2) 0
Less: Amortization of ESOP borrowings (3) 870,874
Less: Recognition Plan Vesting (4) 1,306,311
---------
Net Earnings Increase $5,284,462
<CAPTION>
Net
Before Earnings After
3. Pro Forma Earnings Conversion Increase Conversion
---------- -------- ----------
<S> <C> <C> <C>
12 Months ended September 30, 1997 (reported) $11,177,000 $5,284,462 $16,461,462
12 Months ended September 30, 1997 (core) $10,217,000 $5,284,462 $15,501,462
<CAPTION>
Before Net Cash Tax Benefit (5) After
4. Pro Forma Net Worth Conversion Proceeds Of Contribution Conversion
---------- -------- --------------- ----------
<S> <C> <C> <C> <C>
September 30, 1997 $126,620,000 $211,019,417 $4,396,238 $342,035,655
September 30, 1997 (Tangible) $126,620,000 $211,019,417 $4,396,238 $342,035,655
<CAPTION>
Before Net Cash Tax Benefit (5) After
5. Pro Forma Assets Conversion Proceeds Of Contribution Conversion
---------- -------- --------------- ----------
<S> <C> <C> <C> <C>
September 30, 1997 $1,176,451,000 $211,019,417 $4,396,238 $1,391,866,655
</TABLE>
(1) Includes ESOP and MRP stock purchases equal to 8.0 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 35.00 percent rate.
(4) MRP is amortized over 5 years, and amortization expense is tax effected at
35.00 percent.
(5) Reflects tax benefit of stock contribution to the Foundation.
<PAGE>
Exhibit IV-7
PRO FORMA EFFECT OF CONVERSION PROCEEDS
Lockport Savings Bank
At the Supermaximum Value
<TABLE>
<S> <C>
1. Offering Proceeds $288,895,631
Less: Estimated Offering Expenses 5,777,913
---------
Net Conversion Proceeds $283,117,718
2. Estimated Additional Income from Conversion Proceeds
Net Conversion Proceeds $283,117,718
Less: Cash Contribution to Foundation 5,777,913
Less: Non-Cash Stock Purchases (1) 34,667,476
----------
Net Proceeds Reinvested $242,672,330
Estimated net incremental rate of return 3.54%
-----
Earnings Increase $8,580,894
Less: Estimated cost of ESOP borrowings (2) 0
Less: Amortization of ESOP borrowings (3) 1,001,505
Less: Recognition Plan Vesting (4) 1,502,257
---------
Net Earnings Increase $6,077,131
</TABLE>
<TABLE>
<CAPTION>
Net
Before Earnings After
3. Pro Forma Earnings Conversion Increase Conversion
---------- -------- ----------
<S> <C> <C> <C>
12 Months ended September 30, 1997 (reported) $11,177,000 $6,077,131 $17,254,131
12 Months ended September 30, 1997 (core) $10,217,000 $6,077,131 $16,294,131
</TABLE>
<TABLE>
<CAPTION>
Before Net Cash Tax Benefit (5) After
4. Pro Forma Net Worth Conversion Proceeds Of Contribution Conversion
---------- -------- --------------- ----------
<S> <C> <C> <C> <C>
September 30, 1997 $126,620,000 $242,672,330 $5,055,674 $374,348,004
September 30, 1997 (Tangible) $126,620,000 $242,672,330 $5,055,674 $374,348,004
</TABLE>
<TABLE>
<CAPTION>
Before Net Cash Tax Benefit (5) After
5. Pro Forma Assets Conversion Proceeds Of Contribution Conversion
---------- -------- --------------- ----------
<S> <C> <C> <C> <C>
September 30, 1997 $1,176,451,000 $242,672,330 $5,055,674 $1,424,179,004
</TABLE>
(1) Includes ESOP and MRP stock purchases equal to 8.0 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 35.00 percent rate.
(4) MRP is amortized over 5 years, and amortization expense is tax effected at
35.00 percent.
(5) Reflects tax benefit of stock contribution to the Foundation.
<PAGE>
EXHIBIT IV-8
Peer Group Core Earnings Analysis
<PAGE>
RP FINANCIAL, LC.
