<PAGE>
As filed with the Securities and Exchange Commission on April 29, 1998
Registration No. 333-44831
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------
PRE-EFFECTIVE
AMENDMENT NO. 2 TO
FORM SB-2
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
------------------------------
BCSB BANKCORP, INC.
(Name of small business issuer in its charter)
<TABLE>
<CAPTION>
<S> <C> <C>
UNITED STATES 6035 TO BE REQUESTED
- ------------------------------- ------------ ---------------------
(State or other jurisdiction of (Primary standard industrial (I.R.S. employer
incorporation or organization) classification code number) identification number)
</TABLE>
4111 E. JOPPA ROAD, SUITE 300
BALTIMORE, MARYLAND 21236
(410) 256-5000
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(Address and telephone number of principal executive offices and principal place
------------
of business)
MICHAEL J. DIETZ, PRESIDENT
BCSB BANKCORP, INC.
4111 E. JOPPA ROAD, SUITE 300
BALTIMORE, MARYLAND 21236
(410) 256-5000
----------------------------------------------------------
(Name, address, and telephone number of agent for service)
PLEASE SEND COPIES OF ALL COMMUNICATIONS TO:
GARY R. BRONSTEIN, ESQUIRE
JOEL E. RAPPOPORT, ESQUIRE
HOUSLEY KANTARIAN & BRONSTEIN, P.C.
1220 19TH STREET, N.W., SUITE 700
WASHINGTON, D.C. 20036
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this registration statement becomes effective.
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering.[_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.[_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.[_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box.[_]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<PAGE>
PROSPECTUS
[LOGO]
BCSB BANKCORP, INC.
(HOLDING COMPANY FOR
BALTIMORE COUNTY SAVINGS BANK, F.S.B.)
Up to 2,286,602 Shares of Common Stock
$10.00 Per Share
(Shares offered in conjunction with mutual holding company reorganization)
BCSB Bankcorp, Inc., a Federal corporation, (the "Company"), is offering
1,988,350 shares, subject to adjustment to up to 2,286,602 shares, of its common
stock, par value $.01 per share (the "Common Stock"), for a purchase price of
$10.00 per share (the "Purchase Price"), in connection with the reorganization
of Baltimore County Savings Bank, F.S.B. (the "Bank") into the federal mutual
holding
(continued on following page)
FOR INFORMATION ON HOW TO SUBSCRIBE, CALL THE STOCK INFORMATION CENTER AT (410)
256-0460.
PROSPECTIVE INVESTORS SHOULD CAREFULLY REVIEW AND CONSIDER
THE DISCUSSION UNDER "RISK FACTORS" BEGINNING ON PAGE 16.
THE SHARES OF COMMON STOCK BEING OFFERED BY THIS PROSPECTUS WILL REPRESENT A
MINORITY
OWNERSHIP INTEREST IN THE COMPANY. THE REMAINING ISSUED AND OUTSTANDING SHARES
OF COMMON STOCK, REPRESENTING A MAJORITY OF THE OUTSTANDING COMMON
STOCK, WILL BE OWNED BY BALTIMORE COUNTY SAVINGS BANK, M.H.C.
THESE SHARES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE
COMMISSION, THE OFFICE OF THRIFT SUPERVISION, OR ANY STATE SECURITIES
COMMISSION,
NOR HAS SUCH COMMISSION, OFFICE OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE SHARES OF COMMON STOCK OFFERED BY THIS PROSPECTUS ARE NOT SAVINGS
ACCOUNTS OR DEPOSITS AND ARE NOT INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY.
<TABLE>
<CAPTION>
=========================================================================================
Estimated Fees and
Expenses, Including
Purchase Underwriting Discounts Estimated Net
Price (1) and Commissions (2) Proceeds
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share (3)................. $10.00 $.39 $9.61
- -----------------------------------------------------------------------------------------
Total Minimum................. $14,696,500 $641,000 $14,055,500
- -----------------------------------------------------------------------------------------
Total Midpoint................ $17,290,000 $677,000 $16,613,000
- -----------------------------------------------------------------------------------------
Total Maximum................. $19,883,500 $713,000 $19,170,500
- -----------------------------------------------------------------------------------------
Total Maximum, as adjusted.... $22,866,020 $754,000 $22,112,020
==========================================================================================
</TABLE>
(1) The shares of Common Stock offered hereby will be sold at an aggregate
purchase price that is based upon an independent valuation (the
"Independent Valuation") prepared by RP Financial, LC. ("RP Financial"),
dated January 2, 1998 and updated as of March 27, 1998, which states that
the pro forma market value of the Common Stock that would be offered in a
full mutual-to-stock conversion ranged from $39,312,500 to $53,187,500 (the
"Estimated Valuation Range"), with a midpoint of $46,250,000, based upon
the assumption, among others, that a contribution would be made to the
Baltimore County Savings Bank Foundation, Inc. (the "Foundation") of
$750,000 of the common stock sold in a full stock conversion of the Bank.
The Independent Evaluation will be further updated immediately prior to the
completion of the Offering and could be increased to up to $61,165,620
without a resolicitation of subscribers based on market and financial
conditions at the completion of the Offering. The Board of Directors has
established a public offering range such that the public ownership of the
Company will constitute a 38.0% ownership interest prior to the issuance of
shares to the Foundation. Accordingly, the offering range to the public of
the minority stock will be $14,696,500 at the minimum, $17,290,000 at the
midpoint, $19,883,500 at the maximum and $22,866,020 at the maximum, as
adjusted. Based on the public offering range, exclusive of the shares to
be issued to the Foundation, the public ownership of the shares will
represent 37.4% of the shares of Common Stock to be outstanding following
consummation of the Reorganization and Stock Issuance and establishment of
the Foundation. In the event members do not approve the establishment of
the Foundation, the Company and the Bank intend to complete the
Reorganization and Stock Issuance without establishing the Foundation. If
the Foundation is not established, RP Financial has indicated that the
Independent Valuation would increase to a range of from $39,950,000 to
$54,050,000 with a midpoint of $47,000,000 (the "Increased Range"). The
Increased Range will be further updated immediately prior to the completion
of the Offering and could be increased to up to $62,157,500 without a
resolicitation of subscribers based on market and financial conditions at
the completion of the Offering In such event, the public offering range
would be structured such that the public will have a 39.0% ownership
interest in the Company, and, as a result, the shares to be sold in the
Offering would be 1,558,266, 1,833,254, 2,108,242 and 2,424,478, the total
purchase price would be $15,582,660, $18,332,540, $21,082,420 and
$24,244,780, the estimated fees and expenses, including underwriting
discounts and commissions, would be $653,000, $691,000, $729,000 and
$773,000, and the estimated net proceeds would be $14,929,660, $17,641,540,
$20,353,420 and $23,471,780, at the minimum, midpoint, maximum and maximum,
as adjusted, respectively, of the Increased Range. See "The Reorganization
and Stock Issuance -- Stock Pricing and Number of Shares to be Issued."
(footnotes continued on following page)
TRIDENT SECURITIES, INC.
The date of this Prospectus is ________ __, 1998
<PAGE>
company form of ownership, whereby the Bank will convert to a federally
chartered stock savings bank as a wholly owned subsidiary of the Company, and
the Company will become a majority-owned subsidiary of Baltimore County Savings
Bank, M.H.C. (the "MHC"), a mutual holding company (the "Reorganization"). The
shares of Common Stock are being offered hereby pursuant to the Company's Plan
of Stock Issuance (the "Plan of Stock Issuance"), which is an integral part of
the Bank's Plan of Reorganization from Mutual Savings Bank to Mutual Holding
Company and Subsidiary Holding Company Formation (the "Plan of Reorganization").
The issuance of shares of the Company's Common Stock to the MHC pursuant to the
Plan of Reorganization and the issuance and sale of up to 1,988,350 shares,
subject to adjustment, of Common Stock offered by this Prospectus pursuant to
the Plan of Stock Issuance referred to herein as the "Stock Issuance."
Shares of the Common Stock are being offered hereby pursuant to
nontransferable subscription rights ("Subscription Rights") in the following
order of priority: (i) depositors of the Bank as of September 30, 1996 with a
$50.00 minimum deposit at that date ("Eligible Account Holders"); (ii) the
Company's Employee Stock Ownership Plan (the "ESOP") (a tax-qualified employee
stock benefit plan of the Company, as defined in the Plan of Stock Issuance);
(iii) depositors of the Bank with $50.00 or more on deposit as of March 31, 1998
("Supplemental Eligible Account Holders"); and (iv) certain depositors and
borrowers as of __________ __, 1998 ("Other Members") in a subscription offering
(the "Subscription Offering"). Subscription Rights received in any of the
foregoing categories will be subordinated to the Subscription Rights received by
those in a prior category, with the exception that any shares of Common Stock
sold in excess of the maximum of the Estimated Valuation Range, as defined
herein, may first be sold to the ESOP. SUBSCRIPTION RIGHTS ARE NOT
TRANSFERABLE, AND PERSONS WHO ATTEMPT TO TRANSFER THEIR SUBSCRIPTION RIGHTS MAY
LOSE THE RIGHT TO SUBSCRIBE FOR STOCK IN THE OFFERING AND MAY BE SUBJECT TO
OTHER SANCTIONS AND PENALTIES IMPOSED BY THE OFFICE OF THRIFT SUPERVISION
("OTS"). The Company may offer any shares of Common Stock not subscribed for in
the Subscription Offering in a community offering (the "Community Offering") to
certain members of the general public to whom the Company delivers a copy of
this Prospectus and a stock order form (the "Stock Order Form"), with preference
given to natural persons and trusts of natural persons who are permanent
"residents" of Baltimore County and Harford County, Maryland (the "Local
Community"). See "The Reorganization and Stock Issuance -- Community Offering."
The Bank and the Company may, in their absolute discretion, reject orders in the
Community Offering in whole or in part. It is anticipated that shares of the
Common Stock not otherwise subscribed for in the Subscription and Community
Offerings may be offered at the discretion of the Company to certain members of
the general public as part of a community offering on a best efforts basis by a
selling group of selected broker-dealers to be managed by Trident Securities,
Inc. (the "Syndicated Community Offering"). The Subscription Offering and the
Community Offering and Syndicated Community Offering, if any, are collectively
referred to herein as the "Offering." Neither Trident Securities, Inc. nor any
selected broker-dealers will have any obligation to purchase any shares of the
Common Stock. See "The Reorganization and Stock Issuance -- The Offering," " --
Subscription Rights," " -- Community Offering" and " -- Syndicated Community
Offering."
(footnotes continued from table on previous page)
_______________
(2) Includes estimated printing, postage, legal, accounting and miscellaneous
expenses which will be incurred in connection with the Reorganization and
Stock Issuance. Also includes estimated fees, sales commissions and
reimbursable expenses to be paid to Trident Securities, Inc. ("Trident
Securities") in connection with the Subscription and Community Offerings,
estimated to be $220,000 assuming the sale of 1,729,000 shares at the
midpoint of the Estimated Valuation Range. The actual fees and expenses
may vary from the estimates. See "Pro Forma Data" for the assumptions used
to arrive at these estimates. Trident Securities may be deemed to be an
underwriter, and certain amounts to be paid to Trident Securities may be
deemed to be underwriting compensation for purposes of the Securities Act
of 1933, as amended. The Company and the Bank have agreed to indemnify
Trident Securities against certain liabilities arising out of its services
as financial and sales advisor.
(3) Based on the midpoint of the Estimated Valuation Range. At the minimum,
maximum and maximum, as adjusted of the Estimated Valuation Range,
estimated fees and expenses, including underwriting discounts and
commissions, are expected to be $.44, $.36 and $.33, respectively, and the
estimated net proceeds per share are expected to be $9.56, $9.64 and $9.67,
respectively. If the Foundation is not established, estimated fees and
expenses, including underwriting discounts and commissions, are expected to
be $.42, $.38, $.35 and $.32, and estimated net proceeds are expected to
be $9.58, $9.62, $9.65 and $9.68 at the minimum, midpoint, maximum and
maximum, as adjusted, respectively of the Increased Range.
2
<PAGE>
Except for the ESOP, which intends to purchase 8% of the total number of
shares of Common Stock issued in the Offering, no Eligible Account Holder,
Supplemental Eligible Account Holder or Other Member, in their capacity as such,
may subscribe in the Subscription Offering for more than $200,000 of the Common
Stock to be issued in the Offering; no person, together with associates of or
persons acting in concert with such person, including individuals on a joint
account or having the same address, may purchase in the Community Offering in
the aggregate more than $200,000 of the Common Stock to be issued in the
Offering; and no person, together with associates of or persons acting in
concert with such person, including individuals on a joint account or having the
same address, may purchase in the Offering more than the overall maximum
purchase limitation of $300,000 of the Common Stock to be issued in the
Offering.
In connection with the Reorganization and the Stock Issuance, the Company
intends to establish a charitable foundation. The Bank and the Company will
form the Baltimore County Savings Bank Foundation (the "Foundation"), which will
be incorporated under Maryland law as a non-stock corporation, and the Company
will contribute 75,000 shares of Common Stock to fund the Foundation. The
Foundation will be dedicated to charitable and educational purposes within the
Baltimore metropolitan area. The establishment of the Foundation is subject to
the approval of the Bank's members at the special meeting being held to consider
the Reorganization. Due to the issuance of additional shares of Common Stock to
the Foundation, persons purchasing shares of Common Stock in the Offering will
have their ownership and voting interests in the Company diluted by between 1.2%
and 1.9% at the maximum, as adjusted and minimum, respectively, of the Estimated
Valuation Range. Further, as a result of the establishment of the Foundation,
the Company will recognize an expense equal to the full amount of the
contribution, offset in part by a corresponding tax benefit, during the quarter
in which the contribution is made, which is expected to be the second quarter of
calendar year 1998. Such expense will cause a material reduction in the
Company's earnings for the quarter and the fiscal year in which the contribution
is made. See "Risk Factors -- Establishment of the Foundation" and "Pro Forma
Data."
THE SUBSCRIPTION OFFERING WILL EXPIRE AT 12:00 NOON, EASTERN TIME, ON
________ ___, 1998, UNLESS EXTENDED BY THE COMPANY FOR UP TO AN ADDITIONAL 45
DAYS. THE COMMUNITY OFFERING, IF ANY, MAY COMMENCE WITHOUT NOTICE AT ANY TIME
AFTER THE COMMENCEMENT OF THE SUBSCRIPTION OFFERING AND MAY TERMINATE AT ANY
TIME WITHOUT NOTICE, BUT MAY NOT TERMINATE LATER THAN ________ ___, 1998.
Subscription Rights are exercisable by completing and returning to any office of
the Bank a Stock Order Form, together with full payment, or appropriate
instructions authorizing withdrawal of such an amount from existing accounts at
the Bank. An executed Stock Order Form, once received by the Bank, may not be
modified, amended or rescinded without the consent of the Bank. Subscriptions
paid by check, cash or money order will be held in a separate account at the
Bank established specifically for this purpose, and interest will be paid at the
Bank's passbook rate from the date payment is received until the Offering is
completed or terminated. In the case of payments to be made through withdrawal
from deposit accounts at the Bank, all sums authorized for withdrawal will
continue to earn interest at the contract rate until the date of the completion
of the Offering. If the Offering is not completed within 45 days after the last
day of the Subscription Offering (which date will be no later than ________ ___,
1998) and the OTS consents to an extension of time to complete the Offering,
subscribers will be required to affirmatively reconfirm their subscriptions
prior to the expiration of the resolicitation offering or their subscription
funds will be promptly refunded with interest, or will be permitted to modify or
cancel their subscriptions. If the Offering is not completed within such period
or extended period, all funds held will be promptly returned together with
accrued interest, and all withdrawal authorizations will be terminated. Such
extensions may not go beyond ________ ___, 2000. See "The Reorganization and
Stock Issuance -- Subscriptions for Stock in Subscription and Community
Offerings."
The Bank has retained Trident Securities, Inc. ("Trident Securities"), a
broker-dealer registered with the Securities and Exchange Commission ("SEC") and
a member of the National Association of Securities Dealers, Inc. ("NASD") to
provide financial and sales assistance in connection with the Subscription and
Community Offerings. Trident Securities has agreed to use its best efforts to
assist the Company and the Bank with the sale of the Common Stock in the
Subscription Offering and the Community Offering, if any. Trident Securities is
not obligated to take or purchase any shares of Common Stock in the Subscription
and Community Offerings.
3
<PAGE>
The Company has never issued capital stock to the public. Consequently,
there is no established market for the Common Stock. The Company has received
conditional approval to have its Common Stock listed on the Nasdaq National
Market System under the symbol "BCSB." There can be no assurance that an active
and liquid trading market for the Common Stock will develop or that, if
developed, it will continue, nor is there any assurance that persons purchasing
shares of Common Stock will be able to sell them at or above the Purchase Price.
4
<PAGE>
[MAP]
THE REORGANIZATION AND STOCK ISSUANCE ARE CONTINGENT UPON APPROVAL OF THE PLAN
OF REORGANIZATION BY THE BANK'S MEMBERS, THE SALE OF AT LEAST THE MINIMUM NUMBER
OF SHARES OFFERED PURSUANT TO THE PLAN OF STOCK ISSUANCE AND THE SATISFACTION OF
CERTAIN OTHER CONDITIONS IMPOSED BY THE OTS IN ITS APPROVAL.
5
<PAGE>
PROSPECTUS SUMMARY
The following summary does not purport to be complete and is qualified in
its entirety by the more detailed information and the Consolidated Financial
Statements and accompanying Notes appearing elsewhere in this Prospectus.
BCSB BANKCORP, INC. BCSB Bankcorp, Inc. has not yet been incorporated.
It will be incorporated under Federal law in
connection with the consummation of the
Reorganization and Stock Issuance at the direction
of the Board of Directors of the Bank for the
purpose of serving as a savings institution holding
company of the Bank upon the acquisition of all of
the capital stock issued by the Bank in the
Reorganization. The Company has received approval
from the OTS to acquire control of the Bank,
subject to satisfaction of certain conditions.
Prior to the consummation of the Reorganization and
Stock Issuance, the Company has not engaged and
will not engage in any material operations. Upon
consummation of the Reorganization and Stock
Issuance, the Company will have no significant
assets other than the outstanding capital stock of
the Bank, up to 50% of the net proceeds of the
Offering (after deducting amounts infused into the
Bank and used to fund the ESOP) and a note
receivable from the ESOP. Upon consummation of the
Reorganization and Stock Issuance, the Company's
principal business will be overseeing the business
of the Bank and investing the portion of the net
Offering proceeds retained by it.
BALTIMORE COUNTY SAVINGS The Bank is a federal mutual savings bank operating
BANK, F.S.B. through six banking offices serving Baltimore and
Baltimore County Building and Loan Association. The
Bank received federal insurance of its deposit
accounts in 1985 and received a federal charter in
1987, at which time it adopted its present name of
Baltimore County Savings Bank, F.S.B. At December
31, 1997, the Bank had total assets of $250.6
million, total deposits of $222.2 million and
retained earnings of $24.5 million.
The Bank's principal business consists of
attracting deposits from the general public and
investing these funds in loans secured by first
mortgages on owner-occupied, one-to four-family
("single-family") residences in the Bank's market
area, and, to a lesser extent, other real estate
loans, consisting of construction loans, single-
family rental property loans and commercial real
estate loans, and consumer loans, particularly
automobile loans. The Bank derives its income
principally from interest earned on loans and, to a
lesser extent, interest earned on mortgage-backed
securities and investment securities and other
income. Funds for these activities are provided
principally by operating revenues, deposits and
repayments of outstanding loans and investment
securities and mortgage-backed securities.
BALTIMORE COUNTY As part of the Reorganization, the Bank will
SAVINGS BANK, M.H.C. organize the MHC as a federal mutual holding
company with the powers set forth in its proposed
charter and bylaws. As long as they remain
depositors of the Bank, persons who had membership
or liquidation rights with respect to the Bank as
of the date of the Reorganization will continue to
have such rights solely with respect to the MHC
after the Reorganization. Borrowers whose loans
were outstanding on June 16, 1987 have membership
rights in the Bank and, accordingly, will have
membership rights in the MHC upon completion of the
Reorganization so long as their loans remain
outstanding. Members of the MHC (consisting solely
of depositors and certain borrowers of the Bank)
shall have exclusive
6
<PAGE>
authority to elect the board of directors of the
MHC for so long as the MHC remains a mutual
institution.
The MHC's principal assets will be the shares of
Common Stock received in the Reorganization and up
to $250,000 received as its initial capitalization.
Immediately after consummation of the
Reorganization, it is expected that the MHC will
not engage in any business activity other than its
investment in, and control of, a majority of the
Common Stock of the Company. The MHC will be a
mutual corporation chartered under federal law and
regulated by the OTS. The MHC will be subject to
the limitations and restrictions imposed on savings
and loan holding companies by Section 10(o)(5) of
the Home Owners' Loan Act of 1933, as amended (the
"HOLA"). See "Regulation -- Regulation of the MHC."
THE REORGANIZATION On October 22, 1997, the Board of Directors of the
Bank adopted the Plan of Reorganization, which was
subsequently amended, pursuant to which the Bank
will reorganize into the federal mutual holding
company form of organization as a wholly owned
subsidiary of the Company, which in turn will be a
majority-owned subsidiary of the MHC. Following
receipt of all required regulatory approvals, the
approval of the members of the Bank entitled to
vote on the Plan of Reorganization, and the
satisfaction of all other conditions precedent to
the Reorganization, the Bank will consummate the
Reorganization. Following completion of the
Reorganization, the Bank in its stock form will
continue to conduct its business and operations
from the same offices with the same personnel as
the Bank conducted prior to the Reorganization. The
Reorganization will not affect the balances,
interest rates, or other terms of the Bank's loans
or deposit accounts and the deposit accounts will
continue to be insured by the FDIC to the same
extent prior to the Reorganization. The MHC
initially will be capitalized with $250,000. Upon
consummation of the Reorganization, such capital
will be used for general corporate purposes. See
"The Reorganization and Stock Issuance."
Those persons who currently serve as directors of
the Bank will be the initial directors of the Bank
in its stock form. The directors of the Company and
the MHC initially also will be the same as the
current members of the Board of Directors of the
Bank. As a holding company parent of a federally
chartered savings bank, the Company will be
required to register as a savings and loan holding
company pursuant to the HOLA, and will be subject
to regulation, examination, and supervision by the
OTS. For additional information, see "Regulation --
Regulation of the Company."
THE STOCK ISSUANCE The Plan of Stock Issuance authorizes the Company
to offer Common Stock to persons other than the MHC
in an amount less than 50% of the issued and
outstanding shares of the Company's voting stock.
The Company is offering between a minimum of
1,469,650 and a maximum of 1,988,350 shares of
Common Stock, subject to adjustment to up to
2,286,602 shares of Common Stock, in the Offering,
which will represent 37.4% of the Company's Common
Stock to be outstanding upon completion of the
Reorganization and Stock Issuance and the
establishment of the Foundation.
Upon the completion of the Reorganization and Stock
Issuance, depositor and borrower members as such
will have no voting rights in the Bank or the
Company and, therefore, will not be able to elect
directors of the Bank or the Company or to control
their affairs. Currently these rights are accorded
to members of the Bank. Subsequent to the
Reorganization and Stock Issuance, voting rights
will be vested exclusively in the stockholders of
the Company which, in turn, will own all of the
stock of the Bank.
7
<PAGE>
Further, following the Reorganization and Stock
Issuance, depositor and borrower members of the
Bank will have full ownership of the MHC, which
will own 61.0% of the Common Stock of the Company
at the midpoint of the Estimated Valuation Range.
Such members currently have a 100% ownership
interest in the Bank.
<TABLE>
<CAPTION>
----------------------------------- ------------------------- --------------------------
ORGANIZATIONAL STRUCTURE Baltimore County Public
AFTER THE REORGANIZATION Savings Bank, M.H.C. Stockholders Foundation
AND THE STOCK ISSUANCE ----------------------------------- ------------------------- --------------------------
<S> <C> <C>
61.0% (1) of 37.4% (1) of 1.6% (1) of
Common Stock Common Stock Common Stock
-------------------------------------------------------------------------------------------------------
BCSB Bankcorp, Inc.
-------------------------------------------------------------------------------------------------------
100% of common stock
-------------------------------------------------------------------------------------------------------
Baltimore County Savings Bank, F.S.B.
-------------------------------------------------------------------------------------------------------
</TABLE>
--------------------
(1) Assumes the sale of 1,729,000 shares of Common
Stock to public stockholders and the issuance
of 2,821,000 shares to the MHC at the midpoint
of the Estimated Valuation Range and the
subsequent issuance of 75,000 shares to the
Foundation.
The Board of Directors determined that the
Reorganization and Stock Issuance are in the best
interest of the Bank. The primary purpose of the
Reorganization is to establish a structure that
will enable the Bank to compete and expand more
effectively in the financial services marketplace,
and that will enable depositors, employees,
management and directors to obtain an equity
ownership interest in the Bank. The new structure
will permit the Company to issue capital stock,
which is a source of capital not available to a
mutual savings bank, and the Company 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 MHC), the
Reorganization and Stock Issuance will result in
less capital raised in comparison to a standard
mutual-to-stock conversion. The Reorganization and
Stock Issuance, however, will also offer the Bank
the opportunity to raise additional capital since
the stock held by the MHC will be available for
sale in the future in the event the MHC decides to
convert to the capital stock form of organization.
See "MHC Conversion to Stock Form." The
Reorganization and Stock Issuance also will give
the Bank greater flexibility to structure and
finance the expansion of its 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
the Bank has no current arrangements,
understandings or agreements regarding any such
opportunities, the Company will be in a position
after the Reorganization and Stock Issuance,
subject to regulatory limitations and the Company's
financial position, to take advantage of any such
opportunities that may arise. Lastly, the
Reorganization and Stock Issuance will enable the
Bank to better manage its capital by providing
broader investment opportunities through the
holding company structure, and enabling the Company
to distribute capital to its stockholders in the
form of
8
<PAGE>
dividends and stock repurchases. Because only a
minority of the Common Stock will be offered for
sale in the Offering, the Bank's current mutual
form of ownership and 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 Directors 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 MHC 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 MHC 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 MHC, which is a mutual
institution that will be controlled by the existing
Board of Directors 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 directors of the Bank. The MHC 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 Company
or other proposals put forth by the minority
stockholders.
THE COMMON STOCK Each share of Common Stock of the Company sold in
the Offering will have the same relative rights as,
and will be identical in all respects to, each
other share of Common Stock issued and sold in the
Stock Issuance. After the Reorganization, the Board
of Directors of the Company will be authorized to
approve the issuance of Common Stock up to the
amount authorized by the Company's Charter without
the approval of the Company's stockholders. THE
COMMON STOCK OF THE COMPANY REPRESENTS WITHDRAWABLE
CAPITAL, IS NOT A DEPOSIT ACCOUNT, AND IS NOT
INSURED BY THE OTS, THE FDIC OR ANY OTHER
GOVERNMENT AGENCY. See "Description of Capital
Stock."
PURCHASE PRICE AND STOCK The Company is offering between 1,469,650 and
PRICING 1,988,350 shares of Common Stock, subject to
adjustment to up to 2,286,602 shares, at a fixed
price of $10.00 per share. OTS regulations require
that the aggregate purchase price of all shares to
be issued in the Offering be consistent with an
independent appraisal of the pro forma market value
of the Common Stock to be offered for sale in the
Offering and issued to the MHC in the Stock
Issuance. RP Financial, an independent appraisal
firm that is experienced in the valuation and
appraisal of business entities, including savings
institutions, has been retained by the Bank to
prepare an appraisal. Based upon factors discussed
in the Independent Valuation, RP Financial has
determined the Independent Valuation was
$46,250,000 as of March 27, 1998. THE INDEPENDENT
VALUATION IS NOT INTENDED, AND MUST NOT BE
CONSTRUED, AS A RECOMMENDATION AS TO THE
ADVISABILITY OF PURCHASING SHARES OF COMMON STOCK
OR THE LIKELY PRICE AT WHICH SHARES WILL TRADE
AFTER THE OFFERING. The aggregate purchase price of
the Common Stock sold in the Offering will equal
37.4% of the updated Independent Valuation to be
delivered by RP Financial prior to consummation of
the Reorganization and Stock Issuance. See "The
9
<PAGE>
Reorganization and Stock Issuance -- Stock Pricing
and Number of Shares to be Issued."
In the event members do not approve the
establishment of the Foundation, the Company and
the Bank intend to complete the Reorganization and
Stock Issuance without establishing the Foundation.
If the Foundation is not established, RP Financial
has indicated that the Independent Valuation would
increase to a range of from $39,950,000 to
$54,050,000 with a midpoint of $47,000,000. The
Increased Range will be further updated immediately
prior to the completion of the Offering and could
be increased to up to $62,157,500 without a
resolicitation of subscribers based on market and
financial conditions at the completion of the
Offering. In such event, the public offering range
would be structured such that the public will have
a 39.0% ownership interest in the Company, and, as
a result, the shares to be sold in the Offering
would be 1,558,266, 1,833,254, 2,108,242 and
2,424,478 at the minimum, midpoint, maximum and
maximum, as adjusted, respectively, of the
Increased Range. See "The Reorganization and Stock
Issuance -- Stock Pricing and Number of Shares to
be Issued."
THE SUBSCRIPTION, The shares of Common Stock to be issued and sold
COMMUNITY AND in the Offering are being offered at the Purchase
SYNDICATED COMMUNITY Price of $10.00 per share in the Subscription
OFFERINGS Offering pursuant to nontransferable Subscription
Rightsthe following order of priority: (i) Eligible
Account Holders (i.e., depositors whose accounts in
the Bank totaled $50.00 or more on September 30,
1996); (ii) the ESOP (i.e., the Company's tax-
qualified stock benefit plan); (iii) Supplemental
Eligible Account Holders (i.e., depositors whose
accounts in the Bank totaled $50.00 or more on
March 31, 1998, other than Eligible Account
Holders); and (iv) Other Members (i.e., certain
depositors and borrower members of the Bank as of
__________, 1998, other than Eligible Account
Holders and Supplemental Eligible Account Holders).
Subscription Rights received in any of the
foregoing categories will be subordinated to the
Subscription Rights received by those in a prior
category, with the exception that any shares of
Common Stock sold in excess of the maximum of the
Estimated Valuation Range, as defined herein, may
first be sold to the ESOP. The Company may offer
any shares of Common Stock not subscribed for in
the Subscription Offering at the same price in the
Community Offering to members of the general public
to whom the Company delivers a copy of this
Prospectus and the Stock Order Form.
In the Community Offering, preference will be given
to natural persons and trusts of natural persons
who are permanent residents of the Local Community.
Subscription Rights will expire if not exercised by
12:00 Noon, Eastern Time, on _______ ___, 1998,
unless extended (the "Expiration Date"). THE
COMPANY AND THE BANK RESERVE THE ABSOLUTE RIGHT TO
ACCEPT OR REJECT ANY ORDERS IN THE COMMUNITY
OFFERING, IN WHOLE OR IN PART, EITHER AT THE TIME
OF RECEIPT OF AN ORDER OR AS SOON AS PRACTICABLE
FOLLOWING THE EXPIRATION DATE.
It is anticipated that shares of Common Stock not
otherwise subscribed for in the Subscription
Offering and Community Offering, if any, may be
offered at the discretion of the Company to certain
members of the general public as part of a
Syndicated Community Offering on a best efforts
basis by a selling group of selected broker-dealers
to be managed by Trident Securities. See "The
Reorganization and Stock Issuance -- Syndicated
Community Offering."
10
<PAGE>
The Bank and the Company have engaged Trident
Securities to consult with and advise the Company
and the Bank with respect to the Offering, and
Trident Securities has agreed to solicit
subscriptions and purchase orders for shares of
Common Stock in the Offering. Trident Securities
will receive sales commissions with respect to
shares sold in the Subscription Offering and the
Community and Syndicated Community Offerings, if
any. The Company and the Bank have agreed to
indemnify Trident Securities against certain
liabilities, including certain liabilities under
the Securities Act of 1933, as amended (the
"Securities Act"). See "The Reorganization and
Stock Issuance -- Plan of Distribution and
Marketing Agent."
The Bank has established a Stock Information
Center, which will be managed by Trident
Securities, to coordinate the Offering, including
tabulation of orders and answering questions about
the Offering by telephone. All subscribers will be
instructed to mail payment to the Stock Information
Center or deliver payment directly to any office of
the Bank. Payment for shares of Common Stock may be
made by cash (if delivered in person), check or
money order or by authorization of withdrawal from
deposit accounts maintained with the Bank. Such
funds will not be available for withdrawal and will
not be released until the Offering is completed or
terminated. See "The Reorganization and Stock
Issuance -- Subscriptions for Stock in Subscription
and Community Offerings."
BALTIMORE COUNTY SAVINGS In furtherance of the Bank's long-standing
BANK, F.S.B. FOUNDATION commitment to its local community, the Company's
Plan of Stock Issuance, as amended, provides for
the establishment of a charitable foundation in
connection with the Reorganization and Stock
Issuance. The Plan of Stock Issuance provides that
the Bank and the Company will create the
Foundation, which will be incorporated under
Maryland law as a non-stock corporation. The
Company will contribute 75,000 shares of Common
Stock to fund the Foundation following consummation
of the Stock Issuance. The Company and the Bank
believe that the funding of the Foundation with
Common Stock is a means of establishing a common
bond between the Bank and its community and thereby
enables the Bank's community to share in any growth
and success of the Company over the long term. By
further enhancing the Bank's visibility and
reputation in its local community, the Bank
believes that the Foundation will enhance the long-
term value of the Bank's community banking
franchise.
The Foundation will be dedicated to charitable
purposes within the Baltimore metropolitan area,
including, but not limited to, providing grants or
donations for housing assistance, scholarships,
local education, not-for-profit medical facilities,
assistance to community groups and other similar
types of organizations or projects. The authority
for the affairs of the Foundation will be vested in
the board of directors of the Foundation, which
initially will be comprised of three members of the
Company's and the Bank's Board of Directors and two
other individuals chosen for their demonstrated
commitment and service to charitable and community
service causes. 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
stated purposes for which the Foundation was
established, and also will be responsible for
directing the activities of the Foundation,
including matters related to ownership of the
75,000 shares of Common Stock held by the
Foundation. However, it is expected that
establishment of the Foundation will be subject to
certain conditions, including, among others, a
requirement that the Common Stock of the Company
held by the
11
<PAGE>
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.
The 75,000 shares of Common Stock proposed to be
contributed to the Foundation will equal between
1.2% and 1.9% of the Common Stock that will be
outstanding following consummation of the
Reorganization and Stock Issuance at the maximum,
as adjusted and minimum, respectively, of the
Estimated Valuation Range. The contribution, once
made, will not be recoverable by the Company or the
Bank. After funding the Foundation with 75,000
shares of Common Stock, assuming the final
valuation is $46,250,000 at the midpoint of the
Estimated Valuation Range, the Company will have
4,625,000 shares issued and outstanding, of which
the Foundation will own 1.6%. 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 BETWEEN 1.2%
AND 1.9%. SEE "PRO FORMA DATA."
If the Foundation is established, the Company will
recognize an expense in the full amount of the
contribution during the quarter in which the
contribution is made, which is expected to be the
second quarter of calendar year 1998. Such expense
will be offset, in part, by a tax benefit that may
be realized over a period of up to six years,
subject to an annual limitation based on 10% of the
Company's annual taxable income. Such expense would
reduce earnings and have a material impact on the
Company's earnings for the quarter and the year.
Assuming a contribution of $750,000 in Common
Stock, and assuming a marginal tax rate of 39.0%,
the Company estimates a net tax-effected expense of
$457,000. For further discussion of the Foundation
and its impact on purchasers in the Offering, see
"Risk Factors -- Establishment of the Foundation,"
"Pro Forma Data" and "Comparison of Valuation and
Pro Forma Information with No Foundation."
PURCHASE LIMITATIONS Except for the ESOP, which intends to purchase 8%
of the total number of shares of Common Stock
issued in the Offering, no Eligible Account Holder,
Supplemental Eligible Account Holder or Other
Member, in their capacity as such, may subscribe in
the Subscription Offering for more than $200,000 of
the Common Stock to be sold in the Offering; no
person, together with associates of or persons
acting in concert with such person, including
individuals on a joint account or having the same
address, may purchase in the Community Offering in
the aggregate more than $200,000 of the Common
Stock to be sold in the Offering; and no person,
together with associates of or persons acting in
concert with such person, including individuals on
a joint account or having the same address, may
purchase in the Offering more than the overall
maximum purchase limitation of $300,000 of the
Common Stock to be sold in the Offering.
INSIDER PARTICIPATION The directors and executive officers of the Bank
have indicated their intention to purchase an
aggregate of approximately $1.2 million of Common
Stock (124,992 shares, or 8.5%, 7.2%, 6.3% and 5.5%
of the shares to be issued in the Offering at the
minimum, midpoint, maximum and maximum, as
adjusted, respectively, of the Estimated Valuation
Range). There is no formal agreement among the
officers and directors and their affiliates
regarding their purchases of Common Stock. In
addition, 8% of the shares issued in the Offering
are expected to be purchased by the ESOP. See
"Proposed Management Purchases to be sold in the
Offering."
12
<PAGE>
POTENTIAL BENEFITS OF THE ESOP. The ESOP intends to purchase an aggregate
REORGANIZATION AND STOCK of 8% of the shares of Common Stock issued in the
ISSUANCE TO MANAGEMENT Offering (117,572,138,320, 159,068 and 182,928
AND DIRECTORS shares of Common Stock at the minimum, midpoint,
maximum and maximum, as adjusted of the Estimated
Valuation Range, respectively). For additional
information, see "Management of the Bank -- Certain
Benefit Plans and Agreements --Employee Stock
Ownership Plan."
Change-in-Control Severance Agreements.
Concurrently with its adoption of the Plan of
Reorganization on October 22, 1997 the Bank amended
and restated Change-of-Control Severance Agreements
(the "Severance Agreements") previously entered
into with certain management officials. The
aggregate payments that would be made to the
executive officers named in the change-in-control
severance agreements assuming termination of
employment under the circumstances described in
those agreements at December 31, 1997 would have
been approximately $1.2 million. See "Management of
the Bank -- Certain Benefit Plans and Agreements --
Change-in-Control Severance Agreements."
Option Plan. No earlier than six months following
consummation of the Stock Issuance, the Company
intends to submit for stockholder consideration a
stock option and incentive plan for the benefit of
the directors, officers and key employees of the
Company and the Bank (the "Option Plan"), pursuant
to which the Company intends to reserve a number of
authorized but unissued shares of Common Stock
equal to 10% of the Common Stock to be issued in
the Offering (146,965, 172,900, 198,835 and 228,660
shares of Common Stock at the minimum, midpoint,
maximum and maximum, as adjusted of the Estimated
Valuation Range, respectively), for issuance
pursuant to stock options and stock appreciation
rights. See "Management of the Bank -- Certain
Benefit Plans and Agreements -- Stock Option
Plan."
Management Recognition Plan. No earlier than six
months following consummation of the Stock
Issuance, the Company intends to submit for
stockholder consideration a Management Recognition
Plan (the "MRP") for the benefit of the directors
and officers of the Company and the Bank. It is
expected that the MRP will be submitted to
stockholders for approval at the same time as the
Option Plan. The Company will contribute funds to
the MRP to enable it to acquire a number of shares
of Common Stock equal to 4% of the number of shares
of Common Stock to be issued in the Offering. Under
the MRP, awards of Common Stock, subject to vesting
and other restrictions, will be awarded to
directors and key employees at no cost to them. See
"Management of the Bank -- Certain Benefit Plans
and Agreements -- Management Recognition Plan."
PROSPECTUS DELIVERY AND To ensure that each subscriber receives a
PROCEDURE FOR Prospectus at least 48 hours prior to the
PURCHASING SHARES Expiration Date in accordance with Rule 15c2-8 of
the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), no Prospectus will be mailed
any later than five days prior to the Expiration
Date or hand delivered any later than two days
prior to such date. Execution of a Stock Order Form
will confirm receipt or delivery in accordance with
Rule 15c2-8. Stock Order Forms will be distributed
only with a Prospectus. The executed Stock Order
Form must be accompanied by payment by check, money
order, bank draft or withdrawal authorization to an
existing account at the Bank.
13
<PAGE>
To ensure that Eligible Account Holders,
Supplemental Eligible Account Holders and Other
Members are properly identified as to their stock
purchase priorities, as well as for purposes of
allocating shares based on subscribers' deposit
balances in the event of oversubscription, such
persons must list all of their deposit accounts at
the Bank on the Stock Order Form. Failure to list
all such deposit accounts may result in the
inability of the Company to fill all or part of a
subscription order. Neither the Company, the Bank
nor any of their agents shall be responsible for
any order on which all deposit accounts of the
subscriber have not been fully and accurately
disclosed.
NON-TRANSFERABILITY OF Applicable federal regulations provide that prior
SUBSCRIPTION RIGHTS to the completion of the Offering, no person shall
transfer or enter into any agreement or
understanding to transfer the legal or beneficial
ownership of the Subscription Rights issued under
the Plan of Stock Issuance or the shares of Common
Stock to be issued upon their exercise. Persons
violating such prohibition may lose their right to
subscribe for stock in the Offering and may be
subject to sanctions by the OTS. Each person
exercising Subscription Rights will be required to
certify that his or her purchase of Common Stock is
solely for the purchaser's own account and that
there is no agreement or understanding regarding
the sale or transfer of such shares.
USE OF PROCEEDS The amount of proceeds from the sale of the Common
Stock in the Offering will depend upon the total
number of shares actually sold, the numbers of
shares of Common Stock sold in the Subscription
Offering and the Community Offering and Syndicated
Community Offering, if any, and the actual expenses
of the Reorganization and Stock Issuance. As a
result, the actual net proceeds from the sale of
the Common Stock cannot be determined until the
Stock Issuance is completed. It is anticipated,
however, that the net proceeds will be between
$14.1 million and $19.2 million if the final
valuation is within the Estimated Valuation Range
and that the net proceeds will be approximately
$22.1 million if the final valuation is increased
to 15% above the maximum of the Estimated Valuation
Range See "Pro Forma Data."
The Company has received OTS approval to purchase
all of the capital stock of the Bank to be issued
in the Reorganization in exchange for at least 50%
of the net proceeds. Assuming the sale of 1,729,000
shares of Common Stock at the midpoint of the
Estimated Valuation Range and the purchase of 8% of
such shares by the ESOP, the Bank would receive
$8.2 million in cash, and the Company would retain
approximately $6.8 million in cash and $1.4 million
in the form of a note receivable from the ESOP. The
ESOP note receivable will be for a ten-year term
and carry an interest rate, which adjusts annually,
equal to the prime rate as published in The Wall
Street Journal. --- ----
------ -------
The proceeds retained by the Company after funding
the ESOP initially will be invested in short-term
and intermediate-term securities, including cash
and cash equivalents and U.S. government and agency
obligations. Also, such proceeds will be available
for a variety of corporate purposes, including
funding the MRP, if the MRP is implemented, future
acquisitions and diversification of business,
additional capital contributions, dividends to
stockholders and future repurchases of the Common
Stock to the extent permitted by applicable
regulations. The Company currently has no specific
plans, intentions, arrangements or understandings
regarding any acquisitions, diversification of
business, additional capital contributions or
repurchases of Common Stock.
The proceeds contributed to the Bank will
substantially increase the capital of the Bank. The
Bank ultimately intends to use such funds for
general corporate purposes, including the
origination of loans and other investments. It is
expected that in the interim all or
14
<PAGE>
part of the proceeds will be invested in short-term
and intermediate-term securities, including cash
and cash equivalents and U.S. government and agency
obligations. In addition, the Bank will use a
portion of the net proceeds, currently estimated to
be $500,000, to modernize the Bank's facilities,
including installing new automated teller machines
("ATMs") and upgrading its computer systems.
Further, the Bank currently is negotiating to lease
land in Harford County on which it will build a new
branch. The Bank intends to use a portion of the
net proceeds to pay for all costs including
construction costs, which are estimated to be
$750,000.
In addition to the new branch office for which a
lease currently is under negotiation, although
there are no specific plans as of the date of this
Prospectus, in the future the Bank desires to open
several new branch offices in its market area and
to possibly relocate an existing branch office. The
Bank's experience has been that construction and
other costs for a new or relocated branch office
generally amount to between $500,000 and $750,000
and that annual lease and other operating expenses
for a new branch office would be expected to be
between approximately $150,000 and $200,000
annually.
MARKET FOR THE The Company, as a newly organized company, has
COMMON STOCK never issued capital stock, and consequently there
is no current established market for its Common
Stock. The Company has received approval to have
the Common Stock listed on the Nasdaq National
Market System under the symbol "BCSB," conditioned
upon completion of the Reorganization and Stock
Issuance and satisfaction of Nasdaq National Market
System entry requirements. Trident Securities has
advised the Company that it intends to act as a
market maker for the Common Stock, but is not
obligated to do so. In addition, Trident Securities
and the Company will seek to encourage and assist
at least one other market maker to make a market in
the Common Stock. The Company believes it will be
successful in finding a second market maker. No
assurance can be given, however, that an active and
liquid market for the Common Stock will develop.
Further, no assurance can be given that an investor
will be able to sell the Common Stock at or above
the Purchase Price after the Stock Issuance. See
"Market for the Common Stock."
DIVIDENDS The Company intends to pay an initial annual cash
dividend of $.50 per share on the Common Stock, to
be paid on a quarterly basis. The first dividend is
expected to be declared and paid following the
second full quarter after completion of the
Reorganization and Stock Issuance. There can be no
assurance, however, that dividends will be paid,
or, if paid, what the amount of the dividends will
be, or whether dividends, once paid, will continue
to be paid. If the MHC elects not to waive receipt
of dividends from the Company, the Company will
have reduced flexibility as to the amount of
dividends that can be paid. See "Risk Factors --
Waiver of Dividends by the MHC" and "Waiver of
Dividends by the MHC." No dividends will be paid if
doing so would impair capital. Furthermore, the
Company has committed to the OTS that it will not
pay or undertake any action to effect a return of
capital for one year after completion of the Stock
Issuance. See "Dividend Policy."
WAIVER OF DIVIDENDS BY It has been the recent practice of the OTS to
THE MHC permit mutual holding companies to waive the
receipt of cash dividends declared by savings
association subsidiaries or subsidiary holding
companies on a case-by-case basis and subject to
the satisfaction of certain conditions, although
there can be no assurance that the OTS will permit
future dividend waivers, or of the terms of such
permitted waivers. The Board of Directors of
the
15
<PAGE>
MHC, which initially will consist of the same
individuals as the Board of Directors of the Bank,
will determine whether the MHC will waive receipt
of such dividends as such dividends are declared by
the Company. The MHC may elect to receive dividends
and to utilize the dividends received, if any, for
general corporate purposes and to fund the purchase
of Common Stock in the open market, as well as the
payment of miscellaneous expenses. Any waiver of
dividends by the MHC may result in an adjustment to
the ratio pursuant to which shares of Common Stock
are exchanged for shares of a stock holding company
should the MHC convert from the mutual to stock
form of organization. Such an adjustment would have
the effect of diluting the ownership interests of
stockholders other than the MHC. The Board of
Directors of the MHC presently intends to waive the
receipt of dividends declared by the Company and to
seek OTS approval to do so. See "Risk Factors --
Waiver of Dividends by the MHC," "MHC Conversion to
Stock Form," and "Dividend Policy."
CONVERSION OF THE MHC Although the MHC may convert to the stock form of
TO STOCK FORM organization (a "Conversion Transaction") in the
future and OTS regulations provide for a Conversion
Transaction, there can be no assurance when, if
ever, a Conversion Transaction will occur, or what
conditions may be imposed by the OTS on any
Conversion Transaction. Any Conversion Transaction
would be subject to federal securities laws and the
regulations of the OTS in effect at the time of the
Conversion Transaction. In the event of a
Conversion Transaction, subject to OTS approval,
(i) the stockholders of the Company other than the
MHC will be entitled to exchange their shares of
Common Stock for shares of the stock holding
company in a manner that is fair and reasonable to
the stockholders and subject to the stock purchase
limitations of the OTS conversion regulations
(which may require, as a condition to the approval
of the Conversion Transaction by the OTS, that
certain insiders of the Company who have
accumulated shares in excess of the stock purchase
limitations of the Conversion Transaction to divest
such shares, and may also potentially restrict or
prohibit additional purchases of common stock of
the stock holding company in the Conversion
Transaction by other stockholders that could be in
excess of such stock purchase limitation), or (ii)
the MHC may conduct a Conversion Transaction that
does not exchange shares of Common Stock for stock
of the stock holding company; provided, however,
the MHC must purchase all shares not owned by it
simultaneously with the closing of such Conversion
Transaction at the fair market value of such
shares, determined as if such shares had such
exchange rights, as determined by an independent
appraisal. The precise treatment of a Conversion
Transaction by the OTS cannot be determined at this
time and the OTS may impose, or the regulations of
the OTS may require, restrictions or conditions
that may adversely affect minority stockholders.
See "MHC Conversion to Stock Form."
RISK FACTORS See "Risk Factors" for a discussion of certain
factors that should be considered by prospective
investors.
16
<PAGE>
SELECTED CONSOLIDATED FINANCIAL INFORMATION AND OTHER DATA
The following summary of selected consolidated financial information
and other data of Baltimore County Savings Bank, F.S.B. does not purport to be
complete and is qualified in its entirety by reference to the detailed
information and Consolidated Financial Statements and accompanying Notes
appearing elsewhere in this Prospectus.
SELECTED FINANCIAL CONDITION DATA
<TABLE>
<CAPTION>
At At September 30
December 31, -----------------------------------------------------------------
1997 1997 1996 1995 1994 1993
--------- --------- --------- -------- --------- ----------
(In thousands)
Total assets.......................... $ 250,582 $ 251,738 $ 258,854 $ 240,683 $ 216,786 $ 217,666
Loans receivable, net................. 159,532 158,676 154,560 145,795 129,210 135,397
Cash.................................. 2,857 3,909 4,786 4,425 3,780 3,197
Interest-bearing deposits in other
banks................................ 20,159 8,206 9,065 15,347 17,199 28,457
Federal funds sold.................... 5,817 7,102 6,225 4,871 2,101 800
Investment securities:
Available for sale................. -- -- 101 2,088 1,270 4,599
Held to maturity................... 20,093 30,323 36,298 25,900 15,499 3,500
Mortgage-backed securities:
Available for sale................. -- -- -- -- -- --
Held to maturity................... 36,110 37,189 39,771 35,047 39,697 31,305
FHLB stock............................ 1,433 1,433 1,301 1,292 1,280 1,483
Deposits.............................. 222,245 224,656 233,311 217,868 195,813 198,873
FHLB advances......................... -- -- -- -- -- --
Retained earnings - substantially
restricted........................... 24,516 23,858 21,913 20,697 19,082 17,074
At At September 30
December 31, -----------------------------------------------------------------
1997 1997 1996 1995 1994 1993
---------- -------- -------- -------- -------- ---------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Number of:
Real estate loans outstanding....... 2,057 2,109 1,882 1,734 1,614 1,795
Savings accounts.................... 26,121 27,199 30,326 27,973 21,122 21,344
Offices open........................ 6 7 8 8 8 8
</TABLE>
17
<PAGE>
SELECTED OPERATIONS DATA
<TABLE>
<CAPTION>
Three Months Ended
December 31, Years Ended September 30,
---------------------- -----------------------------------------------------------------
1997 1996 1997 1996 1995 1994 1993
------- ------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Interest income....................... $ 4,642 $ 4,933 $ 19,458 $ 19,064 $ 17,126 $ 15,822 $ 17,529
Interest expense...................... 2,451 2,685 10,323 10,636 8,974 6,968 7,881
------- ------- -------- -------- -------- -------- --------
Net interest income before
provision for loan losses............ 2,191 2,248 9,135 8,428 8,152 8,854 9,648
Provision for (reduction of) loan
losses............................... 36 (1) 286 434 255 (137) (465)
------- ------- -------- -------- -------- -------- --------
Net interest income................... 2,155 2,249 8,849 7,994 7,897 8,991 10,113
Other income (loss)................... 483 225 686 1,075 (1) 613 383 (959)
Non-interest expense.................. 1,554 1,452 6,257 7,153 (2) 5,821 5,351 5,147
------- ------- -------- -------- -------- -------- --------
Income before income taxes............ 1,084 1,022 3,278 1,916 2,689 4,023 4,007
Income tax provision.................. 427 415 1,301 712 1,112 1,603 1,483
------- ------- -------- -------- -------- -------- --------
Cumulative effect of a change in
accounting for income taxes......... -- -- -- -- -- (394) --
------- ------- -------- -------- -------- -------- --------
Net Income............................ $ 657 $ 607 $ 1,977 $ 1,204 $ 1,577 $ 2,026 $ 2,524
======= ======= ======== ======== ======== ======== ========
</TABLE>
_______________
(1) Includes a $652,000 gain from the liquidation of a real estate
development joint venture. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Comparison of Operating
Results for the Years Ended September 30, 1997 and 1996."
(2) Includes a one-time pre-tax expense of $1.3 million from a special
assessment to recapitalize the SAIF. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Comparison
of Operating Results for the Years Ended September 30, 1997 and 1996 --
Non-Interest Expenses."
18
<PAGE>
SELECTED FINANCIAL RATIOS AND OTHER DATA
<TABLE>
<CAPTION>
At or for the
Three Months Ended At or for the
December 31, Years Ended September 30,
----------------------- ------------------------------------------------
1997 (1) 1996 (1) 1997 1996 1995 1994 1993
---------- ---------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
PERFORMANCE RATIOS:
Return on average assets (net income
divided by average total assets).......... 1.05% 0.93% .76% .47% .68% .91% 1.12%
Return on average retained earnings
(net income divided by average
retained earnings)........................ 10.85 10.97 8.64 5.66 7.93 11.21 15.96
Interest rate spread (combined
weighted average interest rate
earned less combined weighted
average interest rate cost)............... 3.32 3.37 3.41 3.26 3.52 4.12 4.47
Net interest margin (net interest
income divided by average
interest-earning assets).................. 3.64 3.60 3.67 3.49 3.74 4.24 4.57
Ratio of average interest-earning assets
to average interest-bearing liabilities... 107.74 105.42 106.20 104.99 105.20 103.48 102.51
Ratio of non-interest expense to
average total assets...................... 2.47 2.22 2.39 2.81 2.53 2.40 2.29
ASSET QUALITY RATIOS:
Nonperforming assets to total assets at
end of period............................. .64 .98 .76 1.07 .96 1.41 2.10
Nonperforming loans to gross loans at
end of period............................. .92 1.42 1.11 1.38 .58 .76 1.88
Allowance for loan losses to gross loans
at end of period.......................... .59 .49 .59 .56 .50 .39 .43
Allowance for loan losses to nonperforming
loans at end of period.................... 64.33 34.91 53.07 40.49 87.07 51.77 23.13
Provision for loan losses to gross loans..... .02 (.00) .17 .26 .16 (.10) (.33)
Net charge-offs to average loans
outstanding............................... .02 .07 .15 .20 .01 (.05) (.17)
CAPITAL RATIOS:
Retained earnings to total assets at end
of period................................. 9.37 8.97 9.48 8.47 8.60 8.80 7.84
Average retained earnings to average
assets.................................... 9.64 8.45 8.75 8.36 8.62 8.09 7.02
</TABLE>
_______________
(1) Ratios for the three months ended December 31, 1997 and 1996 are
annualized.
RECENT DEVELOPMENTS
The following summary of selected consolidated financial information and
other data does not purport to be complete and is qualified in its entirety by
reference to the detailed information and Consolidated Financial Statements and
accompanying Notes appearing elsewhere in this Prospectus. Selected financial
information at March 31, 1998 and December 31, 1997 and for the three and six
months ended March 31, 1998 and 1997 have been derived from unaudited financial
statements. In the opinion of management of the Bank, such information reflects
all adjustments (which consist only of normal recurring adjustments) necessary
for a fair presentation of the selected financial information and other data.
The results of operations for the three months and six months ended March 31,
1998 are not necessarily indicative of the results which may be expected for any
other period.
<TABLE>
<CAPTION>
SELECTED FINANCIAL CONDITION DATA
At At At
March 31, December 31, September 30,
1998 1997 1997
---------- ----------------- -------------
(In thousands)
<S> <C> <C> <C> <C>
Total assets.................................. $254,301 $250,582 $251,738
Loans receivable, net......................... 160,320 159,532 158,676
Cash.......................................... 3,950 2,857 3,909
Interest-bearing deposits in other banks...... 21,201 20,159 8,206
Federal funds sold............................ 8,658 5,817 7,102
Investment securities:
Available for sale......................... -- -- --
Held to maturity........................... 17,250 20,093 30,323
Mortgage-backed securities:
Available for sale......................... -- -- --
Held to maturity........................... 36,611 36,110 37,189
FHLB stock.................................... 1,512 1,433 1,433
Deposits...................................... 224,901 222,245 224,656
FHLB advances................................. -- -- --
Retained earnings - substantially restricted.. 25,122 24,516 23,858
</TABLE>
SELECTED OPERATIONS DATA
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
March 31, March 31,
---------------- ---------------------
1998 1997 1998 1997
-------- ------ -------- --------
(In thousands)
<S> <C> <C> <C> <C>
Interest income............................... $ 9,211 $9,839 $ 4,569 $ 4,906
Interest expense.............................. 4,888 5,346 2,437 2,661
-------- ------ -------- --------
Net interest income before provision
for loan losses............................. 4,323 4,493 2,132 2,245
Provision for (reduction of) loan losses...... (39) 54 (75) 55
-------- ------ -------- --------
Net interest income........................... 4,362 4,439 2,207 2,190
Other income.................................. 626 402 143 177
Noninterest expense........................... 2,899 2,926 1,345 1,474
-------- ------ -------- --------
Income before income taxes.................... 2,089 1,915 1,005 893
Income tax provision.......................... 825 766 398 351
-------- ------ -------- --------
Net income.................................... $ 1,264 $1,149 $ 607 $ 542
======== ====== ======== ========
</TABLE>
<PAGE>
SELECTED FINANCIAL RATIOS AND OTHER DATA
<TABLE>
<CAPTION>
At or for the At or for the
Six Months Ended Three Months Ended
March 31, March 31,
---------------------- ----------------------
1998 1997 1998 1997
---------- ---------- ------- ----------
<S> <C> <C> <C> <C>
PERFORMANCE RATIOS: (1)
Return on average assets (net income
divided by average total assets).................... 1.00% 0.87% 0.96% 0.82%
Return on average retained earnings (net income
divided by average retained earnings)............... 10.32 10.22 9.78 9.53
Interest rate spread (combined weighted average
interest rate earned less combined weighted
average interest rate cost)......................... 3.24 3.32 3.17 3.28
Net interest margin (net interest income divided
by average interest-earning assets)................. 3.57 3.57 3.49 3.54
Ratio of average interest-earning assets to average
interest-bearing liabilities........................ 108.16 105.91 108.06 106.13
Ratio of non-interest expense to average total assets.. 2.30 2.23 2.12 2.23
ASSET QUALITY RATIOS:
Nonperforming assets to total assets at end of period.. 0.43 0.84 0.43 0.84
Nonperforming loans to gross loans at end of period.... 0.56 1.31 0.56 1.31
Allowance for loan losses to gross loans at end of
period............................................. 0.54 0.51 0.54 0.51
Allowance for loan losses to nonperforming loans
at end of period.................................... 96.98 39.23 96.98 39.23
Provision for loan losses to gross loans............... (0.02) 0.03 (0.05) 0.03
Net charge-offs to average loans outstanding........... 0.02 0.09 0.01 0.02
CAPITAL RATIOS:
Retained earnings to total assets at end of period..... 9.88 8.73 9.88 8.73
Average retained earnings to average assets............ 9.73 8.55 9.80 8.60
</TABLE>
_______________
(1) Ratios are annualized.
<PAGE>
GENERAL
In October 1997, the Bank sold its deposits in its Severna Park branch
office. In connection with such sale, the Bank sold deposits totaling $6.6
million and recognized a $339,000 gain representing a premium paid by the buyer
on the deposits sold. The Bank has terminated its lease at this location.
In February 1998, the Bank leased a drive-in facility at its Dundalk branch
facility. The Bank expects to open the drive-in facility in May 1998. As a
result of the lease, the Bank will make capital improvements of approximately
$125,000 and will have additional expenses of approximately $25,000 per
year.
In March 1998, the Bank signed a lease to relocate its Bel Air branch
office from a store front to a free-standing building within the same shopping
center. The relocated site will make capital improvements of approximately
$125,000 and will provide the branch with three drive-through lanes and an ATM
machine. The new lease is expected to increase the Bank's annual noninterest
expenses by approximately $150,000.
Management anticipates that the branch expansion will initially cause
increased operating expenses but will generate long-term growth for the Bank.
See "Risk Factors -- Potential Cost of ESOP and MRP and Potential Future
Increases in Expenses."
COMPARISON OF FINANCIAL CONDITION AT MARCH 31, 1998 AND DECEMBER 31, 1997
During the quarter ended March 31, 1998, the Bank achieved modest asset and
liability growth, with assets increasing by $3.7 million, or 1.5%, from $250.6
million at December 31, 1997 to $254.3 million at March 31, 1998. Most of the
increase in assets was attributable to an increase in cash, interest-bearing
deposits in other banks and federal funds sold, which increased by $5.0 million,
or 17.4%, from 28.8 million at December 31, 1997 to $33.8 million at March 31,
1998. The Bank invested proceeds from maturing investment securities in federal
funds sold in order to have funds available to fund loans expected to close
during the quarter ending June 30, 1998. The Bank's investment securities
decreased by $2.8 million, or 13.9%, from $20.1 million at December 31, 1997 to
$17.3 million at March 31, 1998, as proceeds from maturing investment securities
were invested primarily in federal funds in anticipation of loans expected to
close during the quarter ending June 30, 1998. Loans receivable, net increased
by $788,000, or .5%, from $159.5 million at December 31, 1997 to $160.3 million
at March 31, 1998. The increase in the Bank's loan portfolio was due primarily
to increased originations of single-family residential mortgage loans as a
result of increased loan demand. The Bank was able to generate modest deposit
growth during the quarter ended March 31, 1998, as deposits increased by $2.7
million, or 1.2%, from $222.2 million at December 31, 1997 to $224.9 million at
March 31, 1998. The Bank historically has experienced a modest seasonal increase
in deposits during the March quarter as Bank customers restore deposits depleted
during the Christmas season.
COMPARISON OF OPERATING RESULTS FOR THE THREE AND SIX MONTHS ENDED MARCH 31,
1998 AND MARCH 31, 1997
Net Income. Net income increased by $65,000, from $542,000 for the three
months ended March 31, 1997 to $607,000 for the three months ended March 31,
1998. The increase in net income was primarily attributable to a $75,000
reduction in the provision for loan losses during the three months ended March
31, 1998, as opposed to a provision for loan losses of $55,000 recorded during
the three months ended March 31, 1997. Net income increased by $115,000, from
$1.1 million for the six months ended March 31, 1997 to $1.3 million for the six
months ended March 31, 1998. The increase in net income during the six months
ended March 31, 1998 was due primarily to a $39,000 reduction in the provision
for loan losses recorded during the six months ended March 31, 1998, as compared
to a provision for loan losses of $54,000 recorded during the six months ended
March 31, 1997. The increase in net income during the six months ended March
31, 1998 also reflected a $224,000 increase in other income, which more than
offset a $170,000 decrease in net interest income.
Net Interest Income. Net interest income was $2.1 million for the three
months ended March 31, 1998, compared to $2.2 million for the three months ended
March 31, 1997, representing a decrease of $113,000, or 5.0%. Net interest
income was $4.3 million for the six months ended March 31, 1998, as compared to
$4.5 million for the six months ended March 31, 1997, representing a decrease of
$170,000, or 3.8%. The decreases in net interest income were
<PAGE>
the result of decreases in the Bank's interest rate spread during the respective
periods. The interest rate spread decreased from 3.28% for the three months
ended March 31, 1997 to 3.17% for the three months ended March 31, 1998 and from
3.32% for the six months ended March 31, 1997 to 3.24% for the six months ended
March 31, 1998. The Bank's interest rate spread decreased as the yield on
interest-earning assets, primarily loans receivable, decreased during a
decreasing market interest rate environment while competitive pressures did not
permit the Bank to lower deposit rates as quickly. The Bank's ratio of average
interest-earning assets to average interest-bearing liabilities increased from
106.13% for the three months ended March 31, 1997 to 108.06% for the three
months ended March 31, 1998 and from 105.91% for the six months ended March 31,
1997 to 108.16% for the six months ended March 31, 1998.
Interest Income. Interest income decreased by $337,000, or 6.9%, from $4.9
million for the three months ended March 31, 1997 to $4.6 million for the three
months ended March 31, 1998. This decrease was due primarily to a $9.6 million,
or 3.8%, decrease in the average balance of interest-earning assets, as well as
to a 25 basis point decrease in the average yield on interest-earning assets.
Interest income decreased by $628,000, or 6.4%, from $9.8 million for the six
months ended March 31, 1997 to $9.2 million for the six months ended March 31,
1998. This decrease was due primarily to a $9.3 million, or 3.7%, decrease in
the average balance of interest-earning assets, as well as to a 22 basis point
decrease in the average yield on interest-earning assets.
Interest Expense. Interest expense, which consists almost entirely of
interest on deposits, decreased by $224,000, or 8.4%, from $2.7 million for the
three months ended March 31, 1997 to $2.4 million for the three months ended
March 31, 1998. This decrease was due primarily to a $13.3 million, or 5.6%,
decrease in the average balance of deposits from $237.2 million for the three
months ended March 31, 1997 to $224.0 million for the three months ended March
31, 1998, primarily due to decreases in the average balances of passbook savings
accounts and certificates of deposits as a result of the sale of the deposits of
the Severna Park branch office in October 1997. Interest expense decreased by
$458,000, or 8.6%, from $5.3 million for the six months ended March 31, 1997 to
$4.9 million for the six months ended March 31, 1998. This decrease was due
primarily to a $13.6 million, or 5.8%, decrease in the average balance of
deposits from $236.2 million for the six months ended March 31, 1997 to $222.6
million for the six months ended March 31, 1998, primarily due to decreases in
the average balances of passbook savings accounts and certificates of deposits
as a result of the sale of the deposits of the Severna Park branch office in
October 1997.
Provision for Loan Losses. The Bank established provisions for loan losses
of $55,000 for the three months ended March 31, 1997 and reduced its provision
for loan losses by $75,000 during the three months ended March 31, 1998. The
Bank established provisions for loan losses of $54,000 for the six months ended
March 31, 1997 and reduced its provisions for loan losses by $39,000 during the
six months ended March 31, 1998. In establishing such provisions, management
considered the level of the Bank's non-performing loans which were $927,000 and
$2.1 million at March 31, 1998 and 1997, respectively, and the levels of the
Bank's net charge-offs, which totaled $9,000, $26,000, $39,000 and $137,000
during the three months ended March 31, 1998 and 1997 and the six months ended
March 31, 1998 and 1997, respectively.
Other Income. Other income decreased by $34,000, or 19.2%, from $177,000
for the three months ended March 31, 1997 to $143,000 for the three months ended
March 31, 1998. The decrease primarily was attributable to a decrease in gains
on sale of foreclosed real estate. Total other income increased by $224,000, or
55.7%, from $402,000 for the six months ended March 31, 1997 to $626,000 for the
six months ended March 31, 1998. The increase in other income for the six
months ended March 31, 1998 was attributable to a $339,000 gain on sale of
branch deposits, as the Bank sold the deposits of its Severna Park branch in
October 1997. In connection with such sale, the Bank sold deposits totaling
$6.6 million and recognized a gain of $339,000 representing a premium paid by
the buyer on the deposits sold. Such increase was offset, in part, by the
absence during the six months ended March 31, 1998 of a gain on sale of
investment securities; the Bank earned a $51,000 gain on sale of investment
securities during the six months ended March 31, 1997.
Non-interest Expenses. Total non-interest expenses decreased by $129,000,
or 8.8%, from $1.5 million for the three months ended March 31, 1997 to $1.3
million for the three months ended March 31, 1998. Total non-interest expenses
were $2.9 million for the six months ended March 31, 1997 and 1998. The
decrease during the three months ended March 31, 1998 was due to a decrease in
salaries and related expenses and occupancy expenses, as the Bank closed its
Severna Park branch office following the sale of the deposits of that office in
October 1997, as well as to
<PAGE>
reduced pension plan costs. For the six month periods, reduced salaries and
related expense and reduced occupancy expense attributable to closing the
Severna Park branch office were offset by increased advertising expenses, as the
Bank sought to increase both loan and deposit market share.
Management believes that salaries and related expense will increase in
future periods as a result of the adoption of the ESOP and other stock benefit
plans, if adopted. Furthermore, the Bank expects other expenses will increase
as a result of the costs associated with being a public institution. Further,
the Company expects to incur an expense, currently estimated to be $457,000, net
of taxes, during the second quarter of calendar year 1998 in connection with the
establishment of the Foundation. See "Risk Factors -- Establishment of the
Foundation -- Impact on Earnings."
Income Taxes. The Bank's income tax expense was $351,000 and $398,000 for
the three months ended March 31, 1997 and 1998, respectively, and $766,000 and
$825,000 for the six months ended March 31, 1997 and 1998, respectively. The
Bank's effective tax rates were 39.3%, 39.6%, 40.0% and 39.5% for the three
months ended March 31, 1997 and 1998 and the six months ended March 31, 1997 and
1998, respectively.
LIQUIDITY AND CAPITAL RESOURCES
The Bank's liquidity and capital resources at March 31, 1998 remained
relatively unchanged from December 31, 1997. The Bank anticipates that it will
have sufficient funds available to meet commitments outstanding at March 31,
1998 to originate loans. As of March 31, 1998, the Bank's ratios of tangible
capital and core capital to adjusted total assets were 9.5%, as compared to the
required levels of 1.5% and 3.0%, respectively. The risk-based capital ratio at
that date was 18.4%, as compared to the requirement of 8.0%. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Liquidity and Capital Resources."
<PAGE>
RISK FACTORS
BEFORE INVESTING IN THE SHARES OF THE COMMON STOCK OFFERED BY THIS
PROSPECTUS, PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE MATTERS
PRESENTED BELOW.
RISK OF LOSS OF PRINCIPAL
The shares of Common Stock offered by this Prospectus are not savings
accounts or deposits and are not insured or guaranteed by the FDIC, the SAIF or
any other governmental agency, and involve investment risk, including the
possible loss of principal.
CONTROL OF THE COMPANY BY THE MHC AND ITS MEMBERS AND BOARD OF DIRECTORS
The Company is required to be a majority-owned subsidiary of the MHC
as long as the MHC remains in existence. Following the Stock Issuance and
assuming the contribution to the Foundation with 75,000 newly issued shares of
Common Stock, the MHC will own between 60.7% and 61.4% of the Company's
outstanding Common Stock. Holders of deposit accounts in the Bank will be
entitled to vote on all matters presented to the members of the MHC for
resolution by vote, including, without limitation, election of directors of the
MHC. Prior to the Reorganization, members of the Bank generally granted
revocable proxies to the Board of Directors of the Bank, and members of the MHC
may grant proxies to the Board of Directors of the MHC after the Reorganization.
According to regulations of the OTS, the revocable proxies that members of the
Bank have granted to the Board of Directors of the Bank, which confer on the
Board of Directors of the Bank general authority to cast a member's vote on any
and all matters presented to the members, shall be deemed to cover the member's
votes as members of the MHC, and such authority shall be conferred on the Board
of Directors of the MHC. The Plan of Reorganization also provides for the
transfer of previously executed proxies to the Board of Directors of the MHC.
The use of such proxies will facilitate control over the MHC by the MHC's Board
of Directors and thereby control of the Company by virtue of the MHC's ownership
of a majority of the Company's outstanding shares of Common Stock. The MHC will
be able to elect all of the members of the Board of Directors of the Company and
will be able to control the outcome of most matters presented to the
stockholders of the Company for resolution by vote, excluding certain matters
related to stock compensation plans and certain votes regarding a conversion to
stock form by the MHC. Therefore, purchasers of the Common Stock in the
Offering will be minority stockholders of the Company ("Minority Stockholders")
and, as such, will not be able to elect directors or effect a change of control
in management of the Company.
No assurances can be given that the MHC or the Company will not take
action which the Minority Stockholders believe to be contrary to their interests
at some future time. For example, the MHC or the Company could revise the
Bank's dividend policy, prevent a Conversion Transaction or defeat a candidate
for the Bank's Board of Directors or other proposals put forth by the Minority
Stockholders. Moreover, the MHC's ownership of a majority of the outstanding
shares of Common Stock, the MHC's mutual form of organization and, to a lesser
extent, provisions in the Company's Charter and Bylaws that eliminate cumulative
voting for the election of directors, authorize the issuance of additional
amounts of capital stock and require staggered terms for members of the Board of
Directors, are likely to perpetuate existing management and directors and
discourage certain transactions that involve an actual or threatened change in
control of the Company. See "Certain Restrictions on Acquisition of the Company
and the Bank."