- ---------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Core Earnings Analysis
Comparable Institution Analysis
For the Twelve Months Ended September 30, 1997
<TABLE>
<CAPTION>
Estimated
Net Income Less: Net Tax Effect Less: Extd Core Income Estimated
to Common Gains(Loss) @ 34% Items to Common Shares Core EPS
---------- ----------- ---------- ---------- ----------- ---------- -----------
($000) ($000) ($000) ($000) ($000) ($000) ($)
<S> <C> <C> <C> <C> <C> <C> <C>
Comparable Group
- ----------------
CMSV Commty. Svgs, MHC of FL (48.5) 5,443 -666 226 0 5,003 5,095 0.98
FFFL Fidelity FSB, MHC of FL (47.7)(1) 3,379 2,947 -1,002 0 5,324 6,771 0.79
SKBO First Carnegie, MHC of PA (45.0)(1)(3) 570 7 -2 0 575 2,300 0.33
FFSX First FS&LA. MHC of IA (46.1) 3,342 -120 41 0 3,263 2,833 1.15
GDVS Greater DV SB, MHC of PA (19.9) 2,217 0 0 0 2,217 3,272 0.68
HARS Harris SB, MHC of PA (24.3) 17,562 -4,716 1,603 0 14,449 33,779 0.43
JXSB Jcksnville SB, MHC of IL (45.6) 1,020 -10 3 0 1,013 1,272 0.80
LFED Leeds FSB, MHC of MD (36.3) 3,338 0 0 0 3,338 5,182 0.64
NWSB Northwest SB, MHC of PA (30.7) 19,333 -355 121 0 19,099 46,753 0.41
PBHC OswegoCity SB, MHC of NY (46.) 2,012 -315 107 0 1,804 1,917 0.94
PBCT Peoples Bank, MHC of CT (40.1) 87,800 -47,300 16,082 0 56,582 61,126 0.93
PHSB Ppls Home SB, MHC of PA (45.0)(3) 1,169 -86 29 0 1,112 2,760 0.54
PULB Pulaski SB, MHC of MO (29.8)(1) 1,431 687 -234 0 1,884 2,094 0.90
PLSK Pulaski SB, MHC of NJ (46.0) 1,110 0 0 0 1,110 2,070 0.54
SBFL SB Fngr Lakes MHC of NY (33.1) 784 186 -63 0 907 1,785 0.51
WAYN Wayne S&L Co. MHC of OH (47.8) 1,829 -163 55 0 1,721 2,255 0.76
WCFB Wbstr Cty FSB MHC of IA (45.2) 1,336 0 0 0 1,336 2,100 0.64
</TABLE>
(1) Financial information is for the quarter ending June 30, 1997.
(3) Figures are for three quarters of financial data, EPS figures are
annualized.
Source: Audited and unaudited financila 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.
<PAGE>
EXHIBIT IV-9
Pro Forma Regulatory Capital Ratios
<PAGE>
<TABLE>
<CAPTION>
Pro Forma at September 30, 1997
Actual, As of ---------------------------------------------
Sept. 30, 1997 Minimum Midpoint
--------------------- ------------------ -------------------
Percent Percent Percent
Amount of Assets Amount of Assets Amount of Assets
------ --------- ------ --------- ------ ---------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Capital and Retained
Earnings Under
Generally Accepted
Accounting Principles..................... $126,720 10.77% $157,740 12.99% $163,300 13.37%
======== ======== ======== ======== ======== ========
Tier I Risk Based........................... $125,383 20.69% $156,403 25.01% $161,963 25.75%
Requirement................................. 24,235 4.00% 25,017 4.00% 25,156 4.00%
-------- -------- -------- -------- -------- --------
Excess...................................... $101,148 16.69% $131,386 21.01% $136,806 21.75%
======== ======== ======== ======== ======== ========
Total Risk-Based............................ $131,736 21.74% $162,756 26.02% $168,316 26.76%
Risk-Based Requirement...................... 48,469 8.00% 50,033 8.00% 50,313 8.00%
-------- -------- -------- -------- -------- --------
Excess...................................... $83,267 13.74% $112,722 18.02% $118,003 18.76%
======== ======== ======== ======== ======== ========
Tier I Leverage............................. $125,383 10.75% $156,403 12.99% $161,963 13.37%
Requirement................................. 34,991 3.00% 36,129 3.00% 36,333 3.00%
-------- -------- -------- -------- -------- --------
Excess...................................... $90,392 7.75% $120,273 9.99% $125,630 10.37%
======== ======== ======== ======== ======== ========
<CAPTION>
Pro Forma at September 30, 1997
-------------------------------------------------
Maximum Maximum As Adjusted
-------------------------- ---------------------
Percent Percent
Amount of Assets Amount of Assets