WAIVER OF DIVIDENDS BY THE MHC
The Board of Directors of the MHC will determine whether the MHC will
waive the receipt of dividends declared by the Company each time the Company
declares a dividend. The Board of Directors of the MHC presently intends to
waive the receipt of dividends declared by the Company. OTS regulations require
the MHC to notify the OTS of any proposed waiver of the right to receive
dividends. It is the OTS' recent practice to review dividend waiver notices on
a case-by-case basis, and, in general, not to object to any such waiver if: (i)
the mutual holding company's board of
20
<PAGE>
directors determines that such waiver is consistent with such directors'
fiduciary duties to the mutual holding company's members; (ii) for as long as
the subsidiary holding company is controlled by the mutual holding company, the
dollar amount of dividends waived by the mutual holding company is considered to
be a restriction on the stockholders' equity of the subsidiary holding company,
which restriction, if material, is disclosed in the public financial statements
of the subsidiary holding company as a note to the financial statements; (iii)
the amount of any dividend waived by the mutual holding company is available for
declaration as a dividend solely to the mutual holding company, and, in
accordance with Statement of Financial Accounting Standards No. 5, where the
subsidiary holding company determines that the payment of such dividend to the
mutual holding company is probable, an appropriate dollar amount is recorded as
a liability; (iv) the amount of any waived dividend is considered as having been
paid by the subsidiary holding company in evaluating any proposed dividend under
OTS capital distribution regulations; and (v) in the event the mutual holding
company converts to stock form, the appraisal submitted to the OTS in connection
with the Conversion Transaction takes into account the amount of the dividends
waived by the mutual holding company. In addition, the OTS has announced that
the dividends waived by mutual holding companies will affect the ratio pursuant
to which shares of common stock of a subsidiary holding company held by Minority
Stockholders would be exchanged for shares of common stock of the converted
holding company in a Conversion Transaction. The OTS will not permit a pro rata
exchange if the mutual holding company has waived the receipt of cash dividends
by the subsidiary holding company. Accordingly, the precise treatment of any
Conversion Transaction cannot be assured. Any waiver of dividends by the MHC is
likely to result in an adjustment to the ratio pursuant to which shares of
Common Stock are exchanged for shares of the converted MHC in a Conversion
Transaction, which adjustment will have the effect of diluting Minority
Stockholders' interests. See "MHC Conversion to Stock Form."
MANAGEMENT SUCCESSION
Michael J. Dietz, the President of the Bank, has discussed with the
Board of Directors the possibility of his retirement. The Board of Directors
will begin shortly a search to select his successor, but has not determined who
that successor would be or whether the successor will be a member of current
management or someone not currently employed by the Bank. The Board of
Directors will seek to hire a successor who shares the Board of Directors' goal
of expanding the operations of the Company, the Bank and the MHC while
continuing to serve the credit needs of its community.
ANTICIPATED LOW RETURN ON EQUITY FOLLOWING STOCK ISSUANCE
For the three months ended December 31, 1997 and the year ended
September 30, 1997, the Bank's ratio of average retained earnings to average
assets was 9.64% and 8.75%, respectively. On a pro forma basis at December 31,
1997, assuming the sale of the midpoint of 1,729,000 shares of Common Stock in
the Offering, on a consolidated basis, the Company's ratio of stockholders'
equity to total assets would have been 14.74%. With such a high capital
position, it is doubtful that the Company will be able to quickly leverage the
capital raised in the Offering by increasing its deposits and loans and thereby
generate earnings to support its high level of capital, and, as a result, it is
expected that the Company's return on equity initially will be below industry
norms. Consequently, investors expecting a return on equity which will meet or
exceed industry standards for the foreseeable future should carefully evaluate
and consider the risk of a subpar return on equity.
POTENTIAL COST OF ESOP AND MRP AND OTHER POTENTIAL FUTURE INCREASES IN EXPENSES
It is anticipated that the ESOP will purchase 8% of the Common Stock
sold in the Offering with funds borrowed from the Company. The cost of
acquiring the ESOP shares will be $1.2 million, $1.4 million, $1.6 million and
$1.8 million at the minimum, midpoint, maximum and maximum, as adjusted,
respectively, of the Estimated Valuation Range. In accordance with the
American Institute of Certified Public Accountants ("AICPA") Statement of
Position ("SOP") 93-6, "Employers' Accounting for Employee Stock Ownership
Plans," the Company will record annual ESOP expenses in an amount equal to the
fair value of shares committed to be released to employees. If shares of Common
Stock appreciate in value over time, SOP 93-6 may increase compensation expense
relating to the ESOP over
21
<PAGE>
time. In addition, it is possible that, following the Stock Issuance, and
subject to regulatory and stockholder approval, the Company will implement the
MRP, under which employees and directors could be awarded (at no cost to them)
up to an aggregate of 4% of the shares issued in the Offering. Assuming the sale
in the Offering of the minimum, midpoint, maximum and maximum, as adjusted of
the Estimated Valuation Range, and assuming the shares of Common Stock to be
awarded under the MRP cost the Purchase Price of $10.00 per share, the reduction
to stockholders' equity of funding the MRP would be $588,000, $692,000, $795,000
and $915,000, respectively.
In addition to the ESOP and the MRP, the Bank expects to incur
additional expense as a result of a new branch office it intends to open in
Harford County, the lease for which currently is under negotiation. All costs,
including construction costs, for the new branch office are estimated to be
$750,000. The Bank also intends to utilize $500,000 of the net proceeds from
the Offering to modernize the Bank's facilities, including installing ATMs and
upgrading its computer systems. See "Use of Proceeds." Further, the Bank's
expenses are expected to increase by approximately $175,000 annually as a result
of the lease of a drive-in facility at the Dundalk branch facility and the
relocation of the Bel Air branch office. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Recent
Developments." In addition, although there are no specific plans as of the date
of this Prospectus, in the future the Bank desires to open several new branch
offices in its market area and to possibly relocate an existing branch office.
The Bank's experience has been that construction and other costs for a new or
relocated branch office generally amount to between $500,000 and $750,000 and
that annual lease and other operating expenses for a new branch office would be
expected to be between approximately $150,000 and $200,000 annually. The
expenses associated with establishing and improving branch offices will reduce
the Bank's net income in the short term.
UNCERTAINTY AS TO EXISTENCE OF GROWTH OPPORTUNITIES
In order to fully deploy post-Stock Issuance capital, if sufficient
growth opportunities are not available in its market area, the Bank may seek to
expand into suitable market areas by either establishing one or more new
branches or by acquiring another financial institution or branches of another
financial institution. The Bank's ability to expand by establishing new branch
offices is dependent on its ability to identify advantageous branch office
locations and generate new deposits and loans from those locations that will
create an acceptable level of net income for the Company. At the same time, the
Company's ability to grow through selective acquisitions of other financial
institutions or branches of such institutions is dependent on successfully
identifying, acquiring and integrating such institutions or branches. There can
be no assurance the Company will be able to generate internal growth or to
identify attractive acquisition candidates, acquire such candidates on favorable
terms or successfully integrate any acquired institutions or branches into the
Company.
STRONG COMPETITION WITHIN THE BANK'S MARKET AREA
Competition in the banking and financial services industry is intense.
In its market area, the Bank competes with commercial banks, savings
institutions, 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 the Bank and may offer certain services that the Bank does
not or cannot provide. The profitability of the Bank depends upon its continued
ability to successfully compete in its market area. See "Business of the Bank -
- - Competition."
RISKS RELATED TO CERTAIN TYPES OF LENDING AND CREDIT ENHANCEMENTS
The Bank's Board of Directors has sought to increase the Bank's
interest rate spread and reduce the Bank's exposure to interest rate risk by
offering automobile loans and acquisition and development loans. At December
31, 1997, the Bank's automobile loans totaled $30.3 million, or 18.2% of the
Bank's gross loan portfolio, and acquisition
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and development loans, which are considered to be construction loans, totaled
$2.2 million, or 1.3% of the Bank's gross loan portfolio.
Consumer loans entail greater risk than do residential mortgage loans,
particularly in the case of loans that are unsecured or loans, such as
automobile loans, that are secured by rapidly depreciable assets. Further,
management of the Bank estimates that approximately 80% of automobile loans are
originated on an indirect basis through various dealerships located in its
market area. Automobile loans originated on an indirect basis are considered to
entail greater credit risk than automobile loans originated on a direct basis
because the creditworthiness of direct borrowers generally is considered
superior to that of indirect borrowers, and because higher downpayments
generally are made by direct borrowers. In addition, during the three months
ended December 31, 1997 and 1996 and the years ended September 30, 1997 and
1996, the Bank had consumer loan charge-offs, net of recoveries, of $31,000,
$111,000, $234,000 and $292,000, respectively, virtually all of which were
related to automobile loans. The Bank periodically establishes provisions for
loan losses necessary to replenish the Bank's allowance for loan losses as a
result of the reduction to the allowance resulting from net charge-offs. Such
charge-offs and provisions for loan losses offset, in part, the higher yields
obtained on automobile loans. See "Business of the Bank -- Lending Activities -
- - Consumer Lending."
Commercial real estate lending, and acquisition and development loans
in particular, also entails significant additional risks as compared with
single-family residential property lending. Commercial real estate loans
typically involve larger loan balances to single borrowers or groups of related
borrowers. The payment experience on such loans typically is dependent on the
successful operation of the real estate project, retail establishment or
business. These risks can be significantly impacted by supply and demand
conditions in the market for office and retail space and, as such, may be
subject to a greater extent to adverse conditions in the economy generally. See
"Business of the Bank -- Lending Activities -- Commercial Real Estate
Lending."
In addition, the Bank is a party to financial instruments with off-
balance sheet risk made in the normal course of business to meet the financing
needs of its customers. These financial instruments include standby letters of
credit and lines of credit and involve varying degrees and elements of credit
risk in excess of the amount recognized in the statement of financial position.
The contract amounts of those instruments express the extent of involvement the
Bank has in this class of financial instruments and represents the Bank's
exposure to credit loss from nonperformance by the other party. The Bank
generally does not require collateral or other security to support financial
instruments with off-balance sheet credit risk. At December 31, 1997, the Bank
had commitments under standby letters of credit and lines of credit of $2.7
million and $8.9 million, respectively. See Note 3 of Notes to Consolidated
Financial Statements.
ESTABLISHMENT OF THE FOUNDATION
General. Pursuant to the Plan of Stock Issuance, the Company intends
to establish a charitable foundation in connection with the Reorganization and
Stock Issuance. The Foundation will be dedicated to charitable and educational
purposes within the Baltimore metropolitan area. The Plan of Stock Issuance
provides that the Bank and the Company will establish the Foundation, which will
be incorporated under Maryland law as a non-stock corporation. The Company will
contribute 75,000 shares of Common Stock to fund the Foundation. 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 will be established.
Dilution of Stockholders' Interests. The Company proposes to fund the
Foundation with 75,000 shares of Common Stock, which represents between 1.2% and
1.9% of the number of shares of Common Stock that will be outstanding following
consummation of the Reorganization and Stock Issuance. At the Purchase Price of
$10.00 per share, the contribution to the Foundation would have a value of
$750,000. At the midpoint of the Estimated Valuation Range, upon completion of
the Stock Issuance and establishment of the Foundation, the Company will have
4,625,000 shares of Common Stock issued and outstanding, of which the Foundation
will own 75,000 shares, or 1.6%. As a result, persons purchasing shares of
Common Stock in the Offering will have their ownership and voting interests in
the Company diluted. See "Pro Forma Data."
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Impact on Earnings. The contribution of Common Stock to the
Foundation will have an adverse impact on the Company'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 Common Stock to the Foundation in the quarter
in which it occurs, which is expected to be the second quarter of calendar year
1998. The amount of the contribution will be $750,000. 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 advisor 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 a
contribution of $750,000 in Common Stock, the Company estimates a net tax
effected expense of $457,000 (based on a 39.0% marginal tax rate). If the
Foundation had been established at September 30, 1997, the Bank would have
reported net income of $1.5 million for the year ended September 30, 1997 rather
than reporting net income of $2.0 million. 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 such year. However, in
light of the expected contribution to the Foundation, the Bank does not expect
in the future to make other than nominal charitable contributions within the
communities it serves. In addition, the Company and the Bank do not currently
anticipate making additional contributions to the Foundation within the first
five years following the initial contribution.
Tax Considerations. The Company and the Bank have been advised by
their independent tax advisors that an organization created for the above-
described 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
Internal Revenue Service ("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 expected to be required by regulatory authorities 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 its legal counsel that compliance with
the voting restriction would (i) cause a violation of Maryland law and the OTS
determines that federal law would not preempt the application of the laws of
Maryland to the Foundation, (ii) 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 (iii) subject the Foundation to an excise tax
under Section 4941 of the Code, the OTS shall waive such voting restriction upon
submission of a legal opinion by the Company or the Foundation that is
satisfactory to the OTS. 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,
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. Thus, while the
Company would receive a tax benefit of approximately $293,000 in the year ending
September 30, 1998, (based upon a contribution of $750,000 of Common Stock), the
Company is permitted under the Code to carry over the excess contribution in the
five following years. The Company estimates that for federal income tax
purposes, a substantial portion 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 of the charitable contribution, there can be no assurance 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 further
reduction in earnings in the year in which the IRS makes such a
determination.
Comparison of Valuation and Other Factors Assuming the Foundation is
Not Established as Part of the Stock Issuance. The establishment of the
Foundation was taken into account by RP Financial in determining the estimated
pro forma market value of the Company. The number of shares of Common Stock
being offered in the Offering and the Purchase Price are based upon the
independent appraisal conducted by RP Financial of the estimated pro forma
market value of the Company. The Estimated Valuation Range is currently between
$39.3 million and $53.2 million, with a midpoint of $46.3 million. RP Financial
has indicated that the establishment of the Foundation reduced the
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<PAGE>
Independent Appraisal by $750,000 at the midpoint of the Estimated Valuation
Range, and that if the Foundation is not established then the Independent
Valuation would increase to a range of from $39,950,000 to $54,050,000 with a
midpoint of $47,000,000. The pro forma price to book ratio and the pro forma
price to annualized earnings ratio, at and for the three months ended December
31, 1997, are 118.34% and 14.71x, respectively, at the midpoint of the Estimated
Valuation Range. In the event that the Stock Issuance did not include the
Foundation, RP Financial has estimated that the Independent Valuation would be
$47,000,000 at the midpoint, resulting in a pro forma price to book ratio and a
pro forma price to earnings ratio of 118.48% and 14.71x, respectively. See
"Comparison of Valuation and Pro Forma Information with No 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.
Approval of Members. Establishment of the Foundation is subject to
the approval of a majority of the total outstanding votes of the Bank's members
eligible to be cast at the Special Meeting. The Foundation will be considered
as a separate matter from approval of the Plan of Reorganization. If the Bank's
members approve the Plan of Reorganization, but not the establishment of the
Foundation, the Bank intends to complete the Reorganization and Stock Issuance
without the establishment of the Foundation. Failure to approve the Foundation
may materially increase the pro forma market value of the Common Stock being
offered for sale in the Offering because the Estimated Valuation Range, as set
forth herein, takes into account the proposed contribution to the Foundation.
If the pro forma market value of the Company without the Foundation is either
greater than $62.2 million or less than $40.0 million or if the OTS otherwise
requires a resolicitation of subscribers, the Bank will establish a new
Estimated Valuation Range and commence a resolicitation of subscribers (i.e.,
subscribers will be permitted to continue their orders, in which case they will
need to affirmatively reconfirm their subscriptions prior to the expiration of
the resolicitation offering or their subscription funds will be promptly
refunded with interest.) Any change in the Estimated Valuation Range must be
approved by the OTS. See "The Reorganization and Stock Issuance -- Stock
Pricing and Number of Shares to be Issued." Further, if the MHC were to
undertake a Conversion Transaction, and in connection therewith additional
shares of stock of the converted MHC were proposed to be contributed to the
Foundation, any Conversion Transaction and contribution of additional shares of
Common Stock to the Foundation will be voted on as separate matters and both
matters will require the approval of: (i) a majority of the total outstanding
vote of the members of the MHC eligible to be cast; and (ii) a majority vote of
the total outstanding shares of Common Stock held by stockholders other than the
MHC and the Foundation.
POTENTIALLY ADVERSE IMPACT OF INTEREST RATES AND ECONOMIC CONDITIONS
The results of operations of the Bank are materially affected by
general economic conditions, the monetary and fiscal policies of the federal
government and the regulatory policies of governmental authorities. The results
of operations of the Bank depend to a large extent on its level of net interest
income, which is the difference between interest income on interest-earning
assets, such as loans, mortgage-backed securities and investment securities, and
interest expense on interest-bearing liabilities, such as savings deposits and
borrowings. The Bank's net interest income will be affected by interest rate
fluctuations, and a sustained increase in market interest rates could adversely
affect the Bank's earnings.
General economic conditions also affect the credit quality of the
Bank's assets. During periods of adverse economic conditions and depending on
the extent to which the income and assets of the Bank's borrowers are affected
by the adverse economic conditions, the ability of the Bank's borrowers to repay
loans may be affected. Prevailing economic conditions particularly affect
commercial real estate and consumer loans. See " -- Risks Related to Certain
Types of Lending and Credit Enhancements," "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Asset/Liability Management"
and "Business of the Bank -- Lending Activities."
CHARTER, BYLAW AND STATUTORY PROVISIONS AND EMPLOYEE BENEFIT PLAN PROVISIONS
THAT COULD DISCOURAGE HOSTILE ACQUISITIONS OF CONTROL
The Company's Charter and Bylaws contain certain provisions that could
discourage nonnegotiated takeover attempts that certain stockholders might deem
to be in their interests or through which stockholders might otherwise receive a
premium for their shares over the then current market price and that may tend to
perpetuate existing
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<PAGE>
management. These provisions include: the classification of the terms of the
members of the Board of Directors; the elimination of cumulative voting by
stockholders in the election of directors; certain provisions relating to
meetings of stockholders; and restrictions on the acquisition of the Company's
equity securities. The provisions in the Company's Charter containing
restrictions on acquisitions of the Company's equity securities provide that the
acquisition restrictions do not apply to business combinations or acquisitions
meeting specified Board of Directors approval requirements. The Charter also
authorizes the issuance of 1,500,000 shares of serial preferred stock as well as
additional shares of Common Stock up to a total of 13,500,000 outstanding
shares. These shares could be issued without stockholder approval on terms or in
circumstances that could deter a future takeover attempt. In addition, Federal
law provides for certain restrictions on acquisition of the Company and the
Bank.
The Charter, Bylaw and statutory provisions, as well as certain other
provisions of federal law and certain provisions in the Company's and the Bank's
employee benefit plans and employment agreements and change in control severance
agreements, may have the effect of discouraging or preventing a future takeover
attempt in which stockholders of the Company otherwise might receive a
substantial premium for their shares over then current market prices.
Specifically, the Bank's Severance Agreements with Officers Dietz, Loughran and
Loraditch provide that certain payments be made to such individuals following
termination of employment under certain specified circumstances following a
change in control, as defined in the Severance Agreements, of the Company or the
Bank. In addition, if the Option Plan and the MRP are implemented more than one
year after consummation of the Reorganization, they will provide for the
acceleration of vesting of awards upon a change in control. For a detailed
discussion of those provisions, see "Management of the Bank -- Certain Benefit
Plans and Agreements," "Description of Capital Stock," "Certain Restrictions on
Acquisition of the Company and the Bank -- Certain Anti-Takeover Provisions in
the Charter and Bylaws."
EFFECT OF REGULATORY CHANGES ON OPERATIONS
The Bank is subject to extensive regulation, supervision and
examination by the OTS and the FDIC. Such regulation and supervision
establishes a comprehensive framework of activities in which a savings
institution may engage and is intended primarily for the protection of
depositors and the Savings Association Insurance Fund ("SAIF"), which is
administered by the FDIC. The regulatory structure also gives the regulatory
authorities extensive discretion in connection with their supervisory and
enforcement activities. Any change in such regulation, whether by the OTS, the
FDIC or the U.S. Congress, could have a significant impact on the Bank and its
operations. See "Regulation."
POSSIBLE YEAR 2000 COMPUTER PROGRAM PROBLEMS
A great deal of information has been disseminated about the global
computer crash that may occur in the year 2000. Many computer programs that can
only distinguish the final two digits of the year entered (a common programming
practice in earlier years) are expected to read entries for the year 2000 as the
year 1900 and compute payment, interest or delinquency based on the wrong date
or are expected to be unable to compute payment, interest or delinquency. Rapid
and accurate data processing is essential to the operations of the Bank. Data
processing is also essential to most other financial institutions and many other
companies.
All of the material data processing of the Bank that could be affected
by this problem is provided by a third party service bureau. Management closely
monitors the progress of the service bureau in resolving this potential problem
and reports the status of the service bureau's progress to the Board of
Directors on a quarterly basis. The service bureau has advised the Bank that it
expects to resolve this potential problem before the year 2000 by completing all
implementation procedures by December 31, 1998 to allow for testing to occur in
1999. However, if the service bureau is unable to resolve this potential
problem in time, the Bank would seek to retain a replacement service bureau and
would likely experience significant data processing delays, mistakes or
failures. These delays, mistakes or failures could have a significant adverse
impact on the financial condition and results of operation of the Bank.
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VALUATION NOT INDICATIVE OF FUTURE PRICE OF COMMON STOCK
The final Independent Valuation will be based upon an independent
appraisal. Such valuation is not intended, and must not be construed, as a
recommendation of any kind as to the advisability of purchasing such shares of
Common Stock. 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 shares of Common
Stock in the Offering will thereafter be able to sell such shares at or above
the Purchase Price. See "The Reorganization and Stock Issuance -- Stock Pricing
and Number of Shares to be Issued."
POSSIBLE NEGATIVE INCOME TAX CONSEQUENCES OF DISTRIBUTION OF SUBSCRIPTION RIGHTS
If the Subscription Rights granted to Eligible Account Holders,
Supplemental Eligible Account Holders and Other Members are deemed to have an
ascertainable value, the receipt of such rights would be taxable to recipients
who exercise the Subscription Rights in an amount equal to such value and the
Bank could recognize a gain on such distribution. Whether Subscription Rights
are considered to have ascertainable value is an inherently factual
determination. The Bank has received a letter from RP Financial advising the
Bank of its belief that such rights have no value. The letter of RP Financial
is not binding on the IRS. See "The Reorganization and Stock Issuance -- Effect
of Reorganization and Stock Issuance on Depositors and Borrowers of the Bank --
Tax Effects."
POSSIBLE DILUTIVE EFFECT OF MRP AND STOCK OPTIONS
It is expected that following the consummation of the Stock Issuance
the Company will adopt the Option Plan and the MRP, both of which would be
subject to stockholder approval, and that such plans would be considered and
voted upon at a meeting of the Company's stockholders to be held no earlier than
six months after the Stock Issuance. Under the MRP, employees and directors
could be awarded an aggregate amount of Common Stock equal to 4% of the shares
issued in the Offering, and under the Option Plan, employees and directors could
be granted options to purchase up to an aggregate amount of Common Stock equal
to 10% of the shares issued in the Offering, at exercise prices equal to the
market price of the Common Stock on the date of grant. Under the MRP and Option
Plan, the shares issued to directors and employees could be newly issued shares
or shares purchased in the open market. In the event the shares issued under
the MRP and the Option Plan consist of newly issued shares of Common Stock, the
interests of existing stockholders would be diluted. If the shares to fund the
MRP and Option Plan are assumed to come from newly issued shares purchased
directly from the Company, and further assuming that all options granted under
the Option Plan are exercised, existing stockholders' ownership interests will
be diluted by 5.5%. At the midpoint of the Estimated Valuation Range and
assuming the Foundation is established, if all shares under the MRP and the
Option Plan were newly issued and the exercise price for the option shares were
equal to the Purchase Price per share in the Offering, the number of outstanding
shares of Common Stock would increase from 4,625,000 to 4,867,060, the pro forma
stockholders' equity per share of the outstanding Common Stock at December 31,
1997 would have been $8.53, compared with $8.45 without such plans, and the pro
forma net income per share of the outstanding Common Stock for the three months
ended December 31, 1997 and the year ended September 30, 1997 would have been
$.16 and $.49, respectively, compared to $.17 and $.50, respectively, without
such plans. See "Pro Forma Data" and "Management of the Bank -- Certain Benefit
Plans and Agreements -- Management Recognition Plan" and "-- Stock Option
Plan."
ABSENCE OF MARKET FOR COMMON STOCK
The Company and the Bank have never issued capital stock. The Company
has received conditional approval to have its Common Stock listed on the Nasdaq
National Market System under the symbol "BCSB" upon completion of the Stock
Issuance. For initial and continued inclusion for listing on Nasdaq, the
Company must have two active and registered market makers. Trident Securities
has advised the Company that it will act as a market maker for the Common Stock,
but is not obligated to do so. In addition, Trident Securities and the Company
will seek to encourage and assist at least one other market maker to make a
market in the Common Stock. The Company believes it will be successful in
finding a second market maker. The development of a public trading market
depends upon the existence
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<PAGE>
of willing buyers and sellers, the presence of which is not within the control
of the Company or the Bank. Because there can be no assurance that buyers and
sellers of the Common Stock can be readily matched, investors may wish to
consider the potential illiquid and long-term nature of an investment in the
Common Stock. There can be no assurance that an active and liquid trading
market for the Common Stock will develop, or once developed, will continue, nor
any assurances that purchasers of the Common Stock will be able to sell their
shares at or above the Purchase Price. The absence of a liquid and active
trading market, or the discontinuance thereof, may have an adverse effect on
both the price and the liquidity of the Common Stock. See "Market for the Common
Stock."
BCSB BANKCORP, INC.
BCSB Bankcorp, Inc. has not yet been incorporated. It will be
incorporated under Federal law in connection with the consummation of the
Reorganization and Stock Issuance at the direction of the Board of Directors of
the Bank for the purpose of serving as a savings institution holding company of
the Bank upon the acquisition of all of the capital stock issued by the Bank in
the Reorganization. The Company has received approval from the OTS to acquire
control of the Bank, subject to satisfaction of certain conditions. Prior to
the consummation of the Reorganization and Stock Issuance, the Company has not
engaged and will not engage in any material operations. Upon consummation of
the Reorganization and Stock Issuance, the Company will have no significant
assets other than the outstanding capital stock of the Bank, up to 50% of the
net proceeds of the Offering (after deducting amounts infused into the Bank and
used to fund the ESOP) and a note receivable from the ESOP. Upon consummation
of the Reorganization and Stock Issuance, the Company's principal business will
be overseeing the business of the Bank and investing the portion of the net
Offering proceeds retained by it.
As a holding company, the Company will have greater flexibility than
the Bank to diversify its business activities through existing or newly formed
subsidiaries or through acquisition of or merger with other financial
institutions, although the Company currently does not have any plans,
agreements, arrangements or understandings with respect to any such
diversification, acquisitions or mergers. After the Stock Issuance, the Company
will be classified as a savings and loan holding company and will be subject to
regulation by the OTS.
The Company's executive offices will be located at 4111 E. Joppa Road,
Suite 300, Baltimore, Maryland 21236, and its main telephone number will be
(410) 256-5000.
BALTIMORE COUNTY SAVINGS BANK, F.S.B.
The Bank is a federal mutual savings bank operating through six
banking offices serving Baltimore and Harford Counties in Maryland. The Bank
was chartered by the State of Maryland in 1955 under the name Baltimore County
Building and Loan Association. The Bank received federal insurance of its
deposit accounts in 1985 and received a federal charter in 1987, at which time
it adopted its present name of Baltimore County Savings Bank, F.S.B. At
December 31, 1997, the Bank had total assets of $250.6 million, total deposits
of $222.2 million and retained earnings of $24.5 million.
The Bank's principal business consists of attracting deposits from the
general public and investing these funds in loans secured by first mortgages on
owner-occupied, single-family residences in the Bank's market area, and, to a
lesser extent, other real estate loans, consisting of construction loans,
single-family rental property loans and commercial real estate loans, and
consumer loans, particularly automobile loans. The Bank derives its income
principally from interest earned on loans and, to a lesser extent, interest
earned on mortgage-backed securities and investment securities and other income.
Funds for these activities are provided principally by operating revenues,
deposits and repayments of outstanding loans and investment securities and
mortgage-backed securities.
Financial and operating characteristics of the Bank include the
following:
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Community Orientation. The Bank was founded to meet the financial
needs of the community in which it operates and continues to be committed to
that purpose. The Board of Directors believes that, with the Bank's long-term
presence in the community, the Bank is well positioned to be able to provide a
relatively full range of financial services on a personalized and efficient
basis. Management believes that the Bank can be more effective in servicing its
customers than many of its non-local competitors because of the Bank's ability
to quickly and effectively provide responses to customer needs and inquiries.
Management plans to continue to emphasize the community orientation of the Bank
and believes that this emphasis will represent a continuing competitive
advantage to the Bank.
Capital Strength. At December 31, 1997, the Bank had $24.5 million of
retained earnings, representing 9.8% of total assets. At such date, the Bank
exceeded all of its minimum regulatory capital requirements with tangible and
core capital of 9.4% of adjusted total assets and risk-based capital of 18.3% of
total risk-weighted assets. See "Regulation -- Depository Institution
Regulation -- Regulatory Capital Requirements." As a result of the Stock
Issuance, assuming the Company retains 50% of the net proceeds of the Stock
Issuance at the midpoint of the Estimated Valuation Range, at December 31, 1997,
the Bank would have had pro forma stockholders' equity of approximately $32.7
million, or 12.6% of total assets, and the Company would have had pro forma
consolidated stockholders' equity of $39.1 million, or 15.0% of total pro forma
consolidated assets. See "Capitalization" and "Historical and Pro Forma
Regulatory Capital Compliance."
Profitability. The Bank has been profitable in each of the last five
years, having earned net income for the three months ended December 31, 1997 and
1996 and for the years ended September 30, 1997, 1996, 1995, 1994 and 1993 of
$657,000, $607,000, $2.0 million, $1.2 million ($2.0 million after adjusting for
the one-time after tax charge of $801,000 for the special assessment to
recapitalize the SAIF), $1.6 million, $2.0 million and $2.5 million,
respectively. The Bank's return on average assets was 1.05% (on an annualized
basis), .76% and .47% (.83% after adjusting for the one-time special assessment
to recapitalize the SAIF) for the three months ended December 31, 1997 and for
the years ended September 30, 1997 and 1996, respectively, and the Bank's return
on average retained earnings was 10.9% (on an annualized basis), 8.6% and 5.7%
(9.4% after adjusting for the one-time special assessment to recapitalize the
SAIF) for the three months ended December 31, 1997 and the years ended September
30, 1997 and 1996, respectively.
Asset Quality. At December 31, 1997, loans accounted for on a
nonaccrual basis plus accruing loans 90 days past due totaled $1.5 million and
represented .9% of gross loans outstanding at that date. At that date, the Bank
had $136,000 of other nonperforming assets, which consisted of foreclosed real
estate of $119,000 and $17,000 in repossessed automobiles. The Bank's allowance
for loan losses at December 31, 1997 totaled $983,000, which represented 64.3%
of nonperforming loans and .6% of gross loans.
Deposit Base. The Bank has a large base of passbook savings accounts,
NOW accounts and money market deposit accounts, which typically provide a lower
cost of funds than other sources of funding. At December 31, 1997, such
deposits totaled $93.8 million, or 42.2%, of total deposits. However, the
Bank's levels of passbook savings accounts and money market deposit accounts
have declined in the three months ended December 31, 1997 and the years ended
September 30, 1997 and 1996 as customers transferred funds from passbook
accounts and money market deposit accounts to certificates of deposit to lock in
higher interest rates offered on two-year certificates of deposit between
February and April of 1995 and as a result of the sale of deposits of the Bank's
Severna Park branch office. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Recent Developments."
Loan Diversification. In order to improve yields on its loan
portfolio and to decrease the Bank's interest rate sensitivity, the Bank has
sought to diversify its loan portfolio. In recent years, the Bank had increased
its originations of new and used automobile loans. Because of the higher credit
risk entailed in automobile lending, however, the Bank has decreased its
emphasis on automobile loans during the three months ended December 31, 1997 and
the years ended September 30, 1996 and 1997. Nevertheless, such loans continue
to constitute a significant portion of the Bank's loan portfolio, totaling $30.3
million, or 18.2% of the Bank's gross loan portfolio, at December 31, 1997. In
addition, at December 31, 1997, construction loans and commercial real estate
loans totaled $7.9 million and $10.0 million, respectively, or 4.8% and 6.0%,
respectively, of the Bank's gross loan portfolio at that date. Though such
loans have
29
<PAGE>
higher yields than loans secured by owner-occupied residential real estate and
help lessens the Bank's interest rate risk, they entail greater credit risk.
See "Risk Factors -- Risks Related to Certain Types of Lending and Credit
Enhancements."
The information set forth above should be considered in the context of
the detailed descriptions elsewhere herein, including "Risk Factors."
The Bank is subject to examination and comprehensive regulation by the
OTS, and the Bank's savings deposits are insured up to applicable limits by the
Savings Association Insurance Fund ("SAIF"), which is administered by the FDIC.
The Bank is a member of and owns capital stock in the Federal Home Bank ("FHLB")
of Atlanta, which is one of 12 regional banks in the FHLB System. The Bank is
further subject to regulations of the Federal Reserve Board governing reserves
to be maintained and certain other matters. Regulations significantly affect
the operations of the Bank. See "Regulation -- Depository Institution
Regulation."
The Bank's executive offices are located at 4111 E. Joppa Road, Suite
300, Baltimore, Maryland 21236, and its main telephone number is (410) 256-
5000.
BALTIMORE COUNTY SAVINGS BANK, M.H.C.
As part of the Reorganization, the Bank will organize the MHC as a
federal mutual holding company with the powers set forth in its proposed charter
and bylaws. As long as they remain depositors of the Bank, persons who had
membership or liquidation rights with respect to the Bank as of the date of the
Reorganization will continue to have such rights solely with respect to the MHC
after the Reorganization. Borrowers whose loans were outstanding on June 16,
1987 have membership rights in the Bank and, accordingly, will have membership
rights in the MHC upon completion of the Reorganization so long as their loans
remain outstanding. Members of the MHC (consisting solely of depositors and
certain borrowers of the Bank) shall have exclusive authority to elect the board
of directors of the MHC for so long as the MHC remains a mutual institution.
The MHC's principal assets will be the shares of Common Stock received
in the Reorganization and up to $250,000 received as its initial capitalization.
Immediately after consummation of the Reorganization, it is expected that the
MHC will not engage in any business activity other than its investment in, and
control of, a majority of the Common Stock of the Company. The MHC will be a
mutual corporation chartered under federal law and regulated by the OTS. The
MHC will be subject to the limitations and restrictions imposed on savings and
loan holding companies by Section 10(o)(5) of HOLA. See "Regulation --
Regulation of the MHC." The MHC's executive offices will be located at 4111 E.
Joppa Road, Suite 300, Baltimore, Maryland 21236, and its main telephone number
will be (410) 256-5000.
USE OF PROCEEDS
The amount of proceeds from the sale of the Common Stock in the
Offering will depend upon the total number of shares actually sold in the
Subscription Offering and the Community Offering and the Syndicated Community
Offering, if any, and the actual expenses of the Reorganization and Stock
Issuance. As a result, the actual net proceeds from the sale of the Common
Stock cannot be determined until the Reorganization and Stock Issuance are
completed. Based on the sale of $17.3 million of Common Stock at the midpoint
of the Estimated Valuation Range, the net proceeds from the sale of the Common
Stock are estimated to be approximately $16.6 million. The Company has received
regulatory approval from the OTS to purchase all of the capital stock of the
Bank to be issued in the Stock Issuance in exchange for at least 50% of the net
proceeds. Based on the foregoing assumption and the purchase of 8% of the
shares to be issued in the Offering by the ESOP, the Bank would receive
approximately $8.2 million in cash, and the Company would retain approximately
$6.8 million in cash and $1.4 million in the form of a note receivable from the
ESOP. The ESOP note receivable will be for a ten year term and carry an
interest rate, which adjusts annually, equal to the prime rate as published in
The Wall Street Journal.
- --- ---- ------ -------
30
<PAGE>
The proceeds retained by the Company, after funding the ESOP,
initially will be invested in short-term and intermediate-term securities
including cash and cash equivalents and U.S. government and agency obligations.
Such proceeds will be available for a variety of corporate purposes, including
funding the MRP, if implemented, future acquisitions and diversification of
business, additional capital contributions, dividends to stockholders and
future repurchases of the Common Stock to the extent permitted by applicable
regulations. The Company currently has no specific plans, intentions,
arrangements or understandings regarding acquisitions, diversification of
business, additional capital contributions or repurchases of Common Stock. Due
to the limited nature of the Company's business activities, the Company believes
that the net proceeds retained after the Stock Issuance, earnings on such
proceeds and payments on the ESOP note receivable will be adequate to meet the
Company's financial needs until dividends are paid by the Bank; however, no
assurance can be given that the Company will not have a need for additional
funds in the future. For additional information, see "Regulation -- Depository
Institution Regulation -- Dividend Limitations."
The proceeds contributed to the Bank will ultimately become part of
the Bank's general corporate funds to be used for its business activities,
including making loans and investments. Initially, it is expected that the
proceeds will be invested in short-term and intermediate-term securities
including cash and cash equivalents and U.S. government and agency obligations.