------ --------- ------ ---------
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Capital and Retained
Earnings Under
Generally Accepted
Accounting Principles..................... $168,860 13.75% $175,271 14.18%
======== ======== ======== ========
Tier I Risk Based........................... $167,523 26.49% $173,934 27.33%
Requirement................................. 25,296 4.00% 25,457 4.00%
-------- -------- -------- --------
Excess...................................... $142,227 22.49% $148,476 23.33%
======== ======== ======== ========
Total Risk-Based............................ $173,876 27.49% $180,287 28.33%
Risk-Based Requirement...................... 50,592 8.00% 50,915 8.00%
-------- -------- -------- --------
Excess...................................... $123,284 19.49% $129,372 20.33%
======== ======== ======== ========
Tier I Leverage............................. $167,523 13.76% $173,934 14.19%
Requirement................................. 36,537 3.00% 36,771 3.00%
-------- -------- -------- --------
Excess...................................... $130,986 10.76% $137,163 11.19%
======== ======== ======== ========
</TABLE>
<PAGE>
EXHIBIT IV-10
PRO FORMA ANALYSIS SHEET
Lockport Savings Bank
Prices as of November 28, 1997
<TABLE>
<CAPTION>
All Savings
Peer Group New York Companies Institutions
--------------------------------- --------------------- ------------
Price Multiple Symbol Subject (1) Mean Median Mean Median Mean
- -------------- ------ ----------- ---- ------ ---- ------ ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Price-earnings ratio P/E 16.87x 20.21x 19.71x 19.55x 19.71x 18.88x
Price-book ratio = P/B 104.83% 160.06% 150.49% 146.22% 150.49% 159.78%
Price-assets ratio = P/A 17.79% 18.84% 16.75% 18.81% 16.75% 19.32%
</TABLE>
<TABLE>
<CAPTION>
Valuation Parameters
- --------------------
<S> <C> <C> <C>
Pre-Conversion Earnings (Y) $11,177,000 ESOP Stock Purchases (E) 8.00% (5)
Pre-Conversion Book Value (B) $126,620,000 Cost of ESOP Borrowings (S) 0.00% (4)
Pre-Conv. Tang. Book Value (B) $126,620,000 ESOP Amortization (T) 15.00 years
Pre-Conversion Assets (A) $1,176,451,000 RRP Amount (M) 4.00%
Reinvestment Rate (2)(R) 3.54% RRP Vesting (N) 5.00 years (5)
Est. Conversion Expenses (3)(X) 1.54% Foundation (F) 5.00%
Tax rate (TAX) 35.00% Tax Benefit (Z) 1,786,595
Percentage Sold (PCT) 46.74%
</TABLE>
<TABLE>
<CAPTION>
Calculation of Pro Forma Value After Conversion
- -----------------------------------------------
<S> <C> <C> <C>
1. V= P/E * (Y) V= $224,999,996
------------------------------------------------------------------------
1 - P/E * PCT * ((1-X-E-M-F)*R - (1-TAX)*E/T - (1-TAX)*M/N)
2. V= P/B * (B+Z) V= $224,999,987
---------------------------------
1 - P/B * PCT * (1-X-E-M-F)
3. V= P/A * (A+Z) V= $224,999,999
---------------------------------
1 - P/A * PCT * (1-X-E-M-F)
</TABLE>
<TABLE>
<CAPTION>
Shares Aggregate
Shares Issued to Shares Sold to Price Per Gross Offering Issued To Total Shares Market Value
Conclusion MHC Public Share Proceeds Foundation Issued of Stock Issued
- ----------- --- ------ ----- -------- ---------- ------ ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Minimum 10,186,920 8,677,748 10.00 $86,777,478 260,332 8,938,080 89,380,800
Midpoint 11,984,612 10,209,115 10.00 102,091,150 306,273 10,515,388 105,153,880
Maximum 13,782,304 11,740,482 10.00 117,404,823 352,214 12,092,696 120,926,960
Supermaximum 15,849,649 13,501,555 10.00 135,015,546 405,047 13,906,602 139,066,020
</TABLE>
- ------------------------------------------------------
(1) Pricing ratios shown reflect the midpoint value.
(2) Net return reflects a reinvestment rate of 5.44 percent, and a tax rate of
35.00 percent.
(3) Offering expenses shown at estimated midpoint value.
(4) No cost is applicable since holding company will fund the ESOP loan.
(5) ESOP and MRP amortize over 15 years and 5 years, respectively;
amortization expenses tax effected at 35.00 percent.