The Bank ultimately plans to use such proceeds primarily to originate loans in
the ordinary course of business. In addition, the Bank will use a portion of
the net proceeds, currently estimated to be $500,000 to modernize the Bank's
facilities, including installing new ATMs and upgrading its computer systems.
Further, the Bank currently is negotiating to lease land in Harford County on
which it will build a new branch. The Bank may use a portion of the net
proceeds to pay for all costs including construction costs, which are estimated
to be $750,000.
In addition to the new branch office for which a lease currently is
under negotiation, although there are no specific plans as of the date of this
Prospectus, in the future the Bank desires to open several new branch offices in
its market area and to possibly relocate an existing branch office. The Bank's
experience has been that construction and other costs for a new or relocated
branch office generally amount to between $500,000 and $750,000 and that annual
lease and other operating expenses for a new branch office would be expected to
be between approximately $150,000 and $200,000 annually.
DIVIDEND POLICY
The Company intends to pay an initial annual cash dividend of $.50 per
share on the Common Stock, to be paid on a quarterly basis. The first dividend
is expected to be declared and paid following the second full quarter after
completion of the Reorganization and Stock Issuance. There can be no assurance,
however, that dividends will be paid, or, if paid, what the amount of the
dividends will be, or whether dividends, once paid, will continue to be paid.
If the MHC elects not to waive receipt of dividends from the Company, the
Company will have reduced flexibility as to the amount of dividends that can be
paid. See "Risk Factors -- Waiver of Dividends by the MHC" and "Waiver of
Dividends by the MHC." No dividends will be paid if to do so would impair
capital. Furthermore, the Company has committed to the OTS that it will not pay
or undertake any action that will further the payment of a special distribution
or a return of capital for one year after completion of the Stock Issuance.
From time to time in an effort to manage capital to a reasonable level, the
Board may determine if it is prudent to pay periodic special cash dividends.
Periodic special cash dividends, if paid, may be paid in addition to, or in lieu
of, regular cash dividends. Like all possible dividends, there can be no
assurance that periodic special cash dividends will be paid or that, if paid,
will continue to be paid.
In addition, because the Company initially will have no significant
source of income other than dividends from the Bank and earnings from investment
of the net proceeds of the Offering retained by the Company, the payment of
dividends by the Company will depend in part upon the receipt of dividends from
the Bank. An OTS regulation imposes uniform limitations upon all "capital
distributions" by savings institutions, including cash dividends, payments by a
savings institution to purchase or otherwise acquire its stock, payments to
stockholders of another savings institution in a cash-out merger and other
distributions charged against capital. The regulation establishes a three-
tiered system
31
<PAGE>
of regulations, with the greatest flexibility being afforded to so-called Tier 1
institutions (such as the Bank). See Regulation -- Dividend Limitations."
In addition to the foregoing, earnings of the Bank appropriated to bad
debt reserves and deducted for federal income tax purposes are not available for
payment of cash dividends or other distributions to stockholders without payment
of taxes at the then-current tax rate by the Bank on the amount of earnings
deemed to be removed from the reserves for such distribution. See "Taxation"
and Note 13 of Notes to Consolidated Financial Statements.
WAIVER OF DIVIDENDS BY THE MHC
The Board of Directors of the MHC will determine whether the MHC will
waive the receipt of dividends declared by the Company each time the Company
declares a dividend. The Board of Directors of the MHC presently intends to
waive the receipt of dividends declared by the Company. OTS regulations require
the MHC to notify the OTS of any proposed waiver of the right to receive
dividends. It is the OTS' recent practice to review dividend waiver notices on
a case-by-case basis, and, in general, not to object to any such waiver if: (i)
the mutual holding company's board of directors determines that such waiver is
consistent with such directors' fiduciary duties to the mutual holding company's
members; (ii) for as long as the subsidiary holding company is controlled by the
mutual holding company, the dollar amount of dividends waived by the mutual
holding company is considered to be a restriction on the stockholders' equity of
the subsidiary holding company, which restriction, if material, is disclosed in
the public financial statements of the subsidiary holding company as a note to
the financial statements; (iii) the amount of any dividend waived by the mutual
holding company is available for declaration as a dividend solely to the mutual
holding company, and, in accordance with SFAS No. 5, where the subsidiary
holding company determines that the payment of such dividend to the mutual
holding company is probable, an appropriate dollar amount is recorded as a
liability; (iv) the amount of any waived dividend is considered as having been
paid by the subsidiary holding company in evaluating any proposed dividend under
OTS capital distribution regulations; and (v) in the event the mutual holding
company converts to stock form, the appraisal submitted to the OTS in connection
with the Conversion Transaction takes into account the amount of the dividends
waived by the mutual holding company. In addition, the OTS has announced that
the dividends waived by mutual holding companies will affect the ratio pursuant
to which shares of common stock of a subsidiary holding company held by Minority
Stockholders would be exchanged for shares of common stock of the converted
holding company in a Conversion Transaction. See "MHC Conversion to Stock
Form."
The MHC's Board of Directors may conclude that a dividend waiver by
the MHC, which permits retention of capital by the Company, is in the best
interest of the MHC's members because, among other reasons: (i) the MHC has no
need for the dividend for its business operations, (ii) the cash that would be
received could be invested by the Company more effectively; and (iii) such
waiver preserves the retained earnings of the MHC through its principal asset
(the Company), which would be available for distribution in the unlikely event
of a voluntary liquidation of the Company after satisfaction of claims of
depositors and other creditors. The Board of Directors may consider other
factors in determining whether such waiver is consistent with its fiduciary
duties to members of the MHC. There is no assurance that the MHC will waive the
receipt of the dividends.
Immediately after consummation of the Reorganization and the Stock
Issuance, it is expected that the MHC's operations will consist of activities
relating to its investment in, and control of, a majority of the Common Stock of
the Company and maintenance of books and records relating to members of the MHC.
In the future, the MHC may accept dividends paid by the Company to be used for
the payment of operating expenses and other purposes, including purchasing
Common Stock from time to time in the open market or from the Company. There
can be no assurance that the MHC will accept dividends paid by the Company, or
if such dividends are accepted, that the MHC will purchase shares of Common
Stock in the open market. Any purchases of Common Stock other than from the MHC
will increase the percentage of the Company's outstanding shares of Common Stock
held by the MHC and increase the number of shares eligible to be sold in any
subsequent secondary offering or mutual to stock conversion of the MHC. Any
waiver of dividends by the MHC is likely to result in an adjustment to the ratio
pursuant to which shares of Common Stock are exchanged for shares of the
converted MHC in a Conversion Transaction, which adjustment will have the effect
of
32
<PAGE>
diluting Minority Stockholders' percentage ownership interest in the converted
MHC's shares. See "MHC Conversion to Stock Form."
MHC CONVERSION TO STOCK FORM
As long as the MHC remains a mutual holding company, it must own at
least a majority of the outstanding voting stock of the Company. OTS
regulations specifically authorize mutual holding companies to (i) convert to
stock form, and (ii) exchange stock issued by the converted holding company for
stock issued by a subsidiary holding company. OTS regulations require that such
exchange be "fair and reasonable" but do not specify the basis for such
exchange. Although the MHC may convert to stock form in the future, the Bank
has no current plans and there can be no assurance as to when, if ever, such a
conversion will occur. Any Conversion Transaction would be subject to federal
securities laws and regulations of the OTS in effect at the time of the
Conversion Transaction. In addition, the OTS may, in the future, authorize
alternative forms of structure or organization for mutual holding companies or
their affiliates or subsidiaries. Although the Bank may consider such
alternative forms of structure or organization, there can be no assurances as to
when, if ever, the Bank will choose to avail itself of any such alternative form
of structure or organization. It is unlikely that, in the event the Bank
chooses to avail itself of any such alternative form of structure or
organization, such a transaction would be subject to the federal securities laws
and regulations and the regulations of the OTS in effect at the time of such
transaction and potentially could require stockholder approval. A decision by
the MHC to convert stock form would require the approval of its members prior to
the Conversion Transaction. It is expected that these members will have
subscription rights to purchase stock of the converted MHC. In a Conversion
Transaction, the MHC, the Company or the Bank will have to demonstrate to the
OTS that the terms of such exchange are fair and reasonable and comply with the
stock purchase limitations of the OTS conversion regulations (which may, as a
condition to OTS approval of the Conversion Transaction, in certain limited
circumstances, require certain insiders of the Bank who have accumulated shares
in excess of stock purchase limitations in the Conversion Transaction to divest
such shares in connection with such Conversion Transaction, and also potentially
restrict or prohibit additional purchases of Common Stock in the Conversion
Transaction by other stockholders that would be in excess of such stock purchase
limitations). The fairness of the exchange may be supported by an opinion from
an independent third party.
The OTS policy with respect to dividends waived by mutual holding
companies requires that, in the case of mutual to stock conversions of recently
formed mutual holding companies, such as the MHC, the aggregate amount of cash
dividends waived by a mutual holding company must be considered when
establishing a fair and reasonable basis for exchanging subsidiary holding
company common stock for converted MHC common stock. The OTS will not permit a
pro rata exchange if the mutual holding company has waived the receipt of cash
dividends by the subsidiary holding company. Accordingly, the precise treatment
of any Conversion Transaction cannot be assured. ANY WAIVER OF DIVIDENDS BY THE
MHC IS LIKELY TO RESULT IN AN ADJUSTMENT TO THE RATIO PURSUANT TO WHICH SHARES
OF COMMON STOCK ARE EXCHANGED FOR SHARES OF THE CONVERTED MHC IN A CONVERSION
TRANSACTION, WHICH ADJUSTMENT WILL HAVE THE EFFECT OF DILUTING MINORITY
STOCKHOLDERS' OWNERSHIP INTERESTS.
In addition to the possible adjustment to the exchange ratio due to
waived dividends, the percentage of the converted MHC's common stock received by
Minority Stockholders in any Conversion Transaction may be affected by any
purchases of Common Stock by the MHC, any subsequent secondary offerings or
other stock issuances by the Company (including shares issued under the terms of
the Stock Option Plan and MRP), any intervening acquisitions by the MHC, the
Company's dividend policy, including special dividends, and the amount of
dividends paid by the Company.
As an alternative to the exchange of shares discussed above, if the
stockholders of the Company do not receive for any reason shares of the
converted MHC or the stock institution resulting from the Conversion Transaction
based upon a fair and reasonable exchange ratio, or cash from the resulting
institution in an amount equal to the fair market value of their stock given the
circumstances of the Conversion Transaction, the Company or the MHC (and its
successors) may elect to purchase all shares of the Company's Common Stock not
owned by it simultaneously with the consummation of the Conversion Transaction
at the fair market value of the stock on the date of the Conversion Transaction,
subject to OTS approval and compliance with the limitations of the OTS
regulations governing capital
33
<PAGE>
distributions and other conditions that the OTS may impose. Such fair market
value of the Company's Common Stock shall be established by an independent
appraisal, and may be greater than or less than the Purchase Price. Moreover,
if the Common Stock is traded and has an established and liquid trading market,
of which there is no assurance, the fair market value of the Common Stock, as
established by the independent appraisal, may be greater than or less than the
trading price of such stock.
Moreover, in the event that the MHC converts to stock form in a
Conversion Transaction, any options or other convertible securities held by an
officer, director, or employee of the Company, convertible into shares of Common
Stock shall become options to purchase or convertible into shares of the
converted MHC; provided, however, that if such options or convertible shares
cannot be so reconstituted, the holders of such options or other convertible
securities shall be entitled to receive cash payment for such shares in an
amount equal to the offering price of the number of shares of the converted MHC
into which such securities would otherwise be converted, less the exercise price
of such options or other convertible securities. Any such exchange or redemption
of these securities will be subject to the written approval of the OTS, and
there can be no assurance that such approval would be obtained. In addition, the
OTS may place restrictions on the Company's or the MHC's ability to purchase
Common Stock that are more restrictive than the OTS regulations governing
capital distributions. The fair market value of the common stock of the
converted MHC shall be established by the independent appraisal utilized in the
Conversion Transaction pursuant to the OTS regulations governing conversions.
Management of the MHC may consider conversion to stock form in the future.
However, there is no plan, agreement or understanding with respect to such a
conversion, and there can be no assurance that such a conversion will occur.
Further, if the MHC were to undertake a Conversion Transaction, and in
connection therewith additional shares of stock of the converted MHC were
proposed to be contributed to the Foundation, any Conversion Transaction and
contribution of additional shares of Common Stock to the Foundation will be
voted on as separate matters and both matters will require the approval of: (i)
a majority of the total outstanding vote of the members of the MHC eligible to
be cast; and (ii) a majority vote of the total outstanding shares of Common
Stock held by stockholders other than the MHC and the Foundation.
MARKET FOR THE COMMON STOCK
The Company has never issued capital stock to the public.
Consequently, there is no established market for the Common Stock. The Company
has received conditional approval to have its Common Stock listed on the Nasdaq
National Market System under the symbol "BCSB". For initial and continued
inclusion for listing on Nasdaq, the Company must have two active and registered
market makers. Trident Securities has advised the Company that it will act as a
market maker for the Common Stock, but is not obligated to do so. In addition,
Trident Securities and the Company will seek to encourage and assist at least
one other market maker to make a market in the Common Stock. Making a market
involves maintaining bid and ask quotations and being able, as principal, to
effect transactions in reasonable quantities at those quoted prices, subject to
various securities laws and other regulatory requirements. It is impossible to
ascertain whether a second market maker will make a market in the Common Stock.
There can be no assurance that the Common Stock will in fact be listed on Nasdaq
or that it will trade on Nasdaq. The development of a liquid public market
depends on the existence of willing buyers and sellers, the presence of which is
not within the control of the Company or the Bank, and the number of active
buyers and sellers of the Common Stock at any particular time may be limited.
Under such circumstances, investors in the Common Stock could have difficulty
disposing of their shares and should not view the Common Stock as a short-term
investment. There can be no assurance that an active and liquid trading market
for the Common Stock will develop or that, if developed, it will continue, nor
is there any assurance that persons purchasing shares of Common Stock will be
able to sell them at or above the Purchase Price. While the Company has received
conditional approval to have the Common Stock listed on the Nasdaq National
Market System, no assurance can be given that it will in fact be so listed.
34
<PAGE>
CAPITALIZATION
The following table sets forth information regarding the historical
capitalization, including deposits, of the Bank at December 31, 1997 and the pro
forma consolidated capitalization of the Company giving effect to the sale of
the Common Stock in the Offering based upon the assumptions set forth under "Use
of Proceeds" and below. For additional financial information regarding the
Bank, see the Consolidated Financial Statements and related Notes appearing
elsewhere herein. Depending on market and financial conditions, the total
number of shares to be issued in the Offering may be significantly increased or
decreased above or below the midpoint of the Estimated Valuation Range. No
resolicitation of subscribers and other purchasers will be made unless the
aggregate purchase price of the Common Stock sold in the Offering is below the
minimum of the Estimated Valuation Range or is above 15% above the maximum of
the Estimated Valuation Range. A CHANGE IN THE NUMBER OF SHARES TO BE ISSUED IN
THE OFFERING MAY MATERIALLY AFFECT THE COMPANY'S PRO FORMA CAPITALIZATION. SEE
"PRO FORMA DATA" AND "THE REORGANIZATION AND STOCK ISSUANCE -- STOCK PRICING AND
NUMBER OF SHARES TO BE ISSUED."
<TABLE>
<CAPTION>
Pro Forma Consolidated Capitalization of
the Company at December 31, 1997 Based on the Sale of
---------------------------------------------------------
Bank's Historical 1,469,650 1,729,000 1,988,350 2,286,602
Capitalization at Shares at Shares at Shares at Shares at
December 31, $10.00 $10.00 $10.00 $10.00
1997 Per Share Per Share Per Share Per Share
----------------- ---------- ------------- ---------- ----------
(In thousands)
<S> <C> <C> <C> <C> <C>
Deposits (1)........................................ $222,245 $ 222,245 $ 222,245 $ 222,245 $ 222,245
Other borrowings.................................... -- -- -- -- --
-------- ---------- ---------- ---------- ----------
Total deposits and borrowed funds............... $222,245 $ 222,245 $ 222,245 $ 222,245 $ 222,245
======== ========== ========== ========== ==========
Capital stock:
Common Stock, $.01 par value per share
authorized - 13,500,000 shares; shares
to be outstanding - as shown (2)(3)........... -- 39 46 53 61
Preferred Stock, $.01 par value per share
authorized - 1,500,000 shares; shares to be
outstanding - none............................ -- -- -- --
Paid-in capital (2)(3)........................... -- 14,767 17,317 19,868 22,801
Less: Expense of contribution to
Foundation (4)............................... -- (750) (750) (750) (750)
Plus: Tax benefit of contribution to
Foundation (5)................................ -- 293 293 293 293
Net unrealized gain.................... -- -- -- -- --
Less: Common Stock acquired by ESOP (6)......... -- (1,176) (1,383) (1,591) (1,829)
Common stock acquired by MRP (3)....... -- (588) (692) (795) (915)
Retained earnings (7)............................ 24,516 24,266 24,266 24,266 24,266
-------- ---------- ---------- ---------- ----------
Total stockholders' equity (8)................ $ 24,516 $ 36,851 $ 39,097 $ 41,344 $ 43,927
======== ========== ========== ========== ==========
</TABLE>
- -------------------------
(1) Does not reflect withdrawals from savings accounts for the purchase of
Common Stock in the Offering; any withdrawals will reduce pro forma
deposits by the amount of such withdrawals.
(2) Does not reflect additional shares of Common Stock that possibly could be
purchased by participants in the Option Plan, if implemented, under which
directors, executive officers and other employees could be granted options
to purchase an aggregate of up to 10% of the shares issued in the Offering,
at exercise prices equal to the market price of the Common Stock on the
date of grant. Implementation of the Option Plan will require stockholder
approval. See "Management of the Bank -- Certain Benefit Plans and
Agreements -- Stock Option Plan" and "Risk Factors -- Possible Dilutive
Effect of MRP and Stock Options."
(3) Assumes a number of shares of Common Stock equal to 4% of the Common Stock
to be sold in the Offering will be purchased by the MRP through open market
purchases. The dollar amount of the Common Stock to be purchased by the
MRP is based on the $10.00 per share Purchase Price in the Offering and
represents unearned compensation and is reflected
35
<PAGE>
as a reduction of capital. Such amount does not reflect possible increases
or decreases in the value of such stock relative to the Purchase Price in
the Offering. As the Bank accrues compensation expense to reflect the
vesting of such shares pursuant to the MRP, the charge against capital will
be reduced accordingly. Implementation of the MRP will require stockholder
approval. If the shares to fund the MRP are assumed to come from
authorized but unissued shares purchased by the MRP from the Company at the
Purchase Price within the year following the Stock Issuance, at the
minimum, midpoint, maximum and maximum, as adjusted of the Estimated
Valuation Range, the number of outstanding shares would be 3,990,036,
4,694,160, 5,398,284 and 6,208,026, respectively, and total stockholders'
equity would be $37,439,000, $39,789,000, $42,139,000 and $44,842,000,
respectively. As a result of the MRP acquiring authorized but unissued
shares from the Company, stockholders' ownership in the Company would be
diluted by approximately 1.5%. See "Management of the Bank -- Certain
Benefit Plans and Agreements -- Management Recognition Plan," "Pro Forma
Data" and "Risk Factors -- Possible Dilutive Effect of MRP and Stock
Options."
(4) Reflects the issuance of 75,000 shares of Common Stock to the Foundation at
an assumed value of $10.00 per share.
(5) Reflects the tax effect of the contribution of Common Stock based upon a
39.0% marginal 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.
(6) Assumes 8% of the shares of Common Stock to be sold in the Offering are
purchased by the ESOP, and that the funds used to purchase such shares are
borrowed from the Company out of net proceeds. Although repayment of such
debt will be secured solely by the shares purchased by the ESOP, the Bank
expects to make discretionary contributions to the ESOP in an amount at
least equal to the principal and interest payments on the ESOP debt. The
approximate amount expected to be borrowed by the ESOP is not reflected in
this table as borrowed funds but is reflected as a reduction of capital.
As the Bank accrues compensation expense to reflect the allocation of such
shares pursuant to the ESOP, the charge against capital will be reduced
accordingly. See "Management of the Bank -- Certain Benefit Plans and
Agreements -- Employee Stock Ownership Plan."
(7) The reduction in retained earnings of the Bank reflects the retention by
the MHC of $250,000 upon consummation of the Reorganization.
(8) Pro forma stockholders' equity information is not intended to represent the
fair market value of the Common Stock, the current value of the Bank's
assets or liabilities or the amounts, if any, that would be available for
distribution to stockholders in the event of liquidation. Such pro forma
data may be materially affected by a change in the number of shares to be
sold in the Stock Issuance and by other factors.
36
<PAGE>
HISTORICAL AND PRO FORMA REGULATORY CAPITAL COMPLIANCE
The following table sets forth the Bank's historical and pro forma capital
position relative to the various minimum OTS capital regulatory requirements to
which it is subject. Pro forma data assumes that the Common Stock had been sold
as of December 31, 1997. For additional information regarding the financial
condition of the Bank and the assumptions underlying the pro forma capital
calculations set forth below, see "Use of Proceeds," "Capitalization" and "Pro
Forma Data" and the financial statements and related notes appearing elsewhere
herein.
<TABLE>
<CAPTION>
Pro Forma Capital of the Bank as of December 31, 1997 Based on the Sale of (1):
-------------------------------------------------------------------------------
Bank's 1,469,650 Shares 1,729,000 Shares 1,988,350 Shares 2,286,602 Shares
Historical Capital at $10.00 at $10.00 at $10.00 at $10.00
at December 31, 1997 Per Share Per Share Per Share Per Share
--------------------- ----------------- ------------------ ------------------ ----------------
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>
Capital under general
accepted accounting
principles.............. $24,516 9.78% $31,419 12.15% $32,697 12.57% $33,976 12.99% $35,447 13.46%
======= ===== ======= ===== ======= ===== ======= ===== ======= =====
Tangible capital......... $23,589 9.42% $30,492 11.79% $31,770 12.22% $33,049 12.63% $34,520 13.11%
Tangible capital
requirement............. 3,758 1.50 3,879 1.50 3,901 1.50 3,924 1.50 3,949 1.50
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Excess................ $19,831 7.92% $26,613 10.29% $27,869 10.72% $29,125 11.13% $30,571 11.61%
======= ===== ======= ===== ======= ===== ======= ===== ======= =====
Core capital............. $23,589 9.42% $30,492 11.79% $31,770 12.22% $33,049 12.63% $34,520 13.11%
Core capital requirement. 7,516 3.00 7,758 3.00 7,803 3.00 7,847 3.00 7,899 3.00
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Excess................ $16,073 6.42% $22,734 8.79% $23,967 9.22% $25,202 9.63% $26,621 10.11%
======= ===== ======= ===== ======= ===== ======= ===== ======= =====
Total capital............ $24,572 18.26 $31,475 23.12% $32,753 24.00% $34,032 24.89% $35,503 25.90%
Risk-based capital
requirement............. 10,764 8.00 10,893 8.00 10,917 8.00 10,940 8.00 10,968 8.00
------- ----- ------- ----- ------- ----- ------- ----- ------- -----
Excess................ $13,808 10.26% $20,582 15.12% $21,836 16.00% $23,092 16.89% $24,535 17.90%
======= ===== ======= ===== ======= ===== ======= ===== ======= =====
- -------------------------
</TABLE>
(1) Assumes the Company will purchase all of the capital stock of the Bank to be
issued in the Reorganization and Stock Issuance in exchange for 50% of the
net proceeds. Assumes net proceeds distributed to the Company or the Bank
initially are invested in interest-earning assets and fixed assets with a
20% risk-weighting. Assumes 8% of the Common Stock sold in the Offering is
acquired by the ESOP, and that the funds used to acquire such shares are
borrowed from the Company. Although repayment of such debt will be secured
solely by the Common Stock purchased by the ESOP, the Bank expects to make
discretionary contributions to the ESOP in an amount at least equal to the
principal and interest payments on the ESOP debt. As a result, the table
assumes a reduction to the Bank's pro forma capital and regulatory capital
to reflect the cost of funding the ESOP. Assumes the cost of funding the
MRP will be paid by the Company.
(2) Based on the Bank's total assets determined under generally accepted
accounting principles for capital as determined under generally accepted
accounting principles, adjusted total assets for the purposes of the
tangible and core capital requirements and risk-weighted assets for the
purpose of the risk-based capital requirement.
37
<PAGE>
PRO FORMA DATA
The following table sets forth the net proceeds from the Offering to the
Company and the actual and, after giving effect to the Stock Issuance for the
periods and at the dates indicated, pro forma consolidated income, stockholders'
equity and other data of the Bank prior to the Reorganization and the Stock
Issuance and of the Company following the Reorganization and the Stock Issuance.
Unaudited pro forma consolidated income and related data have been calculated
for the three months ended December 31, 1997 and for the year ended September
30, 1997 as if the Common Stock had been sold at the beginning of such periods,
and the estimated net proceeds had been invested at 5.48% and 5.44% at the
beginning of the respective periods. The foregoing yields approximate the yield
on the one-year U.S. Treasury bill at December 31, 1997 and September 30, 1997,
respectively. (While OTS regulations provide for the use of a yield
representing the arithmetic average of the average yield on the Bank's interest-
earning assets and the average cost of deposits, the Bank believes that the one-
year Treasury bill rate represents a more realistic yield on its investments).
The pro forma after-tax yields for the Company and the Bank are assumed to be
3.34% and 3.32% for the three months ended December 31, 1997 and for the year
ended September 30, 1997, respectively, based on the effective tax rates of
39.0% and 39.0% for the respective periods. No effect has been given in the pro
forma stockholders' equity calculations for the assumed earnings on the net
proceeds. The pro forma income and related data set forth below do not reflect
accruals to be made by the Bank with regard to certain employee benefit plans to
be adopted in connection with, and subsequent to, the Stock Issuance. See
"Management of the Bank -- Certain Benefit Plans and Agreements."
The actual net proceeds from the sale of the Common Stock cannot be
determined until the Reorganization and Stock Issuance is completed. However,
net proceeds set forth on the following table are estimated based upon the
following assumptions: (i) 100% of the shares of Common Stock will be sold in
the Subscription and Community Offerings and the Syndicated Community Offering
as follows: (a) 8% will be sold to the ESOP and 124,992 shares will be sold to
directors and officers of the Bank and their associates, for which commissions
will not be paid; and (b) the remaining shares will be sold to others in the
Subscription and Community Offerings for which a commission of 1.5% will be
paid; and (ii) other Reorganization and Stock Issuance expenses, not including
sales commissions, will be approximately $457,000. The foregoing assumptions
regarding estimated purchases in the Subscription and Community Offerings and
Syndicated Community Offering are based on reasonable market assumptions, market
conditions, consultations between the Bank and Trident Securities and planned
purchases by the ESOP. Actual expenses may vary from those estimated.
THE FOLLOWING TABLE GIVES EFFECT TO THE ISSUANCE OF AUTHORIZED BUT UNISSUED
SHARES OF THE COMPANY'S COMMON STOCK TO THE FOUNDATION CONCURRENTLY WITH THE
COMPLETION OF THE STOCK ISSUANCE. THE STOCKHOLDERS' EQUITY AND RELATED DATA
PRESENTED HEREIN ARE NOT INTENDED TO REPRESENT THE FAIR MARKET VALUE OF THE
COMMON STOCK, THE CURRENT VALUE OF ASSETS OR LIABILITIES, OR THE AMOUNTS, IF
ANY, THAT WOULD BE AVAILABLE FOR DISTRIBUTION TO STOCKHOLDERS IN THE EVENT OF
LIQUIDATION, AND SUCH DATA DOES NOT GIVE EFFECT TO THE RECAPTURE OF THE BANK'S
TAX BAD DEBT RESERVE THAT WOULD OCCUR IN THE EVENT OF LIQUIDATION OF THE BANK.
THE PRO FORMA INCOME AND RELATED DATA DERIVED FROM THE ASSUMPTIONS SET FORTH
ABOVE SHOULD NOT BE CONSIDERED INDICATIVE OF THE ACTUAL RESULTS OF OPERATIONS OF
THE BANK AND THE COMPANY FOR ANY CURRENT OR FUTURE PERIOD.
38
<PAGE>
<TABLE>
<CAPTION>
At or for the Three Months Ended December 31, 1997
---------------------------------------------------------------------------
1,469,650 1,729,000 1,988,350 2,286,602
Shares at Shares at Shares at Shares at
$10.00 Per Share $10.00 Per Share $10.00 Per Share $10.00 Per Share
---------------- ---------------- ---------------- ----------------
(Dollars in thousands, except per share amounts)
<S> <C> <C> <C> <C>
Gross offering proceeds............................... $ 14,697 $ 17,290 $ 19,884 $ 22,866
Plus: Shares issued to Foundation..................... 750 750 750 750
---------- ---------- ---------- ----------
Pro forma market capitalization.................... $ 15,447 $ 18,040 $ 20,634 $ 23,616
========== ========== ========== ==========
Gross Offering proceeds............................... $ 14,697 $ 17,290 $ 19,884 $ 22,866
Less: Estimated Offering expenses:.................... 641 677 713 754
---------- ---------- ---------- ----------
Estimated net Offering proceeds.................... 14,056 16,613 19,171 22,112
Less: Common stock purchased by ESOP.................. 1,176 1,383 1,591 1,829
MRP............................................. 588 692 795 915
Funds to capitalize MHC......................... 250 250 250 250
Investment in fixed assets (1).................. 1,250 1,250 1,250 1,250
---------- ---------- ---------- ----------
Estimated investable net proceeds.................. $ 10,792 $ 13,038 $ 15,285 $ 17,868
========== ========== ========== ==========
Net income (2):
Historical net income.............................. $ 657 $ 657 $ 657 $ 657
Pro forma income on investable net proceeds........ 90 109 128 149
Pro forma ESOP adjustment (3)...................... (18) (21) (24) (28)
Pro forma MRP adjustment (4)....................... (18) (21) (24) (28)
---------- ---------- ---------- ----------
Total............................................. $ 711 $ 724 $ 737 $ 750
========== ========== ========== ==========
Net income per share: (2)(5)
Historical net income.............................. $ 0.17 $ 0.15 $ 0.13 $ 0.11
Pro forma income on investable net proceeds........ 0.02 0.02 0.02 0.03
Pro forma ESOP adjustment (3)...................... 0.00 0.00 0.00 0.00
Pro forma MRP adjustment (4)....................... 0.00 0.00 0.00 0.00
---------- ---------- ---------- ----------
Total............................................. $ 0.19 $ 0.17 $ 0.15 $ 0.14
========== ========== ========== ==========
Weighted average number of shares outstanding
for earnings per share calculations (3).............. 3,815,148 4,488,409 5,161,670 5,935,920
========== ========== ========== ==========
Stockholders' equity:
Historical (6)..................................... $ 24,266 $ 24,266 $ 24,266 $ 24,266
Estimated net proceeds............................. 14,056 16,613 19,171 22,112
Plus: Shares issued to Foundation.................. 750 750 750 750
Less: Contribution to Foundation................... (750) (750) (750) (750)
Plus: Tax Benefit of the contribution to the
Foundation................................. 293 293 293 293
Less: Common stock acquired by the ESOP (3)........ (1,176) (1,383) (1,591) (1,829)
Common Stock acquired by MRP (4)............. (588) (692) (795) (915)
---------- ---------- ---------- ----------
Total............................................. $ 36,851 $ 39,097 $ 41,344 $ 43,927
========== ========== ========== ==========
Stockholders' equity per share: (5)
Historical (6)..................................... $ 6.17 $ 5.25 $ 4.56 $ 3.97
Estimated net offering proceeds (4)................ 3.58 3.59 3.60 3.62
Plus: Shares issued to Foundation................. 0.19 0.16 0.14 0.12
Less: Contribution to Foundation.................. (0.19) (0.16) (0.14) (0.12)
Plus: Tax Benefit of the contribution to the
Foundation................................ 0.07 0.06 0.06 0.05
Less: Common Stock acquired by ESOP (3)............ (0.30) (0.30) (0.30) (0.30)
Common Stock acquired by MRP (4)............. (0.15) (0.15) (0.15) (0.15)
---------- ---------- ---------- ----------
Total............................................. $ 9.37 $ 8.45 $ 7.77 $ 7.19
========== ========== ========== ==========
Number of shares outstanding for stockholders' equity
per share calculations............................... 3,931,250 4,625,000 5,318,750 6,116,562
========== ========== ========== ==========
Offering price as a percentage of pro forma
stockholders' equity per share....................... 106.72% 118.34% 128.70% 139.08%
========== ========== ========== ==========
Ratio of offering price to pro forma net income
per share (annualized)............................... 13.16x 14.71x 16.67x 17.86x
========== ========== ========== ==========
(Footnotes on succeeding page)
</TABLE>
39
<PAGE>
- -------------------------
(1) Consists of $750,000 of construction costs for a new branch and $500,000
to be utilized to upgrade ATMs and computer equipment.
(2) Does not give effect to the non-recurring expense that will be recognized
in the year ending September 30, 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
$457,000. Assuming the contribution to the Foundation was expensed
during the three months ended December 31, 1997, pro forma net income per
share would be $.07, $.06, $.05 and $.05 at the minimum, midpoint,
maximum and maximum, as adjusted, respectively. Per share net income
data is based on 3,815,148, 4,488,409, 5,161,670 and 5,939,920 shares
outstanding, which represents shares sold in the Offering, shares issued
to the MHC, shares contributed to the Foundation and shares to be
allocated or distributed under the ESOP and MRP for the year
presented.
(3) Assumes 8% of the shares to be sold in the Offering are purchased by the
ESOP under all circumstances, and that the funds used to purchase such
shares are borrowed from the Company. The approximate amount expected to
be borrowed by the ESOP is not reflected as a liability but is reflected
as a reduction of capital. Although repayment of such debt will be
secured solely by the shares purchased by the ESOP, the Bank expects to
make discretionary contributions to the ESOP in an amount at least equal
to the principal and interest payments on the ESOP debt. Pro forma net
income has been adjusted to give effect to such contributions, based upon
a fully amortizing debt with a ten-year term. Because the Company will
be providing the ESOP loan, only principal payments on the ESOP loan are
reflected as employee compensation and benefits expense. For purposes of
this table the Purchase Price of $10.00 was utilized to calculate the
ESOP expense. The Bank intends to record compensation expense related to
the ESOP in accordance with AICPA SOP No. 93-6. As a result, to the
extent the value of the Common Stock appreciates over time, compensation
expense related to the ESOP will increase. SOP 93-6 also changes the
earnings per share computations for leveraged ESOPs to include as
outstanding only shares that have been committed to be released to
participants. For purposes of the preceding table, it was assumed that
10% of the ESOP shares purchased in the Stock Issuance were committed to
be released at December 31, 1997. See "Management of the Bank -- Certain
Benefit Plans and Agreements -- Employee Stock Ownership Plan."
(4) Assumes a number of shares of Common Stock equal to 4% of the Common
Stock to be sold in the Offering will be purchased by the MRP in the open
market in the year following the Stock Issuance. The dollar amount of
the Common Stock to be purchased by the MRP is based on the Purchase
Price in the Offering and represents unearned compensation and is
reflected as a reduction of capital. Such amount does not reflect
possible increases or decreases in the value of such stock relative to
the Purchase Price in the Offering. As the Bank accrues compensation
expense to reflect the vesting of such shares pursuant to the MRP, the
charge against capital will be reduced accordingly. Implementation of
the MRP would require stockholder approval at a meeting of the Company's
stockholders to be held no earlier than six months after the Stock
Issuance. For purposes of this table, it is assumed that the MRP will be
adopted by the Bank's Board of Directors and approved by the Company's
stockholders, and that the MRP will purchase the shares of Common Stock
in the open market within the year following the Stock Issuance. If the
shares to be purchased by the MRP are assumed to be newly issued shares
purchased from the Company by the MRP at the Purchase Price, at the
minimum, midpoint, maximum and maximum, as adjusted, of the Estimated
Valuation Range, the offering price as a percentage of pro forma
stockholders' equity per share would be 106.61%, 117.92%, 129.53% and
138.50%, respectively, and pro forma net income per share would have been
$.18, $.16, $.14 and $.13, respectively. As a result of the MRP
acquiring authorized but unissued shares from the Company, stockholders'
ownership interests in the Company would be diluted by approximately
1.5%. See "Management of the Bank -- Certain Benefit Plans and
Agreements -- Management Recognition Plan" and "Risk Factors -- Possible
Dilutive Effect of MRP and Stock Options."
(5) No effect has been given to the issuance of additional shares of Common
Stock pursuant to the Option Plan expected to be adopted by the Company
following the Stock Issuance and considered and voted upon at a meeting
of the Company's stockholders to be held no earlier than six months after
the Stock Issuance. Upon approval of the Option Plan, employees and
directors could be granted options to purchase an aggregate amount of
Common Stock equal to 10% of the shares issued in the Offering at
exercise prices equal to the market price of the Common Stock on the date
of grant. In the event the shares issued under the Option Plan consist
of newly issued shares of Common Stock and all options available for
award under the Option Plan were awarded, the interests of existing
stockholders would be diluted. At the minimum, midpoint and maximum of
Estimated Valuation Range, if all shares under the Option Plan were newly
issued at the end of the period and the exercise price for the option
shares were equal to the Purchase Price in the Offering, the number of
outstanding shares of Common Stock would increase to 4,078,215,
4,797,900, 5,517,100 and 6,345,222, respectively, net income per share
would be $.18, $.16, $.14 and $.12, respectively, and stockholders'
equity per share would be $9.40, $8.51, $7.85 and $7.28, respectively.
See "Management of the Bank -- Certain Benefit Plans and Agreements --
Stock Option Plan" and "Risk Factors -- Possible Dilutive Effect of MRP
and Stock Options."
(6) Pro forma stockholders' equity has been decreased by $250,000 to reflect
the capitalization of the MHC.
40
<PAGE>
<TABLE>
<CAPTION>
At or for the Year Ended September 30, 1997
-----------------------------------------------------------------------------
1,469,650 1,729,000 1,988,350 2,286,602
Shares at Shares at Shares at Shares at
$10.00 Per Share $10.00 Per Share $10.00 Per Share $10.00 Per Share
---------------- ---------------- ---------------- ----------------
(Dollars in thousands, except per share amounts)
<S> <C> <C> <C> <C>
Gross offering proceeds............................. $ 14,697 $ 17,290 $ 19,884 $ 22,866
Plus: Shares issued to Foundation................... 750 750 750 750
---------- ---------- ---------- ----------
Pro forma market capitalization.................... $ 15,447 $ 18,040 $ 20,634 $ 23,616
========== ========== ========== ==========
Gross Offering proceeds............................. $ 14,697 $ 17,290 $ 19,884 $ 22,866
Less: Estimated Offering expenses:.................. 641 677 713 754
---------- ---------- ---------- ----------
Estimated net Offering proceeds.................... 14,056 16,613 19,171 22,112
Less: Common stock purchased by ESOP................ 1,176 1,383 1,591 1,829
MRP........................................... 588 692 795 915
Funds to capitalize MHC....................... 250 250 250 250
Investment in fixed assets (1)................ 1,250 1,250 1,250 1,250
---------- ---------- ---------- ----------
Estimated investable net proceeds.................. $ 10,792 $ 13,038 $ 15,285 $ 17,868
========== ========== ========== ==========
Net income (2):
Historical net income.............................. $ 1,977 $ 1,977 $ 1,977 $ 1,977
Pro forma income on investable net proceeds........ 358 433 507 593
Pro forma ESOP adjustment (3)...................... (72) (84) (97) (112)
Pro forma MRP adjustment (4)....................... (72) (84) (97) (112)
---------- ---------- ---------- ----------
Total............................................ $ 2,191 $ 2,242 $ 2,290 $ 2,346
========== ========== ========== ==========
Net income per share: (2)(5)
Historical net income............................. $ 0.52 $ 0.44 $ 0.38 $ 0.33
Pro forma income on investable net proceeds....... 0.09 0.10 0.10 0.10
Pro forma ESOP adjustment (3)..................... (0.02) (0.02) (0.02) (0.02)
Pro forma MRP adjustment (4)...................... (0.02) (0.02) (0.02) (0.02)
---------- ---------- ---------- ----------
Total............................................ $ 0.57 $ 0.50 $ 0.44 $ 0.39
========== ========== ========== ==========
Weighted average number of shares outstanding
for earnings per share calculations (3)............ 3,819,577 4,493,596 5,167,635 5,942,780
========== ========== ========== ==========
Stockholders' equity:
Historical (6)..................................... $ 23,608 $ 23,608 $ 23,608 $ 23,608
Estimated net proceeds............................. 14,056 16,613 19,171 22,112
Plus: Shares issued to Foundation................. 750 750 750 750
Less: Contribution to Foundation................... (750) (750) (750) (750)
Plus: Tax Benefit of the contribution to the
Foundation................................. 293 293 293 293
Less: Common stock acquired by the ESOP (3)........ (1,176) (1,383) (1,591) (1,829)
Common Stock acquired by MRP (4)............. (588) (692) (795) (915)
---------- ---------- ---------- ----------
Total............................................. $ 36,193 $ 38,439 $ 40,686 $ 43,269
========== ========== ========== ==========
Stockholders' equity per share: (5)
Historical (6)..................................... $ 6.01 $ 5.10 $ 4.44 $ 3.86
Estimated net offering proceeds (4)................ 3.58 3.59 3.60 3.62
Plus: Shares issued to Foundation................. 0.19 0.16 0.14 0.12
Less: Contribution to Foundation................... (0.19) (0.16) (0.14) (0.12)
Plus: Tax Benefit of the contribution to the
Foundation................................ 0.07 0.06 0.06 0.05
Less: Common Stock acquired by ESOP (3)............ (0.30) (0.30) (0.30) (0.30)
Common Stock acquired by MRP (4)............. (0.15) (0.15) (0.15) (0.15)
---------- ---------- ---------- ----------
Total............................................. $ 9.21 $ 8.30 $ 7.65 $ 7.08
========== ========== ========== ==========
Number of shares outstanding for stockholders' equity
per share calculations............................. 3,931,250 4,625,000 5,318,750 6,116,562
========== ========== ========== ==========
Offering price as a percentage of pro forma
stockholders' equity per share..................... 108.58% 120.48% 130.72% 141.24%
========== ========== ========== ==========
Ratio of offering price to pro forma net income
per share (annualized)............................. 17.54x 20.00x 22.73x 25.64x
========== ========== ========== ==========
(Footnotes on succeeding page)
</TABLE>
41
<PAGE>
- -------------------------
(1) Consists of $750,000 of construction costs for a new branch and $500,000
to be utilized to upgrade ATMs and computer equipment.
(2) Does not give effect to the non-recurring expense that will be recognized
in the year ending September 30, 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
$457,000. Assuming the contribution to the Foundation was expensed
during the year ended September 30, 1997, pro forma net income per share
would be $.45, $.40, $.35 and $.32 at the minimum, midpoint, maximum and
maximum, as adjusted, respectively. Per share net income data is based
on 3,819,597, 4,493,592, 5,167,635 and 5,942,780 shares outstanding,
which represents shares sold in the Offering, shares issued to the MHC,
shares contributed to the Foundation and shares to be allocated or
distributed under the ESOP and MRP for the year presented.
(3) Assumes 8% of the shares to be sold in the Offering are purchased by the
ESOP under all circumstances, and that the funds used to purchase such
shares are borrowed from the Company. The approximate amount expected to
be borrowed by the ESOP is not reflected as a liability but is reflected
as a reduction of capital. Although repayment of such debt will be
secured solely by the shares purchased by the ESOP, the Bank expects to
make discretionary contributions to the ESOP in an amount at least equal
to the principal and interest payments on the ESOP debt. Pro forma net
income has been adjusted to give effect to such contributions, based upon
a fully amortizing debt with a ten-year term. Because the Company will
be providing the ESOP loan, only principal payments on the ESOP loan are
reflected as employee compensation and benefits expense. For purposes of
this table the Purchase Price of $10.00 was utilized to calculate the
ESOP expense. The Bank intends to record compensation expense related to
the ESOP in accordance with AICPA SOP No. 93-6. As a result, to the
extent the value of the Common Stock appreciates over time, compensation
expense related to the ESOP will increase. SOP 93-6 also changes the
earnings per share computations for leveraged ESOPs to include as
outstanding only shares that have been committed to be released to
participants. For purposes of the preceding table, it was assumed that
10% of the ESOP shares purchased in the Stock Issuance were committed to
be released at September 30, 1997. See "Management of the Bank --
Certain Benefit Plans and Agreements -- Employee Stock Ownership
Plan."
(4) Assumes a number of shares of Common Stock equal to 4% of the Common
Stock to be sold in the Offering will be purchased by the MRP in the open
market in the year following the Stock Issuance. The dollar amount of
the Common Stock to be purchased by the MRP is based on the Purchase
Price in the Offering and represents unearned compensation and is
reflected as a reduction of capital. Such amount does not reflect
possible increases or decreases in the value of such stock relative to
the Purchase Price in the Offering. As the Bank accrues compensation
expense to reflect the vesting of such shares pursuant to the MRP, the
charge against capital will be reduced accordingly. Implementation of
the MRP would require stockholder approval at a meeting of the Company's
stockholders to be held no earlier than six months after the Stock
Issuance. For purposes of this table, it is assumed that the MRP will be
adopted by the Bank's Board of Directors and approved by the Company's
stockholders, and that the MRP will purchase the shares of Common Stock
in the open market within the year following the Stock Issuance. If the
shares to be purchased by the MRP are assumed to be newly issued shares
purchased from the Company by the MRP at the Purchase Price, at the
minimum, midpoint, maximum and maximum, as adjusted of the Estimated
Valuation Range, the offering price as a percentage of pro forma
stockholders' equity per share would be 108.46%, 119.90%, 131.58% and
140.45%, respectively, and pro forma net income per share would have been
$.57, $.50, $.44 and $.39, respectively. As a result of the MRP
acquiring authorized but unissued shares from the Company, stockholders'
ownership interests in the Company would be diluted by approximately
1.5%. See "Management of the Bank -- Certain Benefit Plans and
Agreements -- Management Recognition Plan" and "Risk Factors -- Possible
Dilutive Effect of MRP and Stock Options."
(5) No effect has been given to the issuance of additional shares of Common
Stock pursuant to the Option Plan expected to be adopted by the Company
following the Stock Issuance and considered and voted upon at a meeting
of the Company's stockholders to be held no earlier than six months after
the Stock Issuance. Upon approval of the Option Plan, employees and
directors could be granted options to purchase an aggregate amount of
Common Stock equal to 10% of the shares issued in the Offering at
exercise prices equal to the market price of the Common Stock on the date
of grant. In the event the shares issued under the Option Plan consist
of newly issued shares of Common Stock and all options available for
award under the Option Plan were awarded, the interests of existing
stockholders would be diluted. At the minimum, midpoint and maximum of
Estimated Valuation Range, if all shares under the Option Plan were newly
issued at the end of the period and the exercise price for the option
shares were equal to the Purchase Price in the Offering, the number of
outstanding shares of Common Stock would increase to 4,078,215,
4,797,900, 5,517,100 and 6,345,222, respectively, net income per share
would be $.55, $.48, $.43 and $.38, respectively, and stockholders'
equity per share would be $9.24, $8.37, $7.73 and $7.18, respectively.
See "Management of the Bank -- Certain Benefit Plans and Agreements --
Stock Option Plan" and "Risk Factors -- Possible Dilutive Effect of MRP
and Stock Options."
(6) Pro forma stockholders' equity has been decreased by $250,000 to reflect
the capitalization of the MHC.
42
<PAGE>
COMPARISON OF VALUATION AND PRO FORMA INFORMATION WITH NO FOUNDATION
In the event that the Foundation was not established as part of the Stock
Issuance, RP Financial has estimated that the pro forma market capitalization of
the Company would be approximately $18.3 million, at the midpoint, which is
approximately $293,000 greater than the pro forma market capitalization of the
Company if the Foundation is approved by the members of the Bank, and would
result in approximately a $1.0 million increase in the amount of Common Stock
offered for sale in the Offering. 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 income per share would be
approximately the same at $8.45 and $.17, respectively, and $8.44 and $.17,
respectively, with the Foundation or without the Foundation. The pro forma
price to book ratio and the pro forma price to earnings ratio are 118.48 and
14.71x, respectively, at the midpoint of the estimate, assuming no Foundation
and 118.34 and 14.71x, respectively, with the Foundation. This estimate by RP
Financial was prepared at the request of the OTS and is solely for purposes of
providing members with sufficient information with which to make an informed
decision on the Foundation. There is no assurance that in the event the
Foundation is not approved at the Special Meeting of members that the appraisal
prepared at that time would conclude that the pro forma market value of the
Company would be the same as that estimated herein. Any appraisal 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 maximum, as
adjusted of the Estimated Valuation Range, assuming the Stock Issuance was
completed at December 31, 1997.
<TABLE>
<CAPTION>
At the Minimum At the Midpoint At the Maximum
------------------------ ------------------------ ------------------------
With No With No With No
Foundation Foundation Foundation Foundation Foundation Foundation
---------- ---------- ---------- ---------- ---------- ----------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C>
Estimated offering amount.... $ 14,697 $ 15,583 $ 17,290 $ 18,333 $ 19,884 $ 21,082
Pro forma market
capitalization.............. 15,447 15,583 18,040 18,333 20,634 21,082
Total assets................. 262,917 263,392 265,163 265,774 267,410 268,155
Total liabilities............ 226,066 226,066 226,066 226,066 226,066 226,066
Pro forma stockholders'
equity...................... 36,851 37,326 39,097 39,708 41,344 42,089
Pro forma consolidated net
earnings.................... 711 716 724 730 737 741
Pro forma stockholders'
equity per share............ 9.37 9.34 8.45 8.44 7.77 7.79
Pro forma consolidated net
income per share............ 0.19 0.20 0.17 0.17 0.15 0.16
Pro forma pricing ratios:
Offering price as a
percentage of pro
forma stockholders'
equity per share....... 106.72% 107.07% 118.34% 118.48% 128.70% 128.37%
Offering price to pro
forma net earnings
per share............ 13.16x 12.50x 14.71x 14.71x 16.67x 15.63x
Offering price to assets
per share................ 5.88% 5.92% 6.80% 6.90% 7.72% 7.86%
Pro forma financial ratios:
Return on assets......... 1.08 1.09 1.09 1.10 1.10 1.11
Return on stockholders'
equity.................. 7.72 7.67 7.41 7.35 7.13 7.04
Stockholders' equity to
assets.................. 14.02 14.17 14.74 14.94 15.46 15.70
<CAPTION>
At the Maximum,
as Adjusted
------------------------
With No
Foundation Foundation
---------- ----------
<S> <C> <C>
Estimated offering amount.... $ 22,866 $ 24,245
Pro forma market
capitalization.............. 23,616 24,245
Total assets................. 269,993 270,894
Total liabilities............ 226,066 226,066
Pro forma stockholders'
equity...................... 43,927 44,828
Pro forma consolidated net
earnings.................... 750 756
Pro forma stockholders'
equity per share............ 7.19 7.21
Pro forma consolidated net
income per share............ 0.14 0.14
Pro forma pricing ratios:
Offering price as a
percentage of pro
forma stockholders'
equity per share....... 139.08% 138.70%
Offering price to pro
forma net earnings
per share............ 17.86x 17.86x
Offering price to assets
per share................ 8.75% 8.95%
Pro forma financial ratios:
Return on assets......... 1.11 1.12
Return on stockholders'
equity.................. 6.83 6.75
Stockholders' equity to
assets.................. 16.27 16.55
</TABLE>
43
<PAGE>
PROPOSED MANAGEMENT PURCHASES
The following table sets forth information regarding the approximate
number of shares of the Common Stock intended to be purchased in the Offering by
each of the directors and officers of the Bank and by all directors and
executive officers as a group, including their associates. For purposes of the
following table, it has been assumed that 1,827,000 shares of the Common Stock
will be sold at $10.00 per share, the midpoint of the Estimated Valuation Range
(see "The Reorganization and Stock Issuance -- Stock Pricing and Number of
Shares to be Issued") and that sufficient shares will be available to satisfy
subscriptions in all categories.
<TABLE>
<CAPTION>
Percent of
Total Shares Aggregate Purchase
Total Sold in Price of
Name and Position Shares Offering (1) Proposed Purchases
----------------- ------- ------------- ------------------
<S> <C> <C> <C>
Michael J. Dietz, President and Director 25,000 1.4% $ 250,000
William M. Loughran, Vice President
and Director 8,000 .5 80,000
Gary C. Loraditch, Vice President, Secretary,
Treasurer and Director 20,000 1.2 200,000
Henry V. Kahl, Chairman of the Board of Directors 6,833 .4 68,330
H. Adrian Cox, Vice Chairman of the Board 10,600 .6 106,000
Martin F. Meyers, Director 8,000 .5 80,000
John J. Panzer, Jr., Director 17,500 1.0 175,000
P. Louis Rohe, Jr., Director 10,700 .6 107,000
Frank W. Dunton, Director 18,359 1.1 183,590
------- ---- ----------
124,992 7.2 1,249,920
All directors and executive officers , as a group
(9 persons) and their associates
ESOP (2) 138,320 8.0 1,383,200
MRP (3) 69,160 4.0 691,600
------- ---- ----------
Total (4) 332,472 19.2 $3,324,720
======= ==== ==========
</TABLE>
- -------------------------
(1) Percentages are based on the sale of 1,729,000 shares of Common Stock at
$10.00 per share, the midpoint of the Estimated Valuation Range, in the
Offering. Following completion of the Stock Issuance and assuming the
issuance of 75,000 shares of Common Stock to the Foundation, at the
minimum, midpoint, maximum and maximum, as adjusted of the Estimated
Valuation Range, the total percentage of the Company's outstanding Common
Stock expected to be held collectively by the Bank's directors and
executive officers as a group, the ESOP and the MRP, is 7.7%, 7.2%, 6.8%
and 6.5%, respectively.
(2) Consists of shares that could be allocated to participants in the ESOP,
under which executive officers and other employees would be allocated in
the aggregate 8% of the Common Stock issued in the Offering. See
"Management of the Bank -- Certain Benefit Plans and Agreements --
Employee Stock Ownership Plan."
(3) Consists of shares that are expected to be awarded to participants in the
MRP, if implemented, under which directors, executive officers and other
employees would be awarded an aggregate number of shares equal to 4% of
the Common Stock sold in the Offering (69,160 shares at the midpoint of
the Estimated Valuation Range). The dollar amount of the Common Stock to
be purchased by the MRP is based on the Purchase Price in the Offering
and does not reflect possible increases or decreases in the value of such
stock relative to the Purchase Price per share in the Offering.
Implementation of the MRP would require approval by the Company's
stockholders. See "Management of the Bank -- Certain Benefit Plans and
Agreements -- Management Recognition Plan." Such shares could be newly
issued shares or shares purchased in the open market following
implementation of the MRP, in the sole discretion of the Company's Board
of Directors. The percentage shown assumes shares are purchased in the
open market. Any sale of newly issued shares to the MRP would be
dilutive to existing stockholders. See "Risk Factors -- Possible
Dilutive Effect of MRP and Stock Options."
(4) Does not include shares that possibly would be purchased by participants
in an Option Plan, intended to be implemented, under which directors,
executive officers and other employees would be granted options to
purchase an aggregate amount of Common Stock equal to 10% of the shares
issued in the Offering (172,900 shares at the midpoint of the Estimated
Valuation Range) at exercise prices equal to the market price of the
Common Stock on the date of grant. Shares issued pursuant to the
exercise of options could be from treasury stock or newly issued shares.
Implementation of the Option Plan would require regulatory and
stockholder approval. See "Management of the Bank -- Certain Benefit
Plans and Agreements -- Stock Option Plan.
44
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company has not been formed and, accordingly, has no results of
operations at this time. As a result, this discussion relates to the financial
condition and results of operations of the Bank. The Bank's principal business
consists of attracting deposits from the general public and investing these
funds in loans secured by first mortgages on owneroccupied, single-family
residences in the Bank's market area, and, to a lesser extent, other real estate
loans, consisting of construction loans, single-family rental property loans and
commercial real estate loans and consumer loans, particularly automobile loans.
The Bank's net income is dependent primarily on its net interest income,
which is the difference between interest income earned on its loan, investment
securities and mortgage-backed securities portfolio and interest paid on
interest-bearing liabilities. Net interest income is determined by (i) the
difference between yields earned on interest-earning assets and rates paid on
interest-bearing liabilities ("interest rate spread") and (ii) the relative
amounts of interest-earning assets and interest-bearing liabilities. The Bank's
interest rate spread is affected by regulatory, economic and competitive factors
that influence interest rates, loan demand and deposit flows. To a lesser
extent, the Bank's net income also is affected by the level of other income,
which primarily consists of fees and charges, and levels of non-interest
expenses such as salaries and related expenses.
The operations of the Bank are significantly affected by prevailing
economic conditions, competition and the monetary, fiscal and regulatory
policies of governmental agencies. Lending activities are influenced by the
demand for and supply of housing, competition among lenders, the level of
interest rates and the availability of funds. Deposit flows and costs of funds
are influenced by prevailing market rates of interest, primarily on competing
investments, account maturities and the levels of personal income and savings in
the Bank's market area.
RECENT DEVELOPMENTS
In October 1997, the Bank sold its deposits in its Severna Park branch
office. In connection with such sale, the Bank sold deposits totaling $6.6
million and recognized a $339,000 gain representing a premium paid by the buyer
on the deposits sold. The Bank has terminated its lease at this location.
In February 1998, the Bank leased a drive-in facility at its Dundalk branch
facility. The Bank expects to open the drive-in facility in May 1998. As a
result of the lease, the Bank will make capital improvements of approximately
$125,000 and will have additional expenses of approximately $25,000 per
year.
In March 1998, the Bank signed a lease to relocate its Bel Air branch
office from a store front to a free-standing building within the same shopping
center. The relocated site will make capital improvements of approximately
$125,000 and will provide the branch with three drive-through lanes and an ATM
machine. The new lease is expected to increase the Bank's annual noninterest
expenses by approximately $150,000.
Management anticipates that the branch expansion will initially cause
increased operating expenses but will generate long-term growth for the Bank.
See "Risk Factors -- Potential Cost of ESOP and MRP and Potential Future
Increases in Expenses."
POSSIBLE YEAR 2000 COMPUTER PROBLEMS
A great deal of information has been disseminated about the global computer
crash that may occur in the year 2000. Many computer programs that can only
distinguish the final two digits of the year entered (a common programming
practice in earlier years) are expected to read entries for the year 2000 as the
year 1900 and compute payment, interest or delinquency based on the wrong date
or are expected to be unable to compute payment, interest or delinquency. Rapid
and accurate data processing is essential to the operations of the Bank. Data
processing is also essential to most other financial institutions and many other
companies.
All of the material data processing of the Bank that could be affected by
this problem is provided by a third party service bureau. Management closely
monitors the progress of the service bureau in resolving this potential problem
and reports the status of the service bureau's progress to the Board of
Directors on a quarterly basis. The service bureau has advised the Bank that it
expect to resolve this potential problem before the year 2000 by completing all
implementation procedures by December 31, 1998 to allow for testing to occur in
1999. However, if the service bureau is unable to resolve this potential problem
in time, the Bank would seek to retain a replacement service bureau and would
likely experience significant data processing delays, mistakes or failures.
These delays, mistakes or failures could have a significant adverse impact on
the financial condition and results of operation of the Bank.
45
<PAGE>
ASSET/LIABILITY MANAGEMENT
The Bank strives to achieve consistent net interest income and reduce its
exposure to adverse changes in interest rates by attempting to match the terms
to repricing of its interest-sensitive assets and liabilities. Factors beyond
the Bank's control, such as market interest rates and competition, may also have
an impact on the Bank's interest income and interest expense.
In the absence of any other factors, the overall yield or return associated
with the Bank's earning assets generally will increase from existing levels when
interest rates rise over an extended period of time, and conversely interest
income will decrease when interest rates decrease. In general, interest expense
will increase when interest rates rise over an extended period of time, and
conversely interest expense will decrease when interest rates decrease. By
controlling the increases and decreases in its interest income and interest
expense which are brought about by changes in market interest rates, the Bank
can significantly influence its net interest income.
The three senior officers of the Bank meet on a weekly basis to monitor the
Bank's interest rate risk position and to set prices on loans and deposits to
manage interest rate risk within the parameters set by the Board of Directors.
The President of the Bank reports to the Board of Directors on a regular basis
on interest rate risk and trends, as well as liquidity and capital ratios and
requirements. The Board of Directors reviews the maturities of the Bank's
assets and liabilities and establishes policies and strategies designed to
regulate the Bank's flow of funds and to coordinate the sources, uses and
pricing of such funds. The first priority in structuring and pricing the Bank's
assets and liabilities is to maintain an acceptable interest rate spread while
reducing the net effects of changes in interest rates. The Bank's management is
responsible for administering the policies and determinations of the Board of
Directors with respect to the Bank's asset and liability goals and strategies.
The Bank's principal strategy in managing interest rate risk has been to
emphasize the acquisition of short- and intermediate-term assets, including
locally originated 15-year fixed-rate mortgage loans and consumer loans,
particularly automobile loans. In addition, in managing its portfolio of
investment securities and mortgage-backed securities, the Bank in recent periods
has purchased short-term investment securities so as to reduce the Bank's
exposure to increases in interest rates. The Bank currently retains all loans
originated in its portfolio, although the Bank's loans generally conform to
secondary market requirements. At December 31, 1997, the Bank held
approximately $12.6 million in loans with adjustable interest rates, which
represented approximately 11.2% of the Bank's gross loan portfolio.
In addition to shortening the average repricing period of its assets, the
Bank has sought to lengthen the average maturity of its liabilities by adopting
a tiered pricing program for its certificates of deposit, which provides higher
rates of interest on its longer term certificates in order to encourage
depositors to invest in certificates with longer maturities.
MARKET RISK
Management measures the Bank's interest rate risk by computing estimated
changes in the net portfolio value ("NPV") of its cash flows from assets,
liabilities and off-balance sheet items in the event of a range of assumed
changes in market interest rates. NPV represents the market value of portfolio
equity and is the difference between incoming and outgoing discounted cash flows
from assets and liabilities, with adjustments made for off-balance sheet items.
These computations estimate the effect on the Bank's NPV of sudden and sustained
1% to 4% increases and decreases in market interest rates. The Bank's Board of
Directors has adopted an interest rate risk policy which establishes maximum
decreases in the Bank's estimated NPV of 25%, 50%, 75% and 90% in the event of
1%, 2%, 3% and 4% increases in market interest rates, respectively, and of 25%,
25%, 25% and 25% in the event of 1%, 2%, 3% and 4% decreases in market interest
rates, respectively. The following table presents the Bank's projected change
in NPV for the various rate shock levels at December 31, 1997.
46
<PAGE>
<TABLE>
<CAPTION>
Net Portfolio Value NPV as % of PV of Assets
Change -------------------------------------- ------------------------------
in Rates $ Amount $ Change (1) % Change (2) NPV Ratio (3) Change (4)
- -------- -------- ------------ ------------ ------------- ----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
+400 bp $15,627 $(13,830) (47)% 6.57% (496) bp
+300 bp 19,177 (10,280) (35) 7.91 (361) bp
+200 bp 22,808 (6,649) (23) 9.23 (229) bp
+100 bp 26,364 (3,093) (10) 10.48 (104) bp
0 bp 29,457 -- -- 11.52 --
- -100 bp 32,107 2,650 9 12.38 86 bp
- -200 bp 34,642 5,185 18 13.18 165 bp
- -300 bp 37,400 7,943 27 14.02 249 bp
- -400 bp 41,092 11,635 39 15.13 360 bp
</TABLE>
_______________
(1) Represents the excess (deficiency) of the estimated NPV assuming the
indicated change in interest rates minus the estimated NPV assuming no
change in interest rates.
(2) Calculated as the amount of change in the estimated NPV divided by the
estimated NPV assuming no change in interest rates.
(3) Calculated as the estimated NPV divided by average total assets.
(4) Calculated as the excess (deficiency) of the NPV ratio assuming the
indicated change in interest rates over the estimated NPV ratio assuming
no change in interest rates.
<TABLE>
<CAPTION>
***Risk Measures: 200 bp rate shock*** At At At
December 31, September 30, December 31,
1997 1997 1996
------------- -------------- -------------
<S> <C> <C> <C>
Pre-Shock NPV Ratio: NPV as % of PV of Assets... 11.52% 10.98% 10.61%
Exposure Measure: Post Shock NPV Ratio.......... 9.23 8.89 7.52
Sensitivity Measure: Change in NPV Ratio........ (229) bp (210) bp (309) bp
</TABLE>
The above table indicates that at December 31, 1997, in the event of
sudden and sustained increases in prevailing market interest rates, the Bank's
NPV would be expected to decrease, and that in the event of sudden and sustained
decreases in prevailing market interest rates, the Bank's NPV would be expected
to increase. The Bank's Board of Directors reviews the Bank's NPV position
quarterly, and, if estimated changes in NPV are not within the targets
established by the Board, the Board may direct management to adjust its asset
and liability mix to bring interest rate risk within Board approved targets. At
December 31, 1997, the Bank's estimated changes in NPV were within the targets
established by the Board of Directors.
NPV is calculated by the OTS by using information provided by the
Bank. The calculation is based on the net present value of discounted cash
flows utilizing market prepayment assumptions and market rates of interest
provided by Bloomberg quotations and surveys performed during the quarter ended
September 30, 1997, with adjustments made to reflect the shift in the Treasury
yield curve between the survey date and the quarter-end date.
Computations of prospective effects of hypothetical interest rate
changes are based on numerous assumptions, including relative levels of market
interest rates, loan prepayments and deposit decay, and should not be relied
upon as indicative of actual results. Further, the computations do not
contemplate any actions the Bank may undertake in response to changes in
interest rates.
47
<PAGE>
Certain shortcomings are inherent in the method of analysis presented
in the computation of NPV. Actual values may differ from those projections set
forth in the table, should market conditions vary from assumptions used in the
preparation of the table. Additionally, certain assets, such as adjustable-rate
loans, have features which restrict changes in interest rates on a short-term
basis and over the life of the asset. In addition, the proportion of
adjustable-rate loans in the Bank's portfolio could decrease in future periods
if market interest rates remain at or decrease below current levels due to
refinance activity. Further, in the event of a change in interest rates,
prepayment and early withdrawal levels would likely deviate significantly from
those assumed in the tables. Finally, the ability of many borrowers to repay
their adjustable-rate debt may decrease in the event of an interest rate
increase.
OTS regulations incorporate in interest rate risk ("IRR") component
into the risk-based capital regulations. The IRR component is a dollar amount
that will be deducted from total capital for the purpose of calculating an
institution's risk based capital requirement and is measured in terms of the
sensitivity of its NPV to changes in interest rates. An institution's IRR is
measured as the change to its NPV as a result of a hypothetical 200 basis point
("bp") change in market interest rates. A resulting change in NPV of more than
2% of the estimated market value of its assets will require the institution to
deduct from its capital 50% of that excess change. The rules provide that the
OTS will calculate the IRR component quarterly for each institution. The Bank,
based on asset size and risk-based capital, has been informed by the OTS that it
is exempt from this rule.
Although the OTS has informed the Bank that it is not subject to the
IRR component discussed above, the Bank is still subject to interest rate risk,
and, as can be seen above, changes in interest rates may reduce the Bank's NPV.
The OTS has the authority to require otherwise exempt institutions to comply
with the rule concerning interest rate risk. See "Regulation -- Regulatory
Capital Requirements."
48
<PAGE>
AVERAGE BALANCE, INTEREST AND AVERAGE YIELDS AND RATES
The following table sets forth certain information relating to the
Bank's average interest-earning assets and interest-bearing liabilities and
reflects the average yield on assets and average cost of liabilities for the
periods and at the date indicated. Such yields and costs are derived by
dividing income or expense by the average monthly balance of assets or
liabilities, respectively, for the periods presented. Average balances are
derived from month-end balances. Management does not believe that the use of
month-end balances instead of daily balances has caused any material difference
in the information presented.
<TABLE>
<CAPTION>
Three Months Ended December 31,
-------------------------------------------------------------------
At December 31, 1997 1996
1997 ------------------------------ --------------------------------
------------------- Average Average
Yield/ Average Yield/ Average Yield/
Balance Cost(1) Balance Interest Cost(1) Balance Interest Cost(1)
-------- --------- -------- -------- ---------- -------- -------- ----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans receivable (2)............... $159,532 8.38% $158,989 $3,328 8.39% $154,738 $3,316 8.87%
Mortgage-backed securities......... 36,110 6.69 36,498 597 6.54 38,904 632 6.50
Investment securities (3) and FHLB
stock............................. 21,526 6.94 20,359 387 7.59 39,880 760 7.63
Other interest-earning assets...... 25,976 5.86 24,939 330 5.30 16,314 225 5.52
-------- -------- ------ -------- ------
Total interest-earning assets..... 243,144 7.93 240,785 4,642 7.71 249,836 4,933 7.90
------ ------
Non-interest-earning assets.......... 7,438 10,631 12,170
-------- -------- --------
Total assets...................... $250,582 $251,416 $262,006
======== ======== ========
Interest-bearing liabilities:
Deposits........................... $222,245 4.41 $222,283 2,449 4.41 $235,835 2,683 4.55
Borrowings......................... 1,475 0.56 1,206 2 0.66 1,149 2 0.70
-------- -------- ------ -------- ------
Total interest-bearing liabilities 223,720 4.38 223,489 2,451 4.39 236,984 2,685 4.53
------ ------
Non-interest-bearing liabilities..... 2,346 3,695 2,887
-------- -------- --------
Total liabilities................. 226,066
Retained earnings.................... 24,516 24,232 22,135
-------- -------- --------
Total liabilities and retained
earnings......................... $250,572 $251,416 $262,006
======== ======== ========
Net interest income.................. $2,191 $2,248
====== ======
Interest rate spread................. 3.55% 3.32% 3.37%
==== ====== ======
Net interest margin (4).............. 3.64% 3.60%
====== ======
Ratio of average interest-earning
assets to
average interest-bearing liabilities 107.74% 105.42%
====== ======
</TABLE>
49
<PAGE>
<TABLE>
<CAPTION>
Year Ended September 30,
------------------------------------------------------------------------------------------------
1997 1996 1995
------------------------------ ----------------------------- -------------------------------
Average Average Average
Average Yield/ Average Yield/ Average Yield/
Balance Interest Cost Balance Interest Cost Balance Interest Cost
-------- -------- -------- -------- -------- -------- -------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans receivable (1)........... $156,227 $13,240 8.47% $149,571 $13,094 8.75% $137,845 $12,017 8.72%
Mortgage backed securities..... 37,440 2,428 6.49 36,936 2,309 6.25 37,220 2,381 6.40
Investment securities (2) and
FHLB stock.................... 39,177 2,877 7.34 34,966 2,439 6.98 22,344 1,548 6.93
Other interest-earning assets.. 16,150 912 5.65 20,349 1,222 6.01 20,803 1,180 5.67
-------- ------- -------- ------- -------- -------
Total interest-earning
assets.................... 248,994 19,457 7.81 241,822 19,064 7.88 218,212 17,126 7.85
Non-interest-earning assets...... 12,317 12,636 12,305
-------- -------- --------
Total assets............... $261,311 $254,458 $230,517
======== ======== ========
Interest-bearing liabilities:
Deposits....................... $232,929 10,312 4.43 $228,913 10,621 4.64 $204,097 8,833 4.33
Other liabilities.............. 1,523 10 0.66 1,406 15 1.07 3,330 141 4.23
-------- ------- -------- ------- -------- -------
Total interest-bearing
liabilities............... 234,452 10,322 4.40 230,319 10,636 4.62 207,427 8,974 4.33
------- ------- -------
Non-interest-bearing liabilities. 3,989 2,861 3,213
-------- -------- --------
Total liabilities.......... 238,441 233,180 210,640
Retained earnings................ 22,870 21,278 19,877
-------- -------- --------
Total liabilities and
retained earnings......... $261,311 $254,458 $230,517
======== ======== ========
Net interest income.............. $ 9,135 $ 8,428 $ 8,152
======= ======= =======
Interest rate spread............. 3.41% 3.26% 3.52%
======= ====== =======
Net interest margin (3).......... 3.67% 3.49% 3.74%
======= ====== =======
Ratio of average
interest-earning assets
to average interest-bearing
liabilities................... 107.20% 104.99% 105.20%
======= ====== ======
</TABLE>
- -------------------------
(1) Annualized.
(2) Includes nonaccrual loans.
(3) Consists of U.S. Government and agency securities and, for the years
ended September 30, 1996 and 1995, investments in mutual funds.
(4) Represents net interest income divided by the average balance of
interest-earning assets.
50
<PAGE>
RATE/VOLUME ANALYSIS
The table below sets forth certain information regarding changes in
interest income and interest expense of the Bank for the periods indicated. For
each category of interest-earning asset and interest-bearing liability,
information is provided on changes attributable to: (i) changes in volume
(changes in volume multiplied by old rate); (ii) changes in rates (change in
rate multiplied by old volume); and (iii) changes in rate/volume (changes in
rate multiplied by the changes in volume).