<PAGE>
EXHIBIT IV-11
Pro Forma Effect of Conversion Proceeds: Minority Stock Offering
<PAGE>
Exhibit IV-11
PRO FORMA EFFECT OF CONVERSION PROCEEDS
Lockport Savings Bank
At the Minimum
<TABLE>
<C> <S> <C>
1. Offering Proceeds $86,777,478
Less: Estimated Offering Expenses 1,455,352
---------
Net Conversion Proceeds $85,322,126
2. Estimated Additional Income from Conversion Proceeds
Net Conversion Proceeds $85,322,126
Less: Cash Contribution to Foundation 1,735,550
Less: Non-Cash Stock Purchases (1) 10,413,297
----------
Net Proceeds Reinvested $73,173,279
Estimated net incremental rate of return 3.54%
-----
Earnings Increase $2,587,407
Less: Estimated cost of ESOP borrowings (2) 0
Less: Amortization of ESOP borrowings (3) 300,829
Less: Recognition Plan Vesting (4) 451,243
-------
Net Earnings Increase $1,835,336
<CAPTION>
Net
Before Earnings After
3. Pro Forma Earnings Conversion Increase Conversion
---------- -------- ----------
<S> <C> <C> <C>
12 Months ended September 30, 1997 (reported) $11,177,000 $1,835,336 $13,012,336
12 Months ended September 30, 1997 (core) $10,217,000 $1,835,336 $12,052,336
<CAPTION>
Before Net Cash Tax Benefit (5) After
4. Pro Forma Net Worth Conversion Proceeds Of Contribution Conversion
---------- -------- --------------- ----------
<S> <C> <C> <C> <C>
September 30, 1997 $126,620,000 $73,173,279 $1,518,606 $201,311,885
September 30, 1997 (Tangible) $126,620,000 $73,173,279 $1,518,606 $201,311,885
<CAPTION>
Before Net Cash Tax Benefit (5) After
5. Pro Forma Assets Conversion Proceeds Of Contribution Conversion
---------- -------- --------------- ----------
<S> <C> <C> <C> <C>
September 30, 1997 $1,176,451,000 $73,173,279 $1,518,606 $1,251,142,885
</TABLE>
(1) Includes ESOP and MRP stock purchases equal to 8.0 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 35.00 percent rate.
(4) MRP is amortized over 5 years, and amortization expense is tax effected at
35.00 percent.
(5) Reflects tax benefit of stock contribution to the Foundation.
<PAGE>
Exhibit IV-11
PRO FORMA EFFECT OF CONVERSION PROCEEDS
Lockport Savings Bank
At the Midpoint
<TABLE>
<S> <C>
1. Offering Proceeds $102,091,150
Less: Estimated Offering Expenses 1,575,105
---------
Net Conversion Proceeds $100,516,045
2. Estimated Additional Income from Conversion Proceeds
Net Conversion Proceeds $100,516,045
Less: Cash Contribution to Foundation 2,041,823
Less: Non-Cash Stock Purchases (1) 12,250,938
----------
Net Proceeds Reinvested $86,223,284
Estimated net incremental rate of return 3.54%
----
Earnings Increase $3,048,855
Less: Estimated cost of ESOP borrowings (2) 0
Less: Amortization of ESOP borrowings (3) 353,916
Less: Recognition Plan Vesting (4) 530,874
-------
Net Earnings Increase $2,164,065
<CAPTION>
Net
Before Earnings After
3. Pro Forma Earnings Conversion Increase Conversion
---------- -------- ----------
<S> <C> <C> <C>
12 Months ended September 30, 1997 (reported) $11,177,000 $2,164,065 $13,341,065
12 Months ended September 30, 1997 (core) $10,217,000 $2,164,065 $12,381,065
<CAPTION>
Before Net Cash Tax Benefit (5) After
4. Pro Forma Net Worth Conversion Proceeds Of Contribution Conversion
---------- -------- --------------- ----------
<S> <C> <C> <C> <C>
September 30, 1997 $126,620,000 $86,223,284 $1,786,595 $214,629,879
September 30, 1997 (Tangible) $126,620,000 $86,223,284 $1,786,595 $214,629,879
<CAPTION>
Before Net Cash Tax Benefit (5) After
5. Pro Forma Assets Conversion Proceeds Of Contribution Conversion
---------- -------- --------------- ----------
<S> <C> <C> <C> <C>
September 30, 1997 $1,176,451,000 $86,223,284 $1,786,595 $1,264,460,879
</TABLE>
(1) Includes ESOP and MRP stock purchases equal to 8.0 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 35.00 percent rate.
(4) MRP is amortized over 5 years, and amortization expense is tax effected at
35.00 percent.
(5) Reflects tax benefit of stock contribution to the Foundation.