<TABLE>
<CAPTION>
Three Months Ended December 31, Year Ended September 30,
--------------------------------- ----------------------------------
1997 vs. 1996 1997 vs. 1996
--------------------------------- ----------------------------------
Increase (Decrease) Increase (Decrease)
Due to Due to
--------------------------------- ----------------------------------
Rate/ Rate/
Volume Rate Volume Total Volume Rate Volume Total
------ ---- ------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(In thousands)
Interest income:
Loans receivable............ $ 91 $(77) $ (2) $ 12 $ 583 $(418) $(19) $ 146
Mortgage-backed securities.. (39) 4 0 (35) 32 86 1 119
Investment securities (1)
and FHLB Stock............. (373) 0 0 (373) 293 129 16 438
Other interest-earning
assets..................... 120 (9) (6) 105 (237) (72) (1) (310)
----- ---- ---- ----- ----- ----- ---- -----
Total interest-earning
assets.................... (201) (82) (8) (291) 671 (275) (3) 393
Interest expense:
Deposits.................... (155) (85) 6 (234) 186 (487) (8) (309)
Other liabilities........... 0 0 0 0 (2) (6) 3 (5)
----- ---- ---- ----- ----- ----- ---- -----
Total interest-bearing
liabilities.............. (155) (85) 6 (234) 184 (493) (5) (314)
----- ---- ---- ----- ----- ----- ---- -----
Change in net interest income $ (46) $ 3 $(14) $ (57) $ 487 $ 218 $ 2 $ 707
===== ==== ==== ===== ===== ===== ==== =====
<CAPTION>
Year Ended September 30,
-----------------------------------
1996 vs. 1995
-----------------------------------
Increase (Decrease)
Due to
-----------------------------------
Rate/
Volume Rate Volume Total
------ ----- ------ ------
<S> <C> <C> <C> <C>
(In thousands)
Interest income:
Loans receivable............ $1,022 $ 51 $ 4 $1,077
Mortgage-backed securities.. (18) (54) -- (72)
Investment securities (1)
and FHLB Stock............. 872 13 6 891
Other interest-earning
assets..................... 2 42 (2) 42
------ ----- ---- ------
Total interest-earning
assets.................... 1,878 52 8 1,938
Interest expense:
Deposits.................... 1,074 637 77 1,788
Other liabilities........... (123) (27) 24 (126)
------ ----- ---- ------
Total interest-bearing
liabilities.............. 951 610 101 1,662
------ ----- ---- ------
Change in net interest income $ 927 $(558) $(93) $ 276
====== ===== ==== ======
</TABLE>
_______________
(1) Consists of U.S. Government and agency securities and, for the years ended
September 30, 1996 and 1995, investments in mutual funds.
51
<PAGE>
COMPARISON OF FINANCIAL CONDITION AT DECEMBER 31, 1997 AND SEPTEMBER 30, 1997
AND 1996
Between 1993 and 1996, the Bank was able to achieve modest asset and
liability growth, with assets increasing from $217.7 million at September 30,
1993 to $258.9 million at September 30, 1996. However, total assets decreased
by $7.2 million, or 2.8%, to $251.9 million at September 30, 1997 and by $1.2
million, or .5%, to $250.6 million at December 31, 1997. The decreases in
assets occurred as the Bank used cash from maturing investment securities to pay
for reductions in certificates of deposit and passbook savings accounts.
Loans receivable, net increased by $4.1 million, or 2.7%, from $154.6
million at September 30, 1996 to $158.7 million at September 30, 1997, and by
$856,000, or .5%, to $159.5 million at December 31, 1997. The increases in the
Bank's loan portfolio were due primarily to increased originations of single-
family residential mortgage loans as a result of increased loan demand. Single-
family residential mortgage loans increased by $9.4 million, or 10.0%, from
$94.3 million at September 30, 1996 to $103.7 million at September 30, 1997, and
by $3.2 million, or 3.1%, to $106.9 million at December 31, 1997. The Bank has
emphasized the origination of automobile loans because of the higher rates and
shorter terms to maturity of those loans. However, in 1996 and 1997, the Bank
determined to reduce the percentage of its portfolio invested in automobile
loans due to the credit risks inherent in indirect automobile lending, which
serves as the source of a significant portion of the Bank's automobile loans.
Automobile loans totaled $40.8 million, $39.9 million, $32.6 million and $30.3
million at September 30, 1995, 1996 and 1997 and December 31, 1997,
respectively, which comprised 26.0%, 24.0%, 19.6% and 18.2%, respectively, of
the Bank's gross loan portfolio.
The Bank's investment securities decreased by $6.1 million, or 16.8%,
from $36.4 million at September 30, 1996 to $30.3 million at September 30, 1997,
and by $10.2 million, or 33.7%, to $20.1 million at December 31, 1997, as
proceeds from maturing investment securities were utilized to meet a reduction
in deposits.
The Bank's mortgage-backed securities decreased by $2.6 million, or
6.5%, from $39.8 million at September 30, 1996 to $37.2 million at September 30,
1997, and by $1.1 million, or 2.9%, to $20.1 million at December 31, 1997, as
funds from maturing mortgage-backed securities were utilized to meet a reduction
in deposits.
The Bank's cash, interest-bearing deposits in other banks and federal
funds sold decreased by $859,000, or 4.3%, from $20.1 million at September 30,
1996 to $19.2 million at September 30, 1997, as the Bank used excess liquidity
during that year to fund loan originations and acquisitions of investment
securities and mortgage-backed securities. The Bank's cash, interest-bearing
deposits in other banks and federal funds sold increased by $9.6 million, or
50.0%, to $28.8 million at December 31, 1997, as the Bank invested the proceeds
from maturing investment securities in federal funds sold to have funds
available to fund loans expected to close in early 1998.
During the period from 1993 to 1996, the Bank experienced modest
deposit growth, as deposits increased from $198.9 million at September 30, 1993
to $233.3 million at September 30, 1996. Between February and May 1995, the
Bank increased the interest rate it offered on two-year certificates of deposit,
thereby attracting customers who choose their bank based on the interest rates
offered. Those certificates of deposit matured in 1997, at which time the
customers withdrew their deposits, thereby causing the Bank's deposits to
decrease by $8.6 million, or 3.7%, to $224.7 million at September 30, 1997.
Deposits further decreased by $2.4 million, or 1.1%, to $222.2 million at
December 31, 1997 due to the sale of the deposits of the Severna Park branch
office. The Bank utilized minimal amounts of FHLB advances during the three
months ended December 31, 1997 and the years ended September 30, 1997 and
1996.
52
<PAGE>
COMPARISON OF OPERATING RESULTS FOR THE THREE MONTHS ENDED DECEMBER 31, 1997 AND
1996
Net Income. The Bank had net income of $657,000 for the three months
ended December 31, 1997, compared to net income of $607,000 for the three months
ended December 31, 1996, representing an increase of $50,000, or 8.2%. The
increase primarily was due to a $339,000 gain on sale of deposits earned during
the three months ended December 31, 1997, which offset a decrease in net
interest income and an increase in salaries and related expense. In addition,
the Bank recognized a $51,000 gain during the three months ended December 31,
1996 on sale of investment securities; no comparable gain was earned during the
three months ended December 31, 1997.
Net Interest Income. Net interest income was $2.2 million for the
three months ended December 31, 1997 and 1996, representing a decrease of
$57,000, or 2.5%. The decrease was due primarily to a decrease in the Bank's
interest rate spread from 3.37% for the three months ended December 31, 1996, to
3.32% for the three months ended December 31, 1997. The Bank's interest rate
spread decreased as the yield on interest-earning assets, primarily loans
receivable, decreased during a decreasing market interest rate environment,
while competitive pressures did not permit the Bank to lower the rates it
charged on its deposits as quickly. The ratio of average interest-earning assets
to average interest-bearing liabilities increased from 105.42% for the three
months ended December 31, 1996 to 107.74% for the three months ended December
31, 1997.
Interest Income. Total interest income was $4.6 million for the three
months ended December 31, 1997, as compared to $4.9 million for the three months
ended December 31, 1996, representing a decrease of $291,000, or 5.9%. Such
decrease was due primarily to a $9.1 million, or 3.6%, decrease in the average
balance of interest-earning assets, as well as to a 19 basis point decrease in
the average yield on interest-earning assets.
Interest on loans receivable increased only slightly, amounting to
$3.3 million for the three months ended December 31, 1997 and 1996, as a $4.3
million, or 2.8%, increase in the average balance of loans receivable was mostly
offset by a 48 basis point decrease in the average yield on loans receivable,
reflecting decreases in prevailing market interest rates. Interest on mortgage-
backed securities decreased by $35,000, or 5.5%, from $632,000 for the three
months ended December 31, 1996 to $597,000 for the three months ended December
31, 1997. The decrease was due to a $2.4 million, or 6.2%, decrease in the
average balance of mortgage-backed securities, due primarily to the exercise of
call options on mortgage-backed securities by issuers. Interest on investment
securities (consisting of U.S. Government and agency securities) and FHLB stock
decreased by $373,000, or 49.1%, from $760,000 for the three months ended
December 31, 1996 to $387,000 for the three months ended December 31, 1997.
Such decrease was due to a $19.5 million, or 49.0%, decrease in the average
balance of investment securities and FHLB stock from $40.0 million for the
three months ended December 31, 1996 to $20.4 million for the three months ended
December 31, 1997, as the Bank invested proceeds from maturing investment
securities into liquid assets in order to have funds available to fund loans
expected to close in early 1998. Interest on other interest-earning assets,
which consist of interest-bearing deposits in other banks and federal funds
sold, increased by $105,000, or 46.7%, from $225,000 for the three months ended
December 31, 1996 to $330,000 for the three months ended December 31, 1997.
Such increase was due to an $8.6 million, or 52.9%, increase in the average
balance of other interest-earning assets from $16.3 million for the three months
ended December 31, 1996 to $24.9 million for the three months ended December 31,
1997, as the Bank increased short-term liquidity during the three months ended
December 31, 1997 in order to have funds available to fund loans expected to
close in early 1998.
Interest Expense. Interest expense, which consists almost entirely of
interest on deposits, decreased by $234,000, or 8.7%, from $2.7 million for the
three months ended December 31, 1996 to $2.5 million for the three months ended
December 31, 1997. Such decrease was due primarily to a $13.6 million, or 5.8%,
decrease in the average balance of deposits from $235.8 million for the three
months ended December 31, 1996 to $222.3 million for the three months ended
December 31, 1997, primarily due to decreases in the average balances of
passbook savings accounts and certificates of deposit as a result of the sale of
the deposits of the Severna Park branch office. Also contributing to a decrease
in the interest on deposits was a 14 basis point decrease in the average rate
paid on
53
<PAGE>
deposits as the Bank was able to take advantage of decreasing market rates to
lower its cost of funds. The Bank made very limited use of FHLB advances during
the three months ended September 30, 1997 and 1996.
Provision for Loan Losses. Provisions for loan losses are charged to
earnings to maintain the total allowance for loan losses at a level considered
adequate by management to provide for probable loan losses, based on prior loss
experience, volume and type of lending conducted by the Bank, industry standards
and past due loans in the Bank's loan portfolio. The Bank's policies require
the review of assets on a regular basis, and the Bank appropriately classifies
loans as well as other assets if warranted. See "Business of the Bank --
Lending Activities -- Nonperforming Loans and Other Problem Assets" and " --
Allowance for Loan Losses." Management believes it uses the best information
available to make a determination with respect to the allowance for loan losses,
recognizing that future adjustments may be necessary depending upon a change in
economic conditions. The Bank established provisions for loan losses of $36,000
during the three months ended December 31, 1997 and reduced its provision for
loan losses by $1,000 during the three months ended December 31, 1996. In
establishing such provisions, management considered the levels of the Bank's
non-performing loans, which were $1.5 million and $2.0 million at December 31,
1997 and 1996, respectively, and the levels of the Bank's net charge-offs, which
totaled $31,000 and $111,000 during the three months ended December 31, 1997 and
1996, respectively.
Other Income. Total other income increased by $258,000, or 114.7%,
from $225,000 for the three months ended December 31, 1996 to $483,000 for the
three months ended December 31, 1997. The increase in other income primarily
was attributable to a $339,000 gain on sale of branch deposits, as the Bank sold
the deposits of its Severna Park branch in October 1997. In connection with
such sale, the Bank sold deposits totaling $6.6 million and recognized a gain of
$339,000 representing a premium paid by the buyer on the deposits sold. The
increase in other income attributable to the gain on sale of deposits was offset
in part by the absence during the three months ended December 31, 1997 of any
gain on sale of investment securities; the Bank earned a $51,000 gain on sale of
investment securities during the three months ended December 31, 1996. Fees and
charges on loans decreased by $19,000, or 30.2%, from $63,000 from three months
ended December 31, 1996 to $44,000 for the three months ended December 31, 1997
due to decreased loan demand during the three months ended December 31, 1997.
Rental income decreased by $18,000, or 45.0%, from $40,000 to $22,000 as the
Bank consolidated its operations in its headquarters. The Bank recognized a gain
of $11,000 on sale of foreclosed real estate during the three months ended
December 31, 1996, as compared to a $2,000 loss during the three months ended
December 31, 1997.
Non-interest Expenses. Total non-interest expenses increased by
$102,000, or 7.0%, from $1.5 million for the three months ended December 31,
1996 to $1.6 million for the three months ended December 31, 1997. Such
increase was primarily due to an increase of $80,000, or 9.4%, in salaries and
related expense, due primarily to the funding of a directors' retirement plan.
The expense related to the directors' retirement plan is expected to decrease
significantly beginning with the quarter ending March 31, 1998. Also
contributing to the increase in non-interest expenses was a $48,000, or 154.8%,
increase in advertising, as the Bank sought to increase both loan and deposit
market share. During the three months ended December 31, 1997, the Bank
established a provision for losses on foreclosed real estate of $13,000. Data
processing expense increased by $9,000, or 9.8%, from $92,000 to $101,000,
property and equipment expense increased by $11,000, or 14.1%, from $78,000 to
$89,000, and professional fees increased by $15,000, or 107.1%, from $14,000 to
$29,000. Offsetting the increase in total non-interest expenses was a $17,000,
or 12.6%, decrease in occupancy expense from $135,000 to $118,000 due primarily
to the expiration of the Arbutus lease in June 1997. The Bank closed its
Arbutus branch in October 1996.
Income Taxes. The Bank's income tax expense was $415,000 and $426,000
for the three months ended December 31, 1996 and 1997, respectively. The Bank's
effective tax rates were 40.6% and 39.3% for the three months ended December
31, 1996 and 1997, respectively.
54
<PAGE>
COMPARISON OF OPERATING RESULTS FOR THE YEARS ENDED SEPTEMBER 30, 1997 AND 1996
Net Income. The Bank had net income of $2.0 million for the year
ended September 30, 1997, compared to net income of $1.2 million for the year
ended September 30, 1996, representing an increase of $773,000, or 64.2%. The
increase primarily was due to an increase in net interest income and a decrease
in deposit insurance premiums, offset in part by a decrease in gain from the
liquidation of a real estate development joint venture and an increased income
tax provision.
Net Interest Income. Net interest income was $9.1 million for the
year ended September 30, 1997, as compared to $8.4 million for the year ended
September 30, 1996, representing an increase of $707,000, or 8.4%. The increase
was due primarily to an increase in the Bank's interest rate spread from 3.26%
for the year ended September 30, 1996 to 3.41% for the year ended September 30,
1997. The Bank was able to improve its interest rate spread during the year
ended September 30, 1997 by taking advantage of decreasing market interest rates
as interest-bearing liabilities repriced more quickly during the year than did
interest-earning assets. The ratio of average interest-earning assets to
average interest-bearing liabilities increased from 104.99% for the year ended
September 30, 1996 to 106.20% for the year ended September 30, 1997.
Interest Income. Total interest income was $19.5 million for the year
ended September 30, 1997, as compared to $19.1 million for the year ended
September 30, 1996, representing an increase of $394,000, or 2.1%. Such
increase was due primarily to a $7.2 million, or 3.0%, increase in the average
balance of interest-earning assets during such year, offset in part by a 7 basis
point decrease in the average yield on interest-earning assets.
Interest on loans receivable increased by $146,000, or 1.1%, from
$13.1 million for the year ended September 30, 1996 to $13.2 million for the
year ended September 30, 1997. The increase was due primarily to an increase in
the average balance of loans receivable of $6.6 million, or 4.4%, from $149.6
million for the year ended September 30, 1996 to $156.2 million for the year
ended September 30, 1997. Such increase was offset, in part, by a 28 basis
point decrease in the average yield on loans receivable, reflecting decreases in
prevailing market interest rates. Interest on mortgage-backed securities
increased by $119,000, or 5.2%, from $2.3 million for the year ended September
30, 1996 to $2.4 million for the year ended September 30, 1997. The increase
was due primarily to a 24 basis point increase in the average yield on mortgage-
backed securities. During the year ended September 30, 1997, the Bank purchased
five- and seven-year callable mortgage-backed securities which earned higher
rates than did the Bank's mortgage-backed securities that matured during the
year, thereby allowing the Bank to increase the yield on mortgage-backed
securities, notwithstanding that rates decreased during the year. Such increase
also reflected a $504,000, or 1.4%, increase in the average balance of mortgage-
backed securities from $36.9 million for the year ended September 30, 1996 to
$37.4 million for the year ended September 30, 1997, as the Bank used excess
liquidity to purchase mortgage-backed securities. Interest on investment
securities (consisting of U.S. Government and agency securities, and for the
year ended September 30, 1996, the Bank's investment in mutual funds) and FHLB
stock increased by $438,000, or 18.0%, from $2.4 million for the year ended
September 30, 1996 to $2.9 million for the year ended September 30, 1997. Such
increase was due primarily to an increase in the average balance of investment
securities and FHLB stock of $4.2 million, or 12.0%, from $35.0 million for the
year ended September 30, 1996 to $39.2 million for the year ended September 30,
1997, as the Bank used excess liquidity to purchase investment securities. The
increase in interest on investment securities and FHLB stock also was due to a
36 basis point increase in the average yield on investment securities and FHLB
stock from 6.98% for the year ended September 30, 1996 to 7.34% for the year
ended September 30, 1997, due to the Bank's purchasing investment securities
with longer terms (generally three to five years) to maturity, which have higher
rates than short-term securities. Interest on other interest-earning assets,
which consist of interest-bearing deposits in other banks and federal funds
sold, decreased by $310,000, or 25.4%, from $1.2 million for the year ended
September 30, 1996 to $912,000 for the year ended September 30, 1997. Such
decrease was due primarily to a $4.2 million, or 20.6%, decrease in the average
balance of other interest-earning assets, as the Bank utilized excess liquidity
to purchase investment securities and mortgage-backed securities and to a 36
basis point decrease in the average yield on other interest-earning assets due
to declines in prevailing market interest rates. The Bank took this action in
order to take advantage of the higher yield available on investment securities
and
55
<PAGE>
mortgage-backed securities as compared to the yield available on interest-
bearing deposits in other banks and federal funds sold.
Interest Expense. Interest expense, which consists primarily of
interest on deposits, decreased by $313,000, or 2.9%, from $10.6 million for the
year ended September 30, 1996 to $10.3 million for the year ended September 30,
1997. Such decrease was due primarily to decreases in prevailing market
interest rates, as the Bank was able to take advantage of decreasing market
rates to lower its cost of funds. The average cost of the Bank's deposits
decreased by 21 basis points from 4.64% for the year ended September 30, 1996 to
4.43% for the year ended September 30, 1997. The decrease in interest on
deposits attributable to the rate decrease was offset, in part, by a $4.0
million, or 1.7%, increase after interest credited in the average balance of
deposits from $228.9 million for the year ended September 30, 1996 to $232.9
million for the year ended September 30, 1997, primarily due to an increase in
certificates of deposit, offset, in part, by a decrease in passbook savings
deposits. The Bank made very limited use of FHLB advances during the year ended
September 30, 1996, while no FHLB advances were utilized during the year ended
September 30, 1997.
Provision for Loan Losses. The Bank established provisions for loan
losses of $434,000 and $286,000 for the years ended September 30, 1996 and 1997,
respectively. The decrease in the provision for loan losses in 1997 reflected a
decrease in the Bank's nonperforming loans. In establishing such provisions,
management considered the levels of the Bank's nonperforming loans, which were
$2.3 million and $1.8 million at September 30, 1996 and 1997, respectively, and
the levels of the Bank's net charge-offs, which totaled $296,000 and $234,000
during the years ended September 30, 1996 and 1997, respectively. The decrease
in nonperforming loans relected decreases in nonaccruing single-family
residential real estate loans and nonaccuring commercial real estate loans.
Other Income. Total other income decreased by $389,000, or 36.1%,
from $1.1 million for the year ended September 30, 1996 to $687,000 for the year
ended September 30, 1997. The decrease in other income primarily was
attributable to a $652,000 gain from liquidation of a real estate development
joint venture, consisting mostly of reversals of previously established
valuation allowances, earned during the year ended September 30, 1996, while the
Bank earned only $35,000 from such activities during the year ended September
30, 1997. The Bank has ceased real estate development activities and does not
expect to earn income from this activity in future years. The Bank also earns
income from servicing fees, fees and charges on loans and fees on transaction
accounts; income from such activities remained relatively stable during the year
ended September 30, 1997 as compared to the prior year. Also contributing to
the decrease in other income was a decrease in gain on sale of foreclosed real
estate from a gain of $112,000 for the year ended September 30, 1996 to a $1,000
loss during the year ended September 30, 1997. Offsetting the effects of these
items was an increase in gain on sale of investment securities from a loss of
$194,000 for the year ended September 30, 1996 to a gain of $51,000 for the year
ended September 30, 1997. In addition, fees and charges on loans increased by
$31,000, or 19.3%, from $161,000 for the year ended September 30, 1996 to
$192,000 for the year ended September 30, 1997, and fees on transaction accounts
increased by $12,000, or 7.7%, from $156,000 for the year ended September 30,
1996 to $168,000 for the year ended September 30, 1997, reflecting increases in
the levels of loans and transaction accounts.
Non-interest Expenses. Total non-interest expenses decreased by
$896,000, or 14.2%, from $7.2 million for the year ended September 30, 1996 to
$6.3 million for the year ended September 30, 1997. Such decrease was
attributable primarily to a decrease in deposit insurance premiums. The Bank
paid deposit insurance premiums of $1.9 million during the year ended September
30, 1996, while paying only $289,000 in deposit insurance premiums during the
year ended September 30, 1997. The expense related to deposit insurance
premiums during 1996 reflected the payment by the Bank of a one-time special
assessment in the amount of $1.3 million assessed by the FDIC on all SAIF-
insured institutions to capitalize the SAIF insurance fund of the FDIC up to the
required reserve ratio. During the year ended September 30, 1996, the Bank paid
continuing SAIF insurance premiums at a rate of 23 cents per $100 of SAIF
deposits. However, that rate dropped to 6.4 cents per $100 effective January 1,
1997 through September 30, 1999 and, based on the Bank's current condition, will
further decrease to 2.4 cents per $100 thereafter. This revised deposit
insurance rate structure enabled the Bank to recognize a substantial reduction
in deposit insurance premiums going forward. The largest component of non-
interest expenses is salaries and related expense, which increased by $477,000,
or 14.5%, from $3.3 million for the year ended September 30, 1996 to $3.7
million for the year ended
56
<PAGE>
September 30, 1997, due primarily to the implementation and initial funding of a
directors' retirement plan. Expenses related to the directors' retirement plan
in future years are not expected to be as high as the initial funding costs.
Management believes that salaries and related expense will increase in
future periods as a result of the adoption of the ESOP and other stock benefit
plans, if adopted. Furthermore, the Bank expects other expenses will increase
as a result of the costs associated with being a public institution. Further,
the Company expects to incur an expense, currently estimated to be $457,000, net
of taxes, during the second quarter of calendar year 1998 in connection with the
establishment of the Foundation. See "Risk Factors -- Establishment of the
Foundation -- Impact on Earnings."
Income Taxes. The Bank's income tax expense was $712,000 and $1.3
million for the years ended September 30, 1996 and 1997, respectively. The
Bank's effective tax rates were 37.2% and 39.7% for the years ended September
30, 1996 and 1997, respectively.
LIQUIDITY AND CAPITAL RESOURCES
Following the completion of the Stock Issuance, the Company initially
will have no business other than that of the Bank and investing the net Offering
proceeds retained by it. Management believes that the net proceeds to be
retained by the Company, earnings on such proceeds and principal and interest
payments on the ESOP loan, together with dividends that may be paid from the
Bank to the Company following the Stock Issuance, will provide sufficient funds
for its initial operations and liquidity needs; however, no assurance can be
given that the Company will not have a need for additional funds in the future.
The Bank will be subject to certain regulatory limitations with respect to the
payment of dividends to the Company. See "Dividend Policy" and "Regulation --
Depository Institution Regulation -- Dividend Limitations." The Company intends
to lend a portion of the net proceeds retained from the Offering to the ESOP to
permit its purchase of Common Stock in the Offering. See "Use of Proceeds."
At December 31, 1997, the Bank exceeded all regulatory minimum capital
requirements. For a discussion of regulatory capital requirements, and see
"Regulation -- Depository Institution Regulation -- Regulatory Capital
Requirements." For information reconciling the Bank's retained earnings as
reported in its financial statements at December 31, 1997 to its tangible, core
and risk-based capital levels and compares such totals to the regulatory
requirements, see Note 12 of Notes to Consolidated Financial Statements.
For information regarding the Bank's actual, pro forma and minimum
required capital ratios at December 31, 1997, see "Historical and Pro Forma
Regulatory Capital Compliance." The Bank will, as a result of the Offering,
have substantially increased capital. There can be no assurance, however, that
the Company's sources of funds will be sufficient to satisfy the liquidity needs
of the Company in the future.
The Bank's primary sources of funds are deposits and proceeds from
maturing investment securities and mortgage-backed securities and principal and
interest payments on loans. While maturities and scheduled amortization of
mortgage-backed securities and loans are a predictable source of funds, deposit
flows and mortgage prepayments are greatly influenced by general interest rates,
economic conditions, competition and other factors.
The primary investing activity of the Bank are the origination of
loans and the purchase of investment securities and mortgage-backed securities.
During the three months ended December 31, 1997 and 1996 and the years ended
September 30, 1997 and 1996, the Bank had $11.9 million, $11.2 million, $51.8
million and $61.4 million, respectively, of loan originations. During the three
months ended December 31, 1997 and 1996 and the years ended September 30, 1997
and 1996, the Bank purchased investment securities in the amounts of $6.8
million, $3.7 million, $44.0 million and $41.0 million, respectively, and
mortgage-backed securities in the amounts of $2.0 million, $0, $4.0 million and
$11.6 million, respectively. Other investing activities include originations of
loans and purchases of mortgage-backed securities. The primary financing
activity of the Bank is the attraction of savings deposits.
57
<PAGE>
The Bank has other sources of liquidity if there is a need for funds.
The Bank has the ability to obtain advances from the FHLB of Atlanta. In
addition, the Bank maintains a portion of its investments in interest-bearing
deposits at other financial institutions that will be available, if needed.
The Bank is required to maintain minimum levels of liquid assets as
defined by OTS regulations. This requirement, which may be changed at the
direction of the OTS depending upon economic conditions and deposit flows, is
based upon a percentage of deposits and short-term borrowings. The required
minimum ratio is currently 4.0%. The Bank's average daily liquidity ratio for
the month of December 1997 was approximately 24.0%, which exceeded the required
level for such period. Management of the Bank seeks to maintain a relatively
high level of liquidity in order to retain flexibility in terms of investment
opportunities and deposit pricing. Because liquid assets generally provide for
lower rates of return, the Bank's relatively high liquidity will, to a certain
extent, result in lower rates of return on assets.
The Bank's most liquid assets are cash, interest-bearing deposits in
other banks and federal funds sold, which are short-term, highly liquid
investments with original maturities of less than three months that are readily
convertible to known amounts of cash. The levels of these assets are dependent
on the Bank's operating, financing and investing activities during any given
period. At December 31, 1997, cash, interest-bearing deposits in other banks
and federal funds sold totaled $2.9 million, $20.2 million and $5.8 million,
respectively.
The Bank anticipates that it will have sufficient funds available to
meet its current commitments. Certificates of deposit which are scheduled to
mature in less than one year at December 31, 1997 totaled $90.3 million. Based
on past experience, management believes that a significant portion of such
deposits will remain with the Bank. The Bank is a party to financial
instruments with off-balance-sheet risk made in the normal course of business to
meet the financing needs of its customers. These financial instruments are
standby letters of credit, lines of credit and commitments to fund mortgage
loans and involve to varying degrees elements of credit risk in excess of the
amount recognized in the statement of financial position. The contract amounts
of those instruments express the extent of involvement the Bank has in this
class of financial instruments and represents the Bank's exposure to credit loss
from nonperformance by the other party.
The Bank generally requires collateral or other security to support
financial instruments with off-balance-sheet credit risk. At December 31, 1997,
the Bank had commitments under standby letters of credit and lines of credit and
commitments to originate mortgage loans of $2.7 million, $8.9 million and $1.6
million, respectively. See Note 3 of Notes to Consolidated Financial
Statements.
Another source of liquidity is anticipated net proceeds from the
Offering. Following the completion of the Stock Issuance, the Bank will receive
at least 50% of the net proceeds from the Offering. These funds are expected to
be used by the Bank for its business activities, including investment in
interest-earning assets.
IMPACT OF INFLATION AND CHANGING PRICES
The Consolidated Financial Statements and Notes thereto presented
herein have been prepared in accordance with generally accepted accounting
principles, which require the measurement of financial position and operating
results in terms of historical dollars without considering the change in the
relative purchasing power of money over time and due to inflation. The impact
of inflation is reflected in the increased cost of the Bank's operations.
Unlike most industrial companies, nearly all the assets and liabilities of the
Bank are monetary in nature. As a result, interest rates have a greater impact
on the Bank's performance than do the effects of general levels of inflation.
Interest rates do not necessarily move in the same direction or to the same
extent as the price of goods and services.
58
<PAGE>
IMPACT OF NEW ACCOUNTING STANDARDS
Earnings per Share. In February 1997, the Financial Accounting
Standards Board ("FASB") issued Statement of Financial Accounting Standards
("SFAS") No. 128, which is effective for financial statements issued for periods
ending after December 15, 1997. This Statement establishes standards for
computing and presenting earnings per share ("EPS"). It replaces the
presentation of primary EPS with a presentation of basic EPS. Management
believes the adoption of this Statement will not have a significant effect on
the Bank's EPS.
Disclosure of Information About Capital Structure. In February 1997,
the FASB issued SFAS No. 129, which establishes standards for disclosing
information about capital structure. This Statement is effective for fiscal
years ending after December 15, 1997. Management believes the adoption of this
Statement will not have a material effect on the Bank's financial statements.
Reporting Comprehensive Income. In June 1997, the FASB issued SFAS
No. 130, which establishes standards for the reporting and display of
comprehensive income and its components. This Statement is effective for fiscal
years beginning after December 15, 1997. Management believes the adoption of
this Statement will not have a material effect on the Bank's financial
statements.
Disclosures About Segments of an Enterprise and Related Income. In
June 1997, the FASB issued SFAS No. 131, which establishes standards for the way
public companies report information about operating segments in the annual and
interim financial statements. This Statement is effective for fiscal years
beginning after December 15, 1997. Management believes the adoption of this
Statement will not have a material effect on the financial statements of the
Bank.
Employers Disclosures About Pensions and Other Postretirement
Benefits. In February 1998, the FASB issued SFAS No. 132 which standardizes
disclosure requirements for pensions and postretirement benefits. This
statement is effective for fiscal years beginning after December 15, 1997.
Management believes that adoption of this Statement will not have a material
effect on the financial statements of the Bank.
BUSINESS OF THE COMPANY
The Company will be organized at the direction of the Board of
Directors of the Bank at the time of consummation of the Reorganization for the
purpose of becoming a holding company to own all of the outstanding capital
stock of the Bank. For additional information, see "BCSB Bankcorp, Inc."
Immediately after consummation of the Reorganization and the Stock
Issuance, it is expected that the only business activity of the Company will be
owning all of the common stock of the Bank, investing the 50% of the net
proceeds of the Offering retained by the Company and holding the note receivable
from the ESOP. In the future, the Company may pursue other business activities,
including the acquisition of other financial institutions, borrowing funds for
investment in the Bank, diversification of operations, and mergers and
acquisitions. There are, however, no current plans for such activities. The
Company also may sell or issue a portion of its common stock, subject to
applicable regulatory approvals, provided that the MHC maintains at least a
majority of the common stock of the Company as long as the MHC remains in
existence. The Company will own 100% of the common stock of the Bank. The Bank
will not issue or sell common stock to persons other than the Company as long as
the MHC is in existence. Initially, the Company will not maintain offices
separate from those of the Bank or employ any persons other than their officers.
Such officers will not be separately compensated for such service.
59
<PAGE>
BUSINESS OF THE BANK
GENERAL
The Bank's principal business consists of attracting deposits from the
general public and investing these funds in loans secured by first mortgages on
owner-occupied, single-family residences in the Bank's market area, and, to a
lesser extent, other real estate loans, consisting of construction loans,
single-family rental property loans and commercial real estate loans, and
consumer loans, particularly automobile loans.
The Bank derives its income principally from interest earned on loans,
as well as interest earned on mortgagebacked securities and investment
securities and non-interest income. The Bank's principal expenses are interest
expense on deposits and non-interest expenses such as salaries and related
expenses, deposit insurance and other miscellaneous expenses. Funds for these
activities are provided principally by deposits, repayments of outstanding
loans, mortgagebacked securities and investment securities and operating
revenues.
MARKET AREA
The Bank's market area consists of Baltimore County and Harford
County, Maryland, which are part of the Baltimore metropolitan area. At
December 31, 1997, management estimates that more than 95% of deposits and 90%
of all lending came from its market area.
The economy of the Bank's market area is diversified, with a mix of
services, manufacturing, wholesale/retail trade, and federal and local
government. Once the backbone of the regional economy, the manufacturing
industry is relatively stable after almost two decades of decline. Baltimore
County currently maintains 36 percent of the regional manufacturing base.
Manufacturing in the market area is dominated by high technology, particularly
within the defense industry. Similar to national trends, most of the job growth
in the Bank's market area has been realized in service related industries, and
service jobs account for the largest portion of the workforce. Based on the
most recent data available, service jobs accounted for 32.8% of Baltimore
County's employment in 1995 as compared to 30.5% in 1991. Comparatively, from
1991 to 1995, manufacturing jobs declined from 11.3% to 9.7% of Baltimore
County's labor force.
Based on data provided by the Maryland Department of Business and
Economic Development, the Bank estimates the population of the market area to be
934,000, compared to a population of 874,000 in 1990. The median household
income in Baltimore and Harford Counties are $36,000 and $39,000, respectively,
compared to $36,000 for the State of Maryland and $29,000 for the United States
as a whole.
LENDING ACTIVITIES
General. The Bank's gross loan portfolio totaled $166.3 million at
December 31, 1997, representing 66.4% of total assets at that date. At December
31, 1997, $106.9 million, or 64.3% of the Bank's gross loan portfolio, consisted
of single-family, residential mortgage loans. Other loans secured by real
estate include construction loans, single-family rental property and commercial
real estate loans, which amounted to $7.9 million, $6.2 million and $10.0
million, respectively, or 4.8%, 3.7% and 6.0%, respectively, of the Bank's gross
loan portfolio at December 31, 1997. The Bank also originates consumer loans,
consisting primarily of automobile loans, as well as home equity lines of credit
and savings account loans which totaled $30.3 million, $4.1 million and
$754,000, respectively, or 18.2%, 2.5% and .5%, respectively, of the Bank's
gross loan portfolio. In addition, the Bank originates a limited amount of
loans pursuant to commercial lines of credit. At December 31, 1997, such loans
amounted to $119,000, which was less than .1% of the Bank's gross loan
portfolio.
60
<PAGE>
Loan Portfolio Composition. The following table sets forth selected
data relating to the composition of the Bank's loan portfolio by type of loan at
the dates indicated. At December 31, 1997, the Bank had no concentrations of
loans exceeding 10% of gross loans other than as disclosed below.
<TABLE>
<CAPTION>
At September 30,
At December 31, ---------------------------------------------------------------------
1997 1997 1996 1995
-------------------- -------------------- ---------------------- --------------------
Amount % Amount % Amount % Amount %
--------- -------- --------- -------- --------- -------- ----------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Real estate loans:
Single-family residential
(1)........................ $106,910 64.27% $103,677 62.30% $ 94,275 56.74% $ 87,575 55.87%
Single-family rental
property loans............. 6,221 3.74 6,409 3.85 7,065 4.25 8,045 5.13
Commercial.................. 9,980 6.00 10,169 6.11 10,316 6.21 11,174 7.13
Construction (2)............ 7,941 4.77 8,645 5.19 11,427 6.87 7,065 4.51
Commercial lines of credit... 119 .07 60 .04 262 .16 234 .15
Consumer loans:
Automobile.................. 30,342 18.24 32,633 19.61 39,925 24.03 40,793 26.02
Home equity lines of credit. 4,076 2.45 3,986 2.40 1,855 1.12 842 .54
Savings account............. 754 .46 825 .50 1,029 .62 1,022 .65
-------- ------- -------- ------- -------- ------- -------- -------
166,343 100.00% 166,404 100.00% 166,154 100.00% 156,750 100.00%
====== ====== ====== ======
Less:
Undisbursed portion of
loans in process........... 2,271 2,807 5,088 3,425
Deferred loan origination
fees....................... 541 567 823 1,166
Unearned interest........... 3,016 3,376 4,757 5,576
Allowance for loan losses... 983 978 926 788
-------- -------- -------- --------
Total...................... $159,532 $158,676 $154,560 $145,795
======== ======== ======== ========
<CAPTION>
At September 30,
-----------------------------------------
1994 1993
-------------------- ------------------
Amount % Amount %
------- --- -------- -----
<S> <C> <C> <C> <C>
Real estate loans:
Single-family residential
(1)........................ $ 82,594 59.86% $ 95,546 67.69%
Single-family rental
property loans............. 8,593 6.23 9,456 6.70
Commercial.................. 10,921 7.91 12,060 8.54
Construction (2)............ 9,853 7.14 9,707 6.87
Commercial lines of credit... 110 .08 65 .05
Consumer loans:
Automobile.................. 24,797 17.97 13,395 9.48
Home equity lines of credit. 125 .09 -- --
Savings account............. 995 .72 1,019 .72
-------- ------- -------- ------
137,988 100.00% 141,248 100.00%
======= ======
Less:
Undisbursed portion of
loans in process........... 3,509 1,612
Deferred loan origination
fees....................... 1,539 2,180
Unearned interest........... 3,188 1,446
Allowance for loan losses... 542 613
-------- --------
Total...................... $129,210 $135,397
======== ========
</TABLE>
- --------------
(1) Includes fixed-rate second mortgage loans.
(2) Includes acquisition and development loans.
61
<PAGE>
Loan Maturity Schedules. The following table sets forth certain information
at September 30, 1997 regarding the dollar amount of loans maturing in the
Bank's portfolio based on their contractual terms to maturity, including
scheduled repayments of principal. Demand loans, loans having no stated schedule
of repayments and no stated maturity, and overdrafts are reported as due in one
year or less. The table does not include any estimate of prepayments which
significantly shorten the average life of mortgage loans and may cause the
Bank's repayment experience to differ from that shown below.
<TABLE>
<CAPTION>
Due After Due After
Due During the Year Ending Due After 5 Through 10 Through
September 30, 3 Through 10 Years 15 Years Due After 15
-------------------------- 5 Years After After After Years After
September September September September
1998 1999 2000 30, 1997 30, 1997 30, 1997 30, 1997
------- ------- ------- ------------- ------------- ------------- ------------
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Real estate loans:
Single-family residential... $ 7,500 $ 7,886 $ 7,770 $12,871 $25,166 $18,627 $23,857
Single-family rental
property................... 274 290 292 573 1,455 1,563 1,962
Commercial................. 641 700 735 1,470 2,859 2,269 1,495
Construction............... 4,144 54 97 133 435 632 3,150
Commercial lines of credit.. 60 -- -- -- -- -- --
Consumer:
Automobiles................. 9,354 8,635 6,694 6,295 1,634 21 --
Home equity................. -- -- -- -- -- -- 3,986
Savings accounts............ 468 233 124 -- -- -- --
------- ------- ------- ------- ------- ------- -------
Total...................... $22,441 $17,798 $15,712 $21,342 $31,549 $23,112 $34,450
======= ======= ======= ======= ======= ======= =======
<CAPTION>
Total
-----
<S> <C>
Real estate loans:
Single-family residential... $103,677
Single-family rental
property................... 6,409
Commercial................. 10,169
Construction............... 8,645
Commercial lines of credit.. 60
Consumer:
Automobiles................. 32,633
Home equity................. 3,986
Savings accounts............ 825
--------
Total...................... $166,404
========
</TABLE>
The following table sets forth at September 30, 1997, the dollar amount of all
loans due one year or more after September 30, 1997 which have predetermined
interest rates and have floating or adjustable interest rates.
<TABLE>
<CAPTION>
Predetermined Floating or
Rate Adjustable Rates
------------- ----------------
(In thousands)
<S> <C> <C>
Real estate loans:
Single-family residential....... $ 88,506 $ 7,671
Single-family rental property... 2,287 3,848
Commercial...................... 6,733 2,795
Construction.................... 4,501 --
Commercial lines of credit....... -- --
Consumer:
Automobiles..................... 23,279 --
Home equity..................... 3,986 --
Savings accounts................ 357 --
-------- -------
Total.......................... $129,649 $14,314
======== =======
</TABLE>
62
<PAGE>
Scheduled contractual principal repayments of loans do not reflect the
actual life of such assets. The average life of loans is substantially less
than their contractual terms because of prepayments. In addition, due-on-sale
clauses on loans generally give the Bank the right to declare a loan immediately
due and payable in the event, among other things, that the borrower sells the
real property subject to the mortgage and the loan is not repaid. The average
life of mortgage loans tends to increase when current mortgage loan market rates
are substantially higher than rates on existing mortgage loans and, conversely,
decrease when current mortgage loan market rates are substantially lower than
rates on existing mortgage loans.
Originations, Purchases and Sales of Loans. The Bank generally has
authority to originate and purchase loans secured by real estate located
throughout the United States. Consistent with its emphasis on being a
community-oriented financial institution, the Bank concentrates its lending
activities in its market area.
The following table sets forth certain information with respect to the
Bank's loan origination, purchase and sale activity for the periods indicated.
<TABLE>
<CAPTION>
Three Months Ended
December 31, Year Ended September 30,
------------------ ------------------------
1997 1996 1997 1996 1995
------- ------- ------- ----------- ----------
(In thousands)
<S> <C> <C> <C> <C> <C>
Loans originated:
Real estate loans:
Single-family residential............. $ 8,323 $ 6,863 $22,507 $27,594 $13,727
Single-family rental property loans... -- 15 135 157 249
Commercial............................ -- -- 1,650 91 282
Construction.......................... -- 789 1,228 2,969 3,045
Commercial lines of credit............. 59 1 -- 68 132
Consumer loans:
Automobiles........................... 2,484 2,776 14,070 21,677 33,334
Home equity........................... 922 740 11,871 8,347 4,092
Savings account....................... 110 48 319 495 488
------- ------- ------- ------- -------
Total loans originated............... $11,898 $11,232 $51,780 $61,398 $55,349
======= ======= ======= ======= =======
Loans purchased:
Real estate loans...................... $ -- $ -- $ -- $ -- $ --
Other loans............................ -- -- -- -- --
------- ------- ------- ------- -------
Total loans purchased................ $ -- $ -- $ -- $ -- $ --
======= ======= ======= ======= =======
Loans sold:
Whole loans............................ $ -- $ -- $ -- $ -- $ --
Participation loans.................... 133 225 225 4,914 94
------- ------- ------- ------- -------
Total loans sold..................... $ 133 $ 225 $ 225 $ 4,914 $ 94
======= ======= ======= ======= =======
</TABLE>
The Bank's loan originations are derived from a number of sources,
including referrals by realtors or automobile dealers, depositors and borrowers
and advertising, as well as walk-in customers. The Bank's solicitation programs
consist of advertisements in local media, in addition to occasional
participation in various community organizations and events. Real estate loans
are originated by the Bank's loan personnel. All of the Bank's loan personnel
are salaried, and the Bank does not compensate loan personnel on a commission
basis for loans originated. With the exception of applications for automobile
loans, which loans may be originated on an indirect basis through a limited
number of approved dealers, loan applications are accepted at the Bank's
offices. The Bank has not purchased loans in the past five years and has no
plans to purchase loans in the future.
63
<PAGE>
The Bank has not sold whole loans in recent years. However, the Bank
occasionally sells participation interests in large acquisition and development
loans to reduce its risk on any individual loan and to comply with regulatory
loans-to-one borrower limitations. The Bank sold loan participations totaling
$133,000, $225,000, $225,000, $4.9 million and $94,000 during the three months
ended December 31, 1997 and 1996 and the years ended September 30, 1997, 1996
and 1995, respectively.
Loan Underwriting Policies. The Bank's lending activities are subject
to the Bank's written, non-discriminatory underwriting standards and to loan
origination procedures prescribed by the Bank's Board of Directors and its
management. Detailed loan applications are obtained to determine the borrower's
ability to repay, and the more significant items on these applications are
verified through the use of credit reports, financial statements and
confirmations. Real estate loans up to $400,000, as well as all requests for
lines of credit up to $25,000, may be approved by the Bank's Loan Committee,
which consists of the Bank's President and two outside directors and meets
weekly. All loans in excess of these amounts must be approved by the full
Board of Directors. Individual officers of the Bank have been granted authority
by the Board of Directors to approve consumer loans up to varying specified
dollar amounts, depending upon the type of loan. Automobile loans are approved
by the Bank's car loan manager or assistant manager and reviewed by the Bank's
Vice President who supervises lending operations.
Applications for single-family real estate loans generally are
underwritten and closed in accordance with the standards of FHLMC and FNMA.
Upon receipt of a loan application from a prospective borrower, a credit report
and verifications are ordered to verify specific information relating to the
loan applicant's employment, income and credit standing. If a proposed loan is
to be secured by a mortgage on real estate, an appraisal of the real estate is
undertaken by an appraiser approved by the Bank and licensed by the State of
Maryland. In the case of single-family residential mortgage loans, except when
the Bank becomes aware of a particular risk of environmental contamination, the
Bank generally does not obtain a formal environmental report on the real estate
at the time a loan is made. A formal environmental report may be required in
connection with commercial real estate loans, and the Bank obtains a Phase I
environmental study in connection with its underwriting of acquisition and
development loans.
It is the Bank's policy to record a lien on the real estate securing a
loan and to obtain title insurance or an attorney's certification which ensures
that the property is free of prior encumbrances and other possible title
defects. Borrowers must also obtain hazard insurance policies prior to closing
and, when the property is in a flood plain as designated by Federal Emergency
Management Agency, pay flood insurance policy premiums.
With respect to single-family residential mortgage loans, the Bank
makes a loan commitment of between 30 and 60 days for each loan approved. If
the borrower desires a longer commitment, the commitment may be extended for
good cause and upon written approval. No fees are charged in connection with
the issuance of a commitment letter. The interest rate is guaranteed until
closing.
The Bank is permitted to lend up to 95% of the lesser of the appraised
value or the purchase price of the real property securing a mortgage loan.
However, if the amount of a residential loan originated or refinanced exceeds
80% of the appraised value, the Bank's policy is to obtain private mortgage
insurance at the borrower's expense on the principal amount of the loan. The
Bank will make a single-family residential mortgage loan with up to a 95% loan-
to-value ratio if the required private mortgage insurance is obtained. The
Bank generally limits the loan-to-value ratio on commercial real estate mortgage
loans to 75%, although the loan-to-value ratio on commercial real estate loans
in limited circumstances has been as high as 80%. The Bank limits the loan-to-
value ratio on single-family rental property loans to 80%. Home equity loans
are made in amounts which, when added to any senior indebtedness, do not exceed
80% of the value of the property.
Under applicable law, with certain limited exceptions, loans and
extensions of credit by a savings institution to a person outstanding at one
time shall not exceed 15% of the institution's unimpaired capital and surplus.
Loans and extensions of credit fully secured by readily marketable collateral
may comprise an additional 10% of unimpaired capital and surplus. Under these
limits, the Bank's loans to one borrower were limited to $3.7 million at
December 31, 1997.
64
<PAGE>
Applicable law additionally authorizes savings institutions to make loans to one
borrower, for any purpose, in an amount not to exceed $500,000 or in an amount
not to exceed the lesser of $30,000,000 or 30% of unimpaired capital and surplus
to develop residential housing, provided: (i) the purchase price of each single-
family dwelling in the development does not exceed $500,000; (ii) the savings
institution is and continues to be in compliance with its fully phased-in
regulatory capital requirements; (iii) the loans comply with applicable loan-to-
value requirements; (iv) the aggregate amount of loans made under this authority
does not exceed 150% of unimpaired capital and surplus; and (v) the Director of
OTS, by order, permits the savings institution to avail itself of this higher
limit. At December 31, 1997, the Bank had no lending relationships in excess of
the loans-to-one-borrower limit. At December 31, 1997, the Bank's largest
lending relationship was a $3.0 million relationship consisting of a commercial
real estate loan and a one-third participation interest in a loan and letter of
credit. The Bank had a $1.6 million loan to a developer to acquire and develop
land for sale to builders who will construct single-family residences. The Bank
also issued $1.4 million in letters of credit to this borrower, but sold a
$722,000 participation interest in one letter of credit to another bank,
resulting in total potential exposure of $680,000. As of December 31, 1997, 30
of the 116 developed lots had been sold, and all 116 lots were developed. This
borrower also had a $560,000 loan secured by commercial real estate. At December
31, 1997, the loans were current and performing in accordance with its terms.
Interest rates charged by the Bank on loans are affected principally
by competitive factors, the demand for such loans and the supply of funds
available for lending purposes. These factors are, in turn, affected by general
economic conditions, monetary policies of the federal government, including the
Federal Reserve Board, legislative tax policies and government budgetary
matters.
Single-Family Residential Real Estate Lending. The Bank historically
has been and continues to be an originator of single-family, residential real
estate loans in its market area. At December 31, 1997, single-family,
residential mortgage loans, excluding single-family rental property loans and
home equity loans, totaled $106.9 million, or 64.3% of the Bank's gross loan
portfolio.
The Bank originates fixed-rate mortgage loans at competitive interest
rates. At December 31, 1997, the Bank had $100.5 million of fixed-rate single-
family mortgage loans, which amounted to 88.8% of the Bank's single-family
mortgage loans. The Bank emphasizes the origination of fixed-rate single-family
residential mortgage loans with maturities of 15 years or less by offering more
competitive rates on these loans as compared to the rates it offers on fixed-
rate mortgage loans with terms in excess of 15 years.
The Bank also offers adjustable-rate, single-family residential
mortgage loans. As of December 31, 1997, $12.6 million, or 11.2% of the Bank's
single-family mortgage loans carried adjustable rates. After the initial term,
the rate adjustments on the Bank's adjustable-rate loans are indexed to a rate
which adjusts annually based upon changes in an index based on the weekly
average yield on U.S. Treasury securities adjusted to a constant comparable
maturity of one year, as made available by the Federal Reserve Board. The
interest rates on most of the Bank's adjustable-rate mortgage loans are adjusted
once a year, and the Bank offers loans that have an initial adjustment period of
one, three or five years. The maximum adjustment is 2% per adjustment period
with a maximum aggregate adjustment of 6% over the life of the loan. The Bank
offers adjustable-rate mortgage loans that provide for initial rates of interest
below the rates that would prevail when the index used for repricing is applied,
i.e., "teaser" rates. All of the Bank's adjustable-rate loans 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,
do not permit any of the increased payment to be added to the principal amount
of the loan, known as "negative amortization."
The retention of adjustable-rate loans in the Bank's portfolio helps
reduce the Bank's exposure to increases in prevailing market interest rates.
However, there are unquantifiable credit risks resulting from potential
increases in costs to borrowers in the event of upward repricing of adjustable-
rate loans. It is possible that during periods of rising interest rates, the
risk of default on adjustable-rate loans may increase due to increases in
interest costs to borrowers. Further, although adjustable-rate loans allow the
Bank to increase the sensitivity of its interest-earning assets to changes in
interest rates, the extent of this interest sensitivity is limited by the
initial fixed-rate period before the first adjustment
65
<PAGE>
and the lifetime interest rate adjustment limitations. Accordingly, there can be
no assurance that yields on the Bank's adjustable-rate loans will fully adjust
to compensate for increases in the Bank's cost of funds. Finally, adjustable-
rate loans increase the Bank's exposure to decreases in prevailing market
interest rates, although decreases in the Bank's cost of funds tend to offset
this effect.
Single-family Rental Property Loans. The Bank also offers single-
family residential mortgage loans secured by properties that are not owner-
occupied, although it has significantly reduced the originations of such loans
during the past five years. As of December 31, 1997, single-family rental
property loans totaled $6.2 million, or 3.7%, of the Bank's gross loan
portfolio. Originations of single-family rental property loans were $0,
$15,000, $135,000, $157,000 and $249,000 for the three months ended December 31,
1997 and 1996 and the years ended September 30, 1997, 1996 and 1995,
respectively. Single-family residential mortgage loans secured by nonowner-
occupied properties are made on a fixed-rate or an adjustable-rate basis and
carry interest rates generally from .5% to 1.0% above the rates charged on
comparable loans secured by owner-occupied properties. The maximum term on such
loans is 20 years.
Construction Lending. A substantial portion of the Bank's
construction loans are originated for the construction of owner-occupied,
single-family dwellings in the Bank's primary market area. Residential
construction loans are offered primarily to individuals building their primary
or secondary residence, as well as to selected local developers to build single-
family dwellings. Generally, loans to owner/occupants for the construction of
owner-occupied, single-family residential properties are originated in
connection with the permanent loan on the property and have a construction term
of up to 12 months. Such loans are offered on a fixed-rate or adjustable-rate
basis. Interest rates on residential construction loans made to the
owner/occupant have interest rates during the construction period equal to the
same rate on the permanent loan selected by the customer. Interest rates on
residential construction loans to builders are set at the prime rate plus a
margin of between .5% and 1.5%. Interest rates on commercial construction loans
are based on the prime rate plus a negotiated margin of between .5% and 1.5% and
adjust monthly, with construction terms generally not exceeding 18 months.
Advances are made on a percentage of completion basis. At December 31, 1997,
$7.9 million, or 4.8%, of the Bank's gross loan portfolio consisted of
construction loans, virtually all of which was secured by single-family
residences.
Prior to making a commitment to fund a loan, the Bank requires both an
appraisal of the property by appraisers approved by the Board of Directors and a
study of projected construction costs. The Bank also reviews and inspects each
project at the commencement of construction and as needed prior to disbursements
during the term of the construction loan.
The Bank's originations of construction loans have declined in recent
years. Recent consolidation within the building industry and the increasing
presence in the Bank's market of large builders that are not locally based have
limited the Bank's ability to compete for some loans to builders because the
Bank's loans-to-one-borrower limitation limits its ability to meet the volume
requirements of the large builders. The Bank's construction loans totaled $7.9
million, $8.6 million, $11.4 million, $7.1 million, $9.8 million and $9.7
million at December 31, 1997 and September 30, 1997, 1996, 1995, 1994 and 1993,
respectively, and construction loan originations were $0, $789,000, $1.2
million, $3.0 million and $3.0 million during the three months ended December
31, 1997 and 1996 and the years ended September 30, 1997, 1996 and 1995,
respectively.
On occasion, the Bank makes acquisition and development loans to local
developers to acquire and develop land for sale to builders who will construct
single-family residences. Acquisition and development loans, which are
considered by the Bank to be construction loans, are made at a rate that adjusts
monthly, based on the prime rate plus a negotiated margin, for terms of up to
three years. Interest only is paid during the term of the loan, and the
principal balance of the loan is paid down as developed lots are sold to
builders. Generally, in connection with acquisition and development loans, the
Bank issues a letter of credit to secure the developer's obligation to local
governments to complete certain work. If the developer fails to complete the
required work, the Bank would be required to fund the cost of completing the
work up to the amount of the letter of credit. Letters of credit generate fee
income for the Bank but create additional risk. See "Risk Factors -- Risks
Related to Certain Types of Lending and Credit Enhancements."
66
<PAGE>
At December 31, 1997, the Bank had two such loans outstanding totaling $2.2
million. All acquisition and development loans were performing in accordance
with their terms at such date.
Construction financing generally is considered to involve a higher
degree of risk of loss than long-term financing on improved, occupied real
estate. Risk of loss on a construction loan is dependent largely upon the
accuracy of the initial estimate of the property's value at completion of
construction or development and the estimated cost (including interest) of
construction. During the construction phase, a number of factors could result
in delays and cost overruns. If the estimate of construction costs proves to be
inaccurate and the borrower is unable to meet the Bank's requirements of putting
up additional funds to cover extra costs or change orders, then the Bank will
demand that the loan be paid off and, if necessary, institute foreclosure
proceedings, or refinance the loan. If the estimate of value proves to be
inaccurate, the Bank may be confronted, at or prior to the maturity of the loan,
with collateral having a value which is insufficient to assure full repayment.
The Bank has sought to minimize this risk by limiting construction lending to
qualified borrowers (i.e., borrowers who satisfy all credit requirements and
whose loans satisfy all other underwriting standards which would apply to the
Bank's permanent mortgage loan financing for the subject property) in the Bank's
market area. On loans to builders, the Bank works only with selected builders
with whom it has experience and carefully monitors the creditworthiness of the
builders.
Commercial Real Estate Lending. The Bank's commercial real estate
loan portfolio includes loans to finance the acquisition of small office
buildings, churches, medical condominiums, small shopping centers and small
commercial and industrial buildings. Such loans generally range in size from
$100,000 to $1 million, with the largest having an outstanding principal balance
of $864,000 at December 31, 1997. At December 31, 1997, the Bank had $10.0
million of commercial real estate loans, which amounted to 6.0% of the Bank's
gross loan portfolio. Commercial real estate loans are originated on a fixed-
rate or adjustable-rate basis with terms of up to 20 years at a rate that is at
least 1% above the rate charged by the Bank on single-family residential
mortgage loans having comparable terms and interest rate adjustment periods.
Commercial real estate lending entails significant additional risks as
compared with single-family residential property lending. Commercial real
estate loans typically involve larger loan balances to single borrowers or
groups of related borrowers. The payment experience on such loans typically is
dependent on the successful operation of the real estate project, retail
establishment or business. These risks can be significantly impacted by supply
and demand conditions in the market for office and retail space and, as such,
may be subject to a greater extent to adverse conditions in the economy
generally. To minimize these risks, the Bank generally limits itself to its
market area or to borrowers with which it has prior experience or who are
otherwise known to the Bank. It is the Bank's policy generally to obtain annual
financial statements of the business of the borrower or the project for which
commercial real estate loans are made. In addition, in the case of commercial
real estate loans made to a partnership or a corporation, the Bank seeks,
whenever possible, to obtain personal guarantees and annual financial statements
of the principals of the partnership or corporation.
Commercial Lines of Credit. On a limited basis and as an
accommodation to its customers, the Bank offers lines of credit to small
businesses. Loans in amounts of up to $25,000 are made on an unsecured basis at
an adjustable rate equal to the prime rate plus a margin of 2%. Up to an
additional $25,000 may be loaned, provided the additional amount is secured.
The secured portion of the loan is made at an adjustable rate equal to the prime
rate plus a margin of 1%. At December 31, 1997, the Bank had $119,000 of
outstanding loans and commitments to fund $206,000 in loans pursuant to unused
lines of credit.
Consumer Lending. The consumer loans currently in the Bank's loan
portfolio consist of automobile loans, home equity lines of credit and loans
secured by savings deposit.
Because of the higher credit risk entailed in automobile lendings the
Bank has decreased its emphasis on automobile loans during the years ended
September 30, 1996 and 1997 and the three months ended December 31, 1997.
67
<PAGE>
Nevertheless, such loans continue to constitute a significant portion of the
Bank's loan portfolio, totaling $30.3 million, or 18.2% of the Bank's gross loan
portfolio, at December 31, 1997.
Automobile loans are secured by both new and used cars and, depending
on the creditworthiness of the borrower, may be made for up to 90% of the
"sticker price" or purchase price, whichever is lower, or, with respect to used
automobiles, the loan values as published by a wholesale value listing utilized
by the automobile industry. Automobile loans are made directly to the borrower-
owner or indirectly, where the financing is arranged by the car dealer.
Management of the Bank estimates that approximately 80% of automobile loans are
originated on an indirect basis through various dealerships located in its
market area. Automobile loans originated on an indirect basis are considered to
entail greater credit risk than automobile loans originated on a direct basis.
See "Risk Factors -- Risks Related to Certain Types of Lending and Credit
Enhancements." New and relatively new cars (less than two years old or 20,000
miles or less) are financed for a period generally of up to five years, while
used cars are financed for a period generally of up to four years, or less,
depending on the age of the car. Collision insurance is required for all
automobile loans. The Bank also maintains a blanket collision insurance policy
that provides insurance for any borrower who allows his insurance to lapse. Any
expense under the blanket insurance policy of covering a borrower is billed to
the borrower.
The Bank recently has begun placing greater emphasis on the
origination of second mortgage loans and home equity lines of credit. As of
December 31, 1997, home equity lines of credit totaled $4.1 million, or 2.5% of
the Bank's gross loan portfolio. Second mortgage loans are made at fixed rates
and for terms of up to 15 years and totaled $13.9 million, or 8.4% of the Bank's
gross loans at December 31, 1997.
The Bank's home equity lines of credit currently have adjustable
interest rates tied to the prime rate and are offered anywhere from as low as
the prime rate less .25% up to the prime rate. The interest rate may not
adjust to a rate higher than 18%. The home equity lines of credit require
monthly payments until the loan is paid in full, with a loan term not to exceed
20 years. The minimum monthly payment is 1.5% of the outstanding principal
balance. Home equity lines of credit are secured by subordinate liens against
residential real property. The Bank requires that fire and extended coverage
casualty insurance (and, if appropriate, flood insurance) be maintained in an
amount at least sufficient to cover its loan.
The Bank makes savings account loans for up to 90% of the depositor's
savings account balance. The interest rate is normally 2.0% above the rate paid
on a passbook savings account, and the account must be pledged as collateral to
secure the loan. Interest generally is billed on a monthly basis. At December
31, 1997, savings account loans accounts totaled $754,000, or .5% of the Bank's
gross loan portfolio.
Consumer lending affords the Bank the opportunity to earn yields
higher than those obtainable on single-family residential lending. However,
consumer loans entail greater risk than do residential mortgage loans,
particularly in the case of loans which are unsecured or secured by rapidly
depreciable assets. Repossessed collateral for a defaulted consumer loan may
not provide an adequate source of repayment of the outstanding loan balance as a
result of the greater likelihood of damage, loss or depreciation. The remaining
deficiency often does not warrant further substantial collection efforts against
the borrower. In addition, consumer loan collections are dependent on the
borrower's continuing financial stability, and thus are more likely to be
adversely affected by events such as job loss, divorce, illness or personal
bankruptcy. Indirect automobile lending generally is considered to entail
greater risk than direct automobile lending due to the higher down payments
generally made by direct borrowers and the level of sophistication of the
borrowers.
Loan Fees and Servicing. The Bank receives fees in connection with
late payments and for miscellaneous services related to its loans. The Bank
also charges fees in connection with loan originations typically from 0 to 3
points (one point being equal to 1% of the loan amount) on residential mortgage
loan originations. The Bank generally does not service loans for others, except
for participation loans originated and sold by the Bank with servicing retained,
and earns minimal income from this activity.
68
<PAGE>
Nonperforming Loans and Other Problem Assets. It is management's
policy to continually monitor its loan portfolio to anticipate and address
potential and actual delinquencies. When a borrower fails to make a payment on
a loan, the Bank takes immediate steps to have the delinquency cured and the
loan restored to current status. Loans which are past due 15 days incur a late
fee of 5% of principal and interest due. As a matter of policy, the Bank will
send a late notice to the borrower after the loan has been past due 15 days and
again after 30 days. If payment is not promptly received, the borrower is
contacted again, and efforts are made to formulate an affirmative plan to cure
the delinquency. Generally, after any loan is delinquent 90 days or more,
formal legal proceedings are commenced to collect amounts owed. In the case of
automobile loans, late notices are sent after loans are ten days delinquent, and
the collateral is seized after a loan is delinquent 60 days. Repossessed cars
subsequently are sold at auction.
Loans generally are placed on nonaccrual status if the loan becomes
past due more than 90 days, except in instances where in management's judgment
there is no doubt as to full collectibility of principal and interest, or
management concludes that payment in full is not likely. Consumer loans are
generally charged off, or any expected loss is reserved for, after they become
more than 120 days past due. All other loans are charged off when management
concludes that they are uncollectible. See Note 1 of Notes to Financial
Statements.
Real estate acquired by the Bank as a result of foreclosure is
classified as real estate acquired through foreclosure until such time as it is
sold. When such property is acquired, it is initially recorded at the lower of
cost or estimated fair value and subsequently at the lower of book value or fair
value less estimated costs to sell. Costs relating to holding such real estate
are charged against income in the current period, while costs relating to
improving such real estate are capitalized until a saleable condition is
reached. Any required write-down of the loan to its fair value less estimated
selling costs upon foreclosure is charged against the allowance for loan losses.
See Note 1 of Notes to Financial Statements.
69
<PAGE>
The following table sets forth information with respect to
the Bank's nonperforming assets at the dates indicated.
<TABLE>
<CAPTION>
At At September 30
December 31, -----------------------------------------------
1997 1997 1996 1995 1994 1993
------------ ------- ------- ------- ------- -------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Loans accounted for on a nonaccrual basis: (1)
Real estate:
Single-family residential..................... $1,528 $1,757 $2,056 $ 717 $1,000 $2,568
Single-family rental property................. -- -- -- -- -- --
Commercial.................................... -- 86 231 188 47 51
Construction.................................. -- -- -- -- -- 31
Commercial lines of credit...................... -- -- -- -- -- --
Consumer........................................ -- -- -- -- -- --
------ ------ ------ ------ ------ ------
Total......................................... $1,528 $1,843 $2,287 $ 905 $1,047 $2,650
====== ====== ====== ====== ====== ======
Accruing loans which are contractually past due
90 days or more:
Real estate:
Single-family residential..................... $ -- $ -- $ -- $ -- $ -- $ --
Single-family rental property................. -- -- -- -- -- --
Commercial.................................... -- -- -- -- -- --
Construction.................................. -- -- -- -- -- --
Commercial lines of credit...................... -- -- -- -- -- --
Consumer........................................ -- -- -- -- -- --
------ ------ ------ ------ ------ ------
Total......................................... $ -- $ -- $ -- $ -- $ -- $ --
====== ====== ====== ====== ====== ======
Total non-performing loans.................... $1,528 $1,843 $2,287 $ 905 $1,047 $2,650
====== ====== ====== ====== ====== ======
Percentage of gross loans......................... 0.92% 1.11% 1.38% 0.58% 0.76% 1.88%
====== ====== ====== ====== ====== ======
Percentage of total assets........................ 0.61% 0.73% 0.88% 0.38% 0.48% 1.22%
====== ====== ====== ====== ====== ======
Other non-performing assets (2)................... $ 136 $ 61 $ 489 $1,410 $2,011 $1,926
====== ====== ====== ====== ====== ======
Loans modified in troubled debt restructuring.... $ -- $ -- $ -- $ -- $ -- $ --
====== ====== ====== ====== ====== ======
</TABLE>
- ----------------------
(1) Non-accrual status denotes loans on which, in the opinion of management,
the collection of additional interest is unlikely. Payments received on
a non-accrual loan are either applied to the outstanding principal
balance or recorded as interest income, depending on management's
assessment of the collectibility of the loan.
(2) Other nonperforming assets include the Bank's inventory of repossessed
cars, and at September 30, 1996, 1995, 1994 and 1993, real estate
developed and held for sale.
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<PAGE>
During the three months ended December 31, 1997 and the year ended
September 30, 1997, gross interest income of $70,000 and $97,000, respectively,
would have been recorded on loans accounted for on a nonaccrual basis if the
loans had been current throughout the year. Interest on such loans included in
income during the three months ended December 31, 1997 and the year ended
September 31, 1997 amounted to $24,000 and $30,000, respectively.
At December 31, 1997, the Bank had no loans which were not classified as
non-accrual, 90 days past due or restructured but where known information about
possible credit problems of borrowers caused management to have serious concerns
as to the ability of the borrowers to comply with present loan repayment terms
and may result in disclosure as nonaccrual, 90 days past due or
restructured.
At December 31, 1997, nonaccrual loans consisted of 23 single-family
residential mortgage loans aggregating $1.5 million.
Real estate acquired through foreclosure is initially recorded at the lower
of cost or estimated fair value and subsequently at the lower of book value or
fair value less estimated costs to sell. Fair value is defined as the amount in
cash or cash-equivalent value of other consideration that a real estate parcel
would yield in a current sale between a willing buyer and a willing seller, as
measured by market transactions. If a market does not exist, fair value of the
item is estimated based on selling prices of similar items in active markets or,
if there are no active markets for similar items, by discounting a forecast of
expected cash flows at a rate commensurate with the risk involved. Fair value is
generally determined through an appraisal at the time of foreclosure. The Bank
records a valuation allowance for estimated selling costs of the property
immediately after foreclosure. Subsequent to foreclosure, real estate acquired
through foreclosure is periodically evaluated by management and an allowance for
loss is established if the estimated fair value of the property, less estimated
costs to sell, declines. At December 31, 1997, the Bank had $119,000 real
estate owned, which consisted of one single-family residence. The Bank also had
$17,000 of other nonperforming assets, which consisted of the Bank's inventory
of repossessed cars.
Federal regulations require savings institutions to classify their assets
on the basis of quality on a regular basis. An asset meeting one of the
classification definitions set forth below may be classified and still be a
performing loan. An asset is classified as substandard if it is determined to
be inadequately protected by the current retained earnings and paying capacity
of the obligor or of the collateral pledged, if any. An asset is classified as
doubtful if full collection is highly questionable or improbable. An asset is
classified as loss if it is considered uncollectible, even if a partial recovery
could be expected in the future. The regulations also provide for a special
mention designation, described as assets which do not currently expose a savings
institution to a sufficient degree of risk to warrant classification but do
possess credit deficiencies or potential weaknesses deserving management's close
attention. Such assets designated as special mention may include nonperforming
loans consistent with the above definition. Assets classified as substandard or
doubtful require a savings institution to establish general allowances for loan
losses. If an asset or portion thereof is classified loss, a savings
institution must either establish a specific allowance for loss in the amount of
the portion of the asset classified loss, or charge off such amount. Federal
examiners may disagree with a savings institution's classifications. If a
savings institution does not agree with an examiner's classification of an
asset, it may appeal this determination to the OTS Regional Director. The Bank
regularly reviews its assets to determine whether any assets require
classification or re-classification. At December 31, 1997, the Bank had $2.6
million in classified assets consisting of $887,000 in assets classified as
special mention, $1.5 million in assets classified as substandard, no assets
classified as doubtful and $56,000 in assets classified as loss. Special
mention assets consisted of 14 single-family residential mortgage loans 60 to 89
days delinquent at December 31, 1997, and substandard assets consisted of the
$1.5 million in nonaccrual loans described above.
Allowance for Loan Losses. In originating loans, the Bank recognizes that
credit losses will be experienced and that the risk of loss will vary with,
among other things, the type of loan being made, the creditworthiness of the
borrower over the term of the loan, general economic conditions and, in the case
of a secured loan, the quality of the security for the loan. It is management's
policy to maintain an adequate allowance for loan losses based on, among other
things, the Bank's and the industry's historical loan loss experience,
evaluation of economic conditions, regular reviews
71
<PAGE>
of delinquencies and loan portfolio quality and evolving standards imposed by
federal bank examiners. The Bank increases its allowance for loan losses by
charging provisions for loan losses against the Bank's income.
Management will continue to actively monitor the Bank's asset quality and
allowance for loan losses. Management will charge off loans and properties
acquired in settlement of loans against the allowances for losses on such loans
and such properties when appropriate and will provide specific loss allowances
when necessary. Although management believes it uses the best information
available to make determinations with respect to the allowances for losses and
believes such allowances are adequate, future adjustments may be necessary if
economic conditions differ substantially from the economic conditions in the
assumptions used in making the initial determinations.
The Bank's methodology for establishing the allowance for loan losses takes
into consideration probable losses that have been identified in connection with
specific assets as well as losses that have not been identified but can be
expected to occur. Management conducts regular reviews of the Bank's assets and
evaluates the need to establish allowances on the basis of this review.
Allowances are established by the Board of Directors on a monthly basis based on
an assessment of risk in the Bank's assets taking into consideration the
composition and quality of the portfolio, delinquency trends, current charge-off
and loss experience, loan concentrations, the state of the real estate market,
regulatory reviews conducted in the regulatory examination process and economic
conditions generally. Additional provisions for losses on loans are made in
order to bring the allowance to a level deemed adequate. Specific reserves will
be provided for individual assets, or portions of assets, when ultimate
collection is considered improbable by management based on the current payment
status of the assets and the fair value of the security. At the date of
foreclosure or other repossession, the Bank would transfer the property to real
estate acquired in settlement of loans initially at the lower of cost or
estimated fair value and subsequently at the lower of book value or fair value
less estimated selling costs. Any portion of the outstanding loan balance in
excess of fair value less estimated selling costs would be charged off against
the allowance for loan losses. If, upon ultimate disposition of the property,
net sales proceeds exceed the net carrying value of the property, a gain on sale
of real estate would be recorded.