<PAGE>
Exhibit IV-11
PRO FORMA EFFECT OF CONVERSION PROCEEDS
Lockport Savings Bank
At the Maximum
<TABLE>
<CAPTION>
<S> <C>
1. Offering Proceeds $117,404,823
Less: Estimated Offering Expenses 1,694,858
---------
Net Conversion Proceeds $115,709,965
2. Estimated Additional Income from Conversion Proceeds
Net Conversion Proceeds $115,709,965
Less: Cash Contribution to Foundation 2,348,096
Less: Non-Cash Stock Purchases (1) 14,088,579
----------
Net Proceeds Reinvested $99,273,289
Estimated net incremental rate of return 3.54%
-----
Earnings Increase $3,510,304
Less: Estimated cost of ESOP borrowings (2) 0
Less: Amortization of ESOP borrowings (3) 407,003
Less: Recognition Plan Vesting (4) 610,505
-------
Net Earnings Increase $2,492,795
<CAPTION>
Net
Before Earnings After
3. Pro Forma Earnings Conversion Increase Conversion
- -- ------------------ ---------- -------- ----------
<S> <C> <C> <C>
12 Months ended September 30, 1997 (reported) $11,177,000 $2,492,795 $13,669,795
12 Months ended September 30, 1997 (core) $10,217,000 $2,492,795 $12,709,795
<CAPTION>
Before Net Cash Tax Benefit (5) After
4. Pro Forma Net Worth Conversion Proceeds Of Contribution Conversion
- -- ------------------- ---------- -------- --------------- ----------
<S> <C> <C> <C> <C>
September 30, 1997 $126,620,000 $99,273,289 $2,054,584 $227,947,874
September 30, 1997 (Tangible) $126,620,000 $99,273,289 $2,054,584 $227,947,874
<CAPTION>
Before Net Cash Tax Benefit (5) After
5. Pro Forma Assets Conversion Proceeds Of Contribution Conversion
- -- ---------------- ---------- -------- --------------- ----------
<S> <C> <C> <C> <C>
September 30, 1997 $1,176,451,000 $99,273,289 $2,054,584 $1,277,778,874
</TABLE>
(1) Includes ESOP and MRP stock purchases equal to 8.0 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 35.00 percent rate.
(4) MRP is amortized over 5 years, and amortization expense is tax effected at
35.00 percent.
(5) Reflects tax benefit of stock contribution to the Foundation.
<PAGE>
Exhibit IV-11
PRO FORMA EFFECT OF CONVERSION PROCEEDS
Lockport Savings Bank
At the Supermaximum Value
<TABLE>
<C> <S> <C>
1. Offering Proceeds $135,015,546
Less: Estimated Offering Expenses 1,800,000
---------
Net Conversion Proceeds $133,215,546
2. Estimated Additional Income from Conversion Proceeds
Net Conversion Proceeds $133,215,546
Less: Cash Contribution to Foundation 2,700,311
Less: Non-Cash Stock Purchases (1) 16,201,866
----------
Net Proceeds Reinvested $114,313,369
Estimated net incremental rate of return 3.54%
-----
Earnings Increase $4,042,121
Less: Estimated cost of ESOP borrowings (2) 0
Less: Amortization of ESOP borrowings (3) 468,054
Less: Recognition Plan Vesting (4) 702,081
-------
Net Earnings Increase $2,871,986
<CAPTION>
Net
Before Earnings After
3. Pro Forma Earnings Conversion Increase Conversion
---------- -------- ----------
<C> <S> <C> <C> <C>
12 Months ended September 30, 1997 (reported) $11,177,000 $2,871,986 $14,048,986
12 Months ended September 30, 1997 (core) $10,217,000 $2,871,986 $13,088,986
<CAPTION>
Before Net Cash Tax Benefit (5) After
4. Pro Forma Net Worth Conversion Proceeds Of Contribution Conversion
---------- -------- --------------- ----------
<C> <S> <C> <C> <C> <C>
September 30, 1997 $126,620,000 $114,313,369 $2,362,772 $243,296,142
September 30, 1997 (Tangible) $126,620,000 $114,313,369 $2,362,772 $243,296,142
<CAPTION>
Before Net Cash Tax Benefit (5) After
5. Pro Forma Assets Conversion Proceeds Of Contribution Conversion
---------- -------- --------------- ----------
<C> <S> <C> <C> <C> <C>
September 30, 1997 $1,176,451,000 $114,313,369 $2,362,772 $1,293,127,142
</TABLE>
(1) Includes ESOP and MRP stock purchases equal to 8.0 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 35.00 percent rate.
(4) MRP is amortized over 5 years, and amortization expense is tax effected at
35.00 percent.
(5) Reflects tax benefit of stock contribution to the Foundation.
<PAGE>
EXHIBIT V-1
RP Financial, LC.
Firm Qualifications Statement
<PAGE>
[LETTERHEAD OF RP FINANCIAL, LC. APPEARS HERE]
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)