72
<PAGE>
The following table sets forth an analysis of the Bank's allowance for loan
losses for the periods indicated.
<TABLE>
<CAPTION>
Three Months Ended
December 31, Years Ended September 30,
------------------ ------------------------------------------------
1997 1996 1997 1996 1995 1994 1993
------ ------ ------- ------- -------- ------- -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at beginning of period.......... $ 978 $ 926 $ 926 $ 788 $ 542 $ 613 $ 836
----- ----- ------ ------ ------ ----- -----
Loans charged-off:
Real estate mortgage:
Single-family residential........... -- -- -- -- -- -- --
Multi-family residential............ -- -- -- -- -- -- --
Commercial.......................... -- -- -- (4) -- -- --
Construction........................ -- -- -- -- -- -- --
Consumer.............................. (105) (144) (392) (394) (178) (71) (67)
----- ----- ------ ------ ------ ----- -----
Total charge-offs....................... (105) (144) (392) (398) (178) (71) (67)
Recoveries:
Real estate mortgage:
Single-family residential........... -- -- -- -- -- -- --
Multi-family residential............ -- -- -- -- -- -- --
Commercial.......................... -- -- -- -- -- -- --
Construction........................ -- -- -- -- -- -- --
Consumer.............................. 74 33 158 102 169 137 309
----- ----- ------ ------ ------ ----- -----
Total recoveries........................ 74 33 158 102 169 137 309
Net loans charged off................... (31) (111) (234) (296) (9) 66 242
Provision for (reduction of) loan
losses............................... 36 (1) 286 434 255 (137) (465)
----- ----- ------ ------ ------ ----- -----
Balance at end of period................ $ 983 $ 814 $ 978 $ 926 $ 788 $ 542 $ 613
===== ===== ====== ====== ====== ===== =====
Ratio of net charge-offs to average
loans outstanding during the period... 0.02% 0.07% (.15)% (.20)% (.01)% .05% .17%
===== ===== ====== ====== ====== ===== =====
</TABLE>
73
<PAGE>
The following table allocates the allowance for loan losses by loan
category at the dates indicated. The allocation of the allowance to each
category is not necessarily indicative of future losses and does not restrict
the use of the allowance to absorb losses in any category.
<TABLE>
<CAPTION>
At September 30,
At December 31, ----------------------------------------------------------------
1997 1997 1996 1995
------------------ ------------------- ------------------- --------------------
Percent Percent Percent Percent
of of of of
Loans in Loans in Loans in Loans in
Category Category Category Category
to to to to
Total Total Total Total
Amount Loans Amount Loans Amount Loans Amount Loans
------ --------- ------ --------- ------- --------- ------- ---------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Real estate:
Single-family residential.. $ 440 64.3% $ 432 62.30% $ 276 56.74% $141 55.87%
Single-family rental
property.................. 12 3.7 13 3.85 4 4.25 4 5.13
Commercial................. 100 6.0 79 6.11 120 6.21 158 7.13
Construction............... 47 4.8 28 5.19 36 6.87 40 4.51
Commercial lines of credit... -- .1 -- .04 -- .16 -- .15
Consumer..................... 384 21.1 426 22.51 490 25.77 445 27.21
----- ------ ----- ------ ----- ------ ---- ------
Total allowance for loan
losses.................. $ 983 100.00% $ 978 100.00% $ 926 100.00% $788 100.00%
===== ====== ===== ====== ===== ====== ==== ======
<CAPTION>
At September 30,
---------------------------------------
1994 1993
------------------- ------------------
Percent Percent
of of
Loans in Loans in
Category Category
to to
Total Total
Amount Loans Amount Loans
------ --------- ------- ---------
<S> <C> <C> <C> <C>
Real estate:
Single-family residential.. $214 59.86% $385 67.64%
Single-family rental
property.................. 4 6.23 5 6.70
Commercial................. 56 7.91 56 8.54
Construction............... 41 7.14 45 6.87
Commercial lines of credit... -- .08 -- .05
Consumer..................... 227 18.78 122 10.20
---- ----- ------ ------
Total allowance for loan
losses.................. $542 100.00% $613 100.00%
==== ====== ==== ======
</TABLE>
74
<PAGE>
INVESTMENT ACTIVITIES
General. The Bank is permitted under federal law to make certain
investments, including investments in securities issued by various federal
agencies and state and municipal governments, deposits at the FHLB of Atlanta,
certificates of deposit in federally insured institutions, certain bankers'
acceptances and federal funds. It may also invest, subject to certain
limitations, in commercial paper rated in one of the two highest investment
rating categories of a nationally recognized credit rating agency, and certain
other types of corporate debt securities and mutual funds. Federal regulations
require the Bank to maintain an investment in FHLB stock and a minimum amount of
liquid assets which may be invested in cash and specified securities. From time
to time, the OTS adjusts the percentage of liquid assets which savings banks are
required to maintain. See "Regulation -- Depository Institution Regulation --
Liquidity Requirements."
The Bank makes investments in order to maintain the levels of liquid
assets required by regulatory authorities and manage cash flow, diversify its
assets, obtain yield and to satisfy certain requirements for favorable tax
treatment. The investment activities of the Bank consist primarily of
investments in mortgage-backed securities and other investment securities,
consisting primarily of securities issued or guaranteed by the U.S. government
or agencies thereof. Typical investments include federally sponsored agency
mortgage pass-through and federally sponsored agency and mortgage-related
securities. In addition, until September 1995, the Bank maintained an
investment in a mutual fund that purchased U.S. government and agency mortgage-
backed securities. Investment and aggregate investment limitations and credit
quality parameters of each class of investment are prescribed in the Bank's
investment policy. The Bank performs analyses on mortgage-related securities
prior to purchase and on an ongoing basis to determine the impact on earnings
and market value under various interest rate and prepayment conditions. Under
the Bank's current investment policy, securities purchases are made by the
Bank's President. The Bank's President and Treasurer have limited authority to
sell investment securities and purchase comparable investment securities with
similar characteristics. The Board of Directors reviews all securities
transactions on a monthly basis.
Securities designated as "held to maturity" are those assets which the
Bank has the ability and intent to hold to maturity. Upon acquisition,
securities are classified as to the Bank's intent, and a sale would only be
effected due to deteriorating investment quality. The held to maturity
investment portfolio is not used for speculative purposes and is carried at
amortized cost. In the event the Bank sells securities from this portfolio for
other than credit quality reasons, all securities within the investment
portfolio with matching characteristics may be reclassified as assets available
for sale. Securities designated as "available for sale" are those assets which
the Bank may not hold to maturity and thus are carried at market value with
unrealized gains or losses, net of tax effect, recognized in retained earnings.
All of the Bank's securities at December 31, 1997 were designated as held to
maturity.
Mortgage-Backed and Related Securities. Mortgage-backed securities
represent a participation interest in a pool of single-family or multi-family
mortgages, the principal and interest payments on which are passed from the
mortgage originators through intermediaries that pool and repackage the
participation interest in the form of securities to investors such as the Bank.
Such intermediaries may include quasi-governmental agencies such as FHLMC, FNMA
and GNMA which guarantee the payment of principal and interest to investors.
Mortgage-backed securities generally increase the quality of the Bank's assets
by virtue of the guarantees that back them, are more liquid than individual
mortgage loans and may be used to collateralize borrowings or other obligations
of the Bank.
Mortgage-related securities typically are issued with stated principal
amounts and the securities are backed by pools of mortgages that have loans with
interest rates that are within a range and have similar maturities. The
underlying pool of mortgages can be composed of either fixed-rate or adjustable-
rate mortgage loans. Mortgage-backed securities generally are referred to as
mortgage participation certificates or pass-through certificates. As a result,
the interest rate risk characteristics of the underlying pool of mortgages,
i.e., fixed-rate or adjustable-rate, as well as prepayment risk, are passed on
to the certificate holder. The life of a mortgage-backed pass-through security
is equal to the life of the underlying mortgages.
75
<PAGE>
The actual maturity of a mortgage-backed security varies, depending on
when the mortgagors prepay or repay the underlying mortgages. Prepayments of
the underlying mortgages may shorten the life of the investment, thereby
adversely affecting its yield to maturity and the related market value of the
mortgage-backed security. The yield is based upon the interest income and the
amortization of the premium or accretion of the discount related to the
mortgage-backed security. Premiums and discounts on mortgage-backed securities
are amortized or accredited over the estimated term of the securities using a
level yield method. The prepayment assumptions used to determine the
amortization period for premiums and discounts can significantly affect the
yield of the mortgage-backed security, and these assumptions are reviewed
periodically to reflect the actual prepayment. The actual prepayments of the
underlying mortgages depend on many factors, including the type of mortgage, the
coupon rate, the age of the mortgages, the geographical location of the
underlying real estate collateralizing the mortgages and general levels of
market interest rates. The difference between the interest rates on the
underlying mortgages and the prevailing mortgage interest rates is an important
determinant in the rate of prepayments. During periods of falling mortgage
interest rates, prepayments generally increase, and, conversely, during periods
of rising mortgage interest rates, prepayments generally decrease. If the
coupon rate of the underlying mortgage significantly exceeds the prevailing
market interest rates offered for mortgage loans, refinancing generally
increases and accelerates the prepayment of the underlying mortgages.
Prepayment experience is more difficult to estimate for adjustable-rate
mortgage-backed securities.
Mortgage-related securities, which include collateralized mortgage
obligations ("CMOs"), are typically issued by a special purpose entity, which
may be organized in a variety of legal forms, such as a trust, a corporation or
a partnership. The entity aggregates pools of pass-through securities, which
are used to collateralize the mortgage-related securities. Once combined, the
cash flows can be divided into "tranches" or "classes" of individual securities,
thereby creating more predictable average lives for each security than the
underlying pass-through pools. Accordingly, under this security structure, all
principal paydowns from the various mortgage pools are allocated to a mortgage-
related securities' class or classes structured to have priority until it has
been paid off. These securities generally have fixed interest rates, and, as a
result, changes in interest rates generally would affect the market value and
possibly the prepayment rates of such securities.
Some mortgage-related securities instruments are like traditional debt
instruments due to their stated principal amounts and traditionally defined
interest rate terms. Purchasers of certain other mortgage-related securities
instruments are entitled to the excess, if any, of the issuer's cash flows.
These mortgage-related securities instruments may include instruments designated
as residual interest and are riskier in that they could result in the loss of a
portion of the original investment. Cash flows from residual interests are very
sensitive to prepayments and, thus, contain a high degree of interest rate risk.
The Bank does not purchase residual interests in mortgage-related securities.
The Bank's mortgage-backed securities portfolio consists primarily of
seasoned fixed-rate mortgage-backed securities. The Bank makes such investments
in order to manage cash flow, diversify assets, obtain yield, to satisfy certain
requirements for favorable tax treatment and to satisfy the qualified thrift
lender test. See "Regulation -- Depository Institution Regulation -- Qualified
Thrift Lender Test."
At December 31, 1997, mortgage-backed securities with an amortized
cost of $36.1 million were classified as held to maturity. At December 31,
1997, the Bank's mortgage-backed securities had a weighted average yield of
6.7%.
At December 31, 1997, the Bank did not have any CMOs, and the Bank's
investment policy does not permit investments in individual issues of CMOs or
Real Estate Mortgage Investment Conduits ("REMICs").
76
<PAGE>
The following table sets forth the carrying value of the Bank's
investments at the dates indicated.
<TABLE>
<CAPTION>
At At September 30,
December 31, ---------------------------
1997 1997 1996 1995
------------ ------- ------- -------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Securities available for sale:
Mutual funds.................... $ -- $ -- $ -- $ 2,002
Equity securities............... -- -- 101 86
Securities held to maturity:
U.S. government and agency
securities.................... 20,093 30,323 36,298 25,900
Mortgage-backed securities...... 36,110 37,189 39,771 35,047
FHLB stock...................... 1,433 1,433 1,301 1,292
------- ------- ------- -------
Total.......................... $57,636 $68,945 $77,471 $64,327
======= ======= ======= =======
</TABLE>
77
<PAGE>
The following table sets forth information in the scheduled
maturities, amortized cost, market values and average yields for the Bank's
investment portfolio at December 31, 1997.
<TABLE>
<CAPTION>
One Year or Less One to Five Years Five to Ten Years More than Ten Years
------------------- ------------------- ------------------- -------------------
Carrying Average Carrying Average Carrying Average Carrying Average
Value Yield Value Yield Value Yield Value Yield
-------- -------- -------- -------- -------- -------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Securities held to maturity:
U.S. government and
agency
obligations............ $999 5.85% $ 8,000 6.83% $10,845 7.36% $ 249 7.13%
Mortgage-backed securities -- -- 19,717 6.26 11,186 6.92 5,207 7.86
FHLB stock................ -- -- -- -- -- -- 1,433 7.31
-------- ------- ------- ------
Total.................. $999 5.85 $27,717 6.31 $22,051 7.14 $6,889 7.72
======== ======= ======= ======
<CAPTION>
Total Investment Portfolio
-----------------------------
Carrying Market Average
Value Value Yield
-------- ------- --------
<S> <C> <C> <C>
Securities held to maturity:
U.S. government and
agency
obligations............ $20,093 $20,190 6.88%
Mortgage-backed securities 36,110 36,597 6.72
FHLB stock................ 1,433 1,433 7.31
------- -------
Total.................. $57,636 $58,220 6.79
======= =======
</TABLE>
78
<PAGE>
DEPOSIT ACTIVITY AND OTHER SOURCES OF FUNDS
General. Deposits are the primary source of the Bank's funds for
lending, investment activities and general operational purposes. In addition to
deposits, the Bank derives funds from loan principal and interest repayments,
maturities of investment securities and mortgage-backed securities and interest
payments thereon. Although loan repayments are a relatively stable source of
funds, deposit inflows and outflows are significantly influenced by general
interest rates and money market conditions. Borrowings may be used on a short-
term basis to compensate for reductions in the availability of funds, or on a
longer term basis for general operational purposes. The Bank has access to
borrow from the FHLB of Atlanta.
Deposits. The Bank attracts deposits principally from within its
market area by offering a variety of deposit instruments, including checking
accounts, money market accounts, statement and passbook savings accounts,
Individual Retirement Accounts, and certificates of deposit which range in
maturity from seven days to five years. Deposit terms vary according to the
minimum balance required, the length of time the funds must remain on deposit
and the interest rate. Maturities, terms, service fees and withdrawal penalties
for its deposit accounts are established by the Bank on a periodic basis. The
Bank reviews its deposit mix and pricing on a weekly basis. In determining the
characteristics of its deposit accounts, the Bank considers the rates offered by
competing institutions, lending and liquidity requirements, growth goals and
federal regulations. Management believes it prices its deposits comparably to
rates offered by its competitors. The Bank does not accept brokered deposits.
The Bank attempts to compete for deposits with other institutions in
its market area by offering competitively priced deposit instruments that are
tailored to the needs of its customers. Additionally, the Bank seeks to meet
customers' needs by providing convenient customer service to the community,
efficient staff and convenient hours of service. Substantially all of the
Bank's depositors are Maryland residents. To provide additional convenience,
the Bank participates in the HONOR Automated Teller Machine network at locations
throughout the mid-Atlantic and the South and the CIRRUS Automated Teller
Machine network at locations throughout the United States, through which
customers can gain access to their accounts at any time. To better serve its
customers, the Bank has installed an automated teller machine at its Perry Hall
office.
79
<PAGE>
Savings deposits in the Bank at December 31, 1997 were represented by
the various types of savings programs described below.
<TABLE>
<CAPTION>
Interest Minimum Minimum Balances Percentage of
Rate Term Category Amount (In thousands) Total Savings
- ---- ---- -------- ------ ------------- -------------
<S> <C> <C> <C> <C> <C>
Demand deposits:
1.65% None NOW and Super NOW accounts $ 250 $ 25,396 11.43%
3.44 None Money market 250 9,509 4.28
-------- ------
Total demand deposits 34,905 15.71
Passbook savings deposits:
3.20 None Regular passbook 25 30,866 13.89
3.63 None Money market passbook 10,000 28,009 12.60
-------- ------
Total passbook savings deposits 58,875 26.49
Certificates of Deposit
-----------------------
4.81 3 months or less Fixed-term, fixed-rate 1,000 12,064 5.43
5.39 6 months Fixed-term, fixed-rate 1,000 10,239 4.61
5.38 12 months Fixed-term, fixed-rate 100 47,979 21.59
5.30 18 months Fixed-term, fixed-rate 100 5,872 2.64
5.49 24 months Fixed-term, fixed-rate 100 14,196 6.39
5.57 30 months Fixed-term, fixed-rate 100 2,643 1.19
5.67 36 months Fixed-term, fixed-rate 100 2,462 1.11
6.39 42 months Fixed-term, fixed-rate 100 1,296 0.58
5.83 48 months Fixed-term, fixed-rate 100 339 0.15
6.14 60 months Fixed-term, fixed-rate 100 19,281 8.67
5.64 $100,000 and over Fixed-term, fixed-rate N/A 13,395 5.13
-------- ------
Total certificates of deposit $127,766 57.49
Accrued interest payable 699 0.31
-------- ------
Total deposits $222,245 100.00%
======== ======
</TABLE>
_______________
* Represents weighted average interest rate.
80
<PAGE>
The following table sets forth the change in dollar amount of deposits
in the various types of accounts offered by the Bank between the dates
indicated.
<TABLE>
<CAPTION>
Balance Balance Balance
at at at
December % of Increase September % of Increase September
31, 1997 Deposits (Decrease) 30, 1997 Deposits (Decrease) 30, 1996
--------- -------- --------- --------- -------- --------- ---------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
NOW.......................... $ 25,396 11.43% $ 1,193 $ 24,203 10.77% $ 207 $ 23,996
Money market deposit......... 9,509 4.28 (546) 10,055 4.48 (516) 10,571
Passbook savings deposits.... 58,875 26.49 (1,782) 60,657 27.00 (3,841) 64,498
Certificates of deposit...... 116,371 52.36 (2,138) 118,509 52.75 (8,669) 127,178
Certificates of deposit
$100,000 and over........... 11,395 5.13 910 10,485 4.67 3,959 6,526
Accrued interests payable.... 699 0.31 (48) 747 .33 205 542
--------- ------- -------- --------- ------- -------- ---------
$ 222,245 100.00% $(2,411) $224,656 100.00% $(8,655) $233,311
========= ======= ======== ========= ======= ======== =========
<CAPTION>
Balance
at
% of Increase September % of
Deposits (Decrease) 30, 1995 Deposits
-------- --------- --------- --------
<S> <C> <C> <C>
NOW.......................... 10.28% $ 1,035 $ 22,961 10.54%
Money market deposit......... 4.54 137 10,434 4.79
Passbook savings deposits.... 27.64 240 64,258 29.49
Certificates of deposit...... 54.51 12,508 114,670 52.64
Certificates of deposit 2.80 1,377 5,149 2.36
$100,000 and over........... .23 146 396 .18
Accrued interests payable.... ------- ------- -------- ------
100.00% $15,443 $217,868 100.00%
======= ======= ======== ======
</TABLE>
81
<PAGE>
The following tables set forth the average balances and average interest
rates based on month-end balances for various types of deposits as of the dates
indicated.
<TABLE>
<CAPTION>
Three Months Ended December 31,
----------------------------------------
1997 1996
------------------ ------------------
Average Average Average Average
Balance Rate(1) Balance Rate(1)
-------- -------- -------- --------
<S> <C> <C> <C> <C>
NOW.......................... $ 21,226 1.95% $ 21,301 1.99%
Money market deposits........ 9,629 3.48 10,349 3.44
Passbook savings deposits.... 58,678 3.46 63,767 3.42
Non-interest-bearing demand
deposits.................... 4,871 -- 4,404 --
Certificates of deposit...... 127,879 5.49 136,014 5.72
-------- --------
Total...................... $222,283 4.41 $238,835 4.55
======== ========
<CAPTION>
Year Ended September 30,
---------------------------------------------------------------
1997 1996 1995
------------------ ------------------ -------------------
Average Average Average Average Average Average
Balance Rate Balance Rate Balance Rate
-------- -------- -------- -------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
NOW.......................... $ 21,277 2.01% $ 20,470 2.14% $ 20,359 2.44%
Money market deposits........ 10,147 3.44 10,481 3.51 11,677 3.67
Passbook savings deposits.... 62,963 3.72 65,253 3.75 67,676 3.81
Non-interest-bearing demand
deposits.................... 4,646 -- 3,715 -- 3,183 --
Certificates of deposit...... 133,896 5.37 128,994 5.71 101,202 5.27
-------- -------- --------
Total...................... $232,929 4.43 $228,913 4.64 $204,097 4.33
======== ======== ========
</TABLE>
________
(1) Annualized.
The following table sets forth the time deposits in the Bank classified by
rates at the dates indicated .
<TABLE>
<CAPTION>
At At September 30,
December 31, ------------------------------
1997 1997 1996 1995
------------ -------- -------- --------
(In thousands)
<S> <C> <C> <C> <C>
2.01 - 4%.............. $113,682 $ -- $ -- $ 821
4.01 - 6%.............. 13,954 116,029 89,543 65,590
6.01 - 8%.............. 130 12,838 44,045 52,919
8.01 - 10%............. -- 127 116 489
-------- -------- -------- --------
$127,766 $128,994 $133,704 $119,819
======== ======== ======== ========
</TABLE>
82
<PAGE>
The following table sets forth the amount and maturities
of time deposits at December 31, 1997.
<TABLE>
<CAPTION>
Amount Due
-------------------------------------------------------
Less Than After
Rate One Year 1-2 Years 2-3 Years 3 Years Total
- ---- --------- --------- --------- -------- --------
(In thousands)
<S> <C> <C> <C> <C> <C>
4.01 - 6%... $89,190 $18,224 $ 1,130 $ 5,138 $113,682
6.01 - 8%... 1,088 1,157 10,493 1,216 13,954
8.01 10%.... 10 120 -- -- 130
------- ------- ------- -------- --------
$90,288 $19,501 $11,623 $ 6,354 $127,766
======= ======= ======= ======= ========
</TABLE>
The following table indicates the amount of the Bank's certificates of
deposit of $100,000 or more by time remaining until maturity as of December 31,
1997. At such date, such deposits represented 5.1% of total deposits and had a
weighted average rate of 5.64%.
<TABLE>
<CAPTION>
Certificates
Maturity Period of Deposit
--------------- --------------
(In thousands)
<S> <C>
Three months or less............ $ 3,793
Over three through six months... 1,951
Over six through 12 months...... 2,765
Over 12 months.................. 2,886
-------
Total......................... $11,395
=======
</TABLE>
The following table sets forth the savings activities of the Bank for
the periods indicated.
<TABLE>
<CAPTION>
Three Months Ended
December 31, Year Ended September 30,
---------------------- -------------------------------
1997 1996 1997 1996 1995
--------- ---------- --------- -------- --------
(In thousands)
<S> <C> <C> <C> <C> <C>
Deposits.................................. $ 88,092 $ 113,000 $417,685 $420,336 $455,185
Deposits sold............................. (6,616) -- -- -- --
Withdrawals............................... (86,336) (112,744) 436,652 415,514 441,963
-------- --------- -------- -------- --------
Net increase (decrease) before interest
credited................................. (4,860) 256 (18,967) 4,822 13,222
Interest credited......................... 2,449 2,683 10,312 10,621 8,833
-------- --------- -------- -------- --------
Net increase (decrease) in savings
deposits................................ $ (2,411) $ 2,939 $ (8,655) $ 15,443 $ 22,055
======== ========= ======== ======== ========
</TABLE>
In the unlikely event the Bank is liquidated after the Stock Issuance,
depositors will be entitled to full payment of their deposit accounts prior to
any payment being made to the sole stockholder of the Bank.
83
<PAGE>
Borrowings. Savings deposits historically have been the primary
source of funds for the Bank's lending, investments and general operating
activities. The Bank is authorized, however, to use advances from the FHLB of
Atlanta to supplement its supply of lendable funds and to meet deposit
withdrawal requirements. The FHLB of Atlanta functions as a central reserve
bank providing credit for savings institutions and certain other member
financial institutions. As a member of the FHLB System, the Bank is required to
own stock in the FHLB of Atlanta and is authorized to apply for advances.
Advances are pursuant to several different programs, each of which has its own
interest rate and range of maturities. The Bank has a Blanket Agreement for
advances with the FHLB under which the Bank may borrow up to 25% of assets
subject to normal collateral and underwriting requirements. Advances from the
FHLB of Atlanta are secured by the Bank's stock in the FHLB of Atlanta and other
eligible assets. During the three months ended December 31, 1997 and 1996 and
the years ended September 30, 1997, 1996 and 1995, the Bank had no borrowings
other than FHLB advances. At December 31, 1997, the Bank had no outstanding
FHLB advances.
SUBSIDIARY ACTIVITIES
As a federally chartered savings bank, the Bank is permitted to invest
an amount equal to 2% of its assets in subsidiaries, with an additional
investment of 1% of assets where such investment serves primarily community,
inner-city and community development purposes. Under such limitations, as of
December 31, 1997, the Bank was authorized to invest up to approximately $5.0
million in the stock of or loans to subsidiaries, including the additional 1%
investment for community inner-city and community development purposes.
Institutions meeting their applicable minimum regulatory capital requirements
may invest up to 50% of their regulatory capital in conforming first mortgage
loans to subsidiaries in which they own 10% or more of the capital stock.
The Bank has two subsidiary service corporations, Baltimore County
Service Corp. ("BCSC") and Ebenezer Road, Inc. ("Ebenezer Road"). Further, BCSC
has a wholly owned subsidiary, Route 543, Incorporated ("Route 543"). BCSC was
formed in the mid 1970's for the purpose of participating in joint ventures for
the development of real estate. The last development project was completed
during the year ended September 30, 1996, and at December 31, 1997, BCSC
conducted immaterial activities. Route 543 was formed for the purpose of
participating in joint ventures with BCSC. The activities of Route 543 were
completed during the year ended September 30, 1996, and Route 543 currently is
inactive. At December 31, 1997, BCSC had substantially no assets or
liabilities, except that it may receive a refund, that would not exceed $13,000,
of amounts owed to it by a utility company in connection with a development
project completed approximately ten years ago. The Bank does not intend to
conduct real estate development activities in the future. Ebenezer Road is an
insurance agency that sells primarily vendor's single interest insurance on
automobile loans, as well as mortgage life insurance and annuity products. The
fees from the activities of its subsidiaries were immaterial during the three
months ended December 31, 1997 and the year ended September 30, 1997.
COMPETITION
The Bank faces strong competition both in originating real estate and
consumer loans and in attracting deposits. The Bank competes for real estate
and other loans principally on the basis of interest rates, the types of loans
it originates, the deposit products it offers and the quality of services it
provides to borrowers. The Bank also competes by offering products which are
tailored to the local community. Its competition in originating real estate
loans comes primarily from other savings institutions, commercial banks and
mortgage bankers. Commercial banks, credit unions and finance companies provide
vigorous competition in consumer lending. Competition may increase as a result
of the continuing reduction of restrictions on the interstate operations of
financial institutions.
The Bank attracts its deposits through its offices primarily from the
local community. Consequently, competition for deposits is principally from
other savings institutions, commercial banks, credit unions and brokers in the
local community. The Bank competes for deposits and loans by offering what it
believes to be a variety of deposit accounts at competitive rates, convenient
business hours, a commitment to outstanding customer service and a well-trained
staff. The Bank believes it has developed strong relationships with local
realtors and the community in general.
84
<PAGE>
Management considers its market area for gathering deposits and making
loans to be Baltimore County and Harford County in Maryland. The Bank estimates
that it competes with numerous banks and savings and loan associations for
deposits and loans. Based on data provided by a private marketing firm, the
Bank estimates that at December 31, 1997, it had approximately 2% of deposits
held by all banks and savings institutions in each of Baltimore County and
Harford County.
OFFICES AND OTHER MATERIAL PROPERTIES
The following table sets forth the location and certain additional
information regarding the Bank's offices at December 31, 1997.
<TABLE>
<CAPTION>
Book Value at Deposits at
Year Owned or Expiration Date December 31, Approximate December 31,
Opened Leased (If Leased) (1) 1997 Square Footage 1997
------ --------- ---------------- ------------- -------------- -------------
(Deposits in
thousands)
<S> <C> <C> <C> <C> <C> <C>
MAIN OFFICE:
Perry Hall 1955 Owned (2) $ 412,290 8,000 $97,774
BRANCH OFFICES:
Bel Air 1975 Leased June 2000 -- 2,000 26,372
Dundalk (3) 1976 Leased June 2001 -- 1,700 32,548
York Road 1977 Leased September 1998 -- 1,155 13,518
Timonium 1978 Leased July 2003 -- 1,250 29,473
Catonsville 1981 Leased February 2001 -- 1,750 22,560
Severna Park (4) 1980 Leased -- 1,237 --
ADMINISTRATIVE OFFICE:
4111 E. Joppa Road 1994 Owned 1,360,450 18,000 N/A
</TABLE>
_______________
(1) All leases have at least one five-year renewal option.
(2) Building is owned, but land is leased. The land lease expires in November
2003 with three 15-year renewal options.
(3) The Bank also is leasing a kiosk and drive-in ATM facility at this
location.
(4) The deposits for this branch were sold in October 1997.
The book value of the Bank's investment in premises and equipment totaled
$2.8 million at December 31, 1997. See Note 7 of Notes to Financial
Statements.
EMPLOYEES
As of December 31, 1997, the Bank had 69 full-time and 12 part-time
employees, none of whom were represented by a collective bargaining agreement.
Management considers the Bank's relationships with its employees to be good.
LEGAL PROCEEDINGS
From time to time, the Bank is a party to various legal proceedings
incident to its business. At December 31, 1997, there were no legal proceedings
to which the MHC, the Company or the Bank was a party, or to which any of their
property was subject, which were expected by management to result in a material
loss to the MHC, the Company or the Bank. There are no pending regulatory
proceedings to which the MHC, the Company, the Bank or their subsidiaries is a
party or to which any of their properties is subject which are currently
expected to result in a material loss.
85
<PAGE>
REGULATION
DEPOSITORY INSTITUTION REGULATION
General. The Bank is a federally chartered savings institution, is a
member of the FHLB of Atlanta and its deposits are insured by the FDIC through
the SAIF. As a federal savings institution, the Bank is subject to regulation
and supervision by the OTS and the FDIC and to OTS regulations governing such
matters as capital standards, mergers, establishment of branch offices,
subsidiary investments and activities and general investment authority. The OTS
periodically examines the Bank for compliance with various regulatory
requirements and for safe and sound operations. The FDIC also has the authority
to conduct special examinations of the Bank because its deposits are insured by
the SAIF. The Bank must file reports with the OTS describing its activities and
financial condition and must obtain the approval of the OTS prior to entering
into certain transactions, such as mergers with or acquisitions of other
depository institutions. This regulatory oversight will continue to apply to
the Bank following consummation of the Reorganization and Stock Issuance.
Regulatory Capital Requirements. Under OTS capital standards, a savings
institution must maintain "tangible" capital equal to 1.5% of adjusted total
assets, "core" capital equal to 3% of adjusted total assets and a combination of
core and "supplementary" capital equal to 8% of "risk-weighted" assets. In
addition, the OTS regulations impose certain restrictions on savings
institutions that have a total risk-based capital ratio that is less than 8%, a
ratio of Tier 1 capital to risk-weighted assets of less than 4% or a ratio of
Tier 1 capital to adjusted total assets of less than 4% (or 3% if the
institution is rated Composite 1 under the OTS examination rating system). See
"-- Prompt Corrective Regulatory Action." For purposes of this regulation, Tier
1 capital has the same definition as core capital which is defined as common
stockholders' equity (including retained earnings), noncumulative perpetual
preferred stock and related surplus, minority interests in the equity accounts
of fully consolidated subsidiaries, certain nonwithdrawable accounts and pledged
deposits and "qualifying supervisory goodwill." Core capital is generally
reduced by the amount of the savings institution's intangible assets for which
no market exists. Limited exceptions to the deduction of intangible assets are
provided for mortgage servicing rights, purchased credit card relationships and
qualifying supervisory goodwill held by an eligible savings institution.
Tangible capital is given the same definition as core capital but does not
include an exception for qualifying supervisory goodwill and is reduced by the
amount of all the savings institution's intangible assets with only a limited
exception for mortgage servicing rights and purchased credit card relationships.
Both core and tangible capital are further reduced by an amount equal to a
percentage of the savings institution's debt and equity investments in
subsidiaries engaged in activities not permissible for national banks, other
than subsidiaries engaged in activities undertaken as agent for customers or in
mortgage banking activities and subsidiary depository institutions or holding
companies therefor. At December 31, 1997, the Bank had no such investments.
Adjusted total assets are a savings institution's total assets as
determined under generally accepted accounting principles, increased for certain
goodwill amounts and by a pro-rated portion of the assets of subsidiaries in
which the savings institution holds a minority interest (and which are not
engaged in activities for which the capital rules require the savings
institution to net its debt and equity investments in such subsidiaries against
capital), as well as a pro-rated portion of the assets of other subsidiaries for
which netting is not fully required under phase-in rules. Adjusted total assets
are reduced by the amount of assets that have been deducted from capital, the
portion of savings institution's investments in subsidiaries that must be netted
against capital under the capital rules and, for purposes of the core capital
requirement, qualifying supervisory goodwill. At December 31, 1997, the Bank's
adjusted total assets for purposes of core and tangible capital requirements
were $250.5 million.
In determining compliance with the risk-based capital requirement, a
savings institution is allowed to include both core capital and supplementary
capital in its total capital, provided the amount of supplementary capital used
does not exceed the savings institution's core capital. Supplementary capital
is defined to include certain preferred stock
86
<PAGE>
issues, nonwithdrawable accounts and pledged deposits that do not qualify as
core capital, certain approved subordinated debt, certain other capital
instruments and a portion of the savings institution's general loss allowances.
Total core and supplementary capital are reduced by the amount of capital
instruments held by other depository institutions pursuant to reciprocal
arrangements and by an increasing percentage of the savings institution's high
loan-to-value ratio land loans, non-residential construction loans and equity
investments other than those deducted from core and tangible capital. As of
December 31, 1997, the Bank had no high ratio land or non-residential
construction loans and no equity investments for which OTS regulations require a
deduction from total capital.
The risk-based capital requirement is measured against risk-weighted assets
which equal the sum of each asset and the credit-equivalent amount of each off-
balance sheet item after being multiplied by an assigned risk weight. Under the
OTS risk-weighting system, one-to-four family first mortgages not more than 90
days past due with loan-to-value ratios under 80% and average annual occupancy
rates of at least 80% and certain qualifying loans for the construction of one-
to-four-family residences pre-sold to home purchasers are assigned a risk weight
of 50%. Consumer and residential construction loans are assigned a risk weight
of 100%. Mortgage-backed securities issued, or fully guaranteed as to principal
and interest by the FNMA or FHLMC are assigned a 20% risk weight. Cash and U.S.
Government securities backed by the full faith and credit of the U.S. Government
(such as mortgage-backed securities issued by GNMA) are given a 0% risk weight.
For information with respect to the Bank's compliance with its regulatory
capital requirements at December 31, 1997, see Note 12 of Notes to Consolidated
Financial Statements.
The risk-based capital requirements of the OTS also require that savings
institutions with more than a "normal" level of interest rate risk to maintain
additional total capital. A savings institution's interest rate risk is
measured in terms of the sensitivity of its "net portfolio value" to changes in
interest rates. Net portfolio value is defined, generally, as the present value
of expected cash inflows from existing assets and off-balance sheet contracts
less the present value of expected cash outflows from existing liabilities. A
savings institution is considered to have a "normal" level of interest rate risk
exposure if the decline in its net portfolio value after an immediate 200 basis
point increase or decrease in market interest rates (whichever results in the
greater decline) is less than two percent of the current estimated economic
value of its assets. A savings institution with a greater than normal interest
rate risk will be required to deduct from total capital, for purposes of
calculating its risk-based capital requirement, an amount (the "interest rate
risk component") equal to one-half the difference between the institution's
measured interest rate risk and the normal level of interest rate risk,
multiplied by the economic value of its total assets.
The OTS calculates the sensitivity of a savings institution's net portfolio
value based on data submitted by the institution in a schedule to its quarterly
Thrift Financial Report and using the interest rate risk measurement model
adopted by the OTS. The amount of the interest rate risk component, if any, to
be deducted from a savings institution's total capital is based on the
institution's Thrift Financial Report filed two quarters earlier. Savings
institutions with less than $300 million in assets and a risk-based capital
ratio above 12% are generally exempt from filing the interest rate risk schedule
with their Thrift Financial Reports. However, the OTS requires any exempt
savings institution that it determines may have a high level of interest rate
risk exposure to file such schedule on a quarterly basis and may be subject to
an additional capital requirement based upon its level of interest rate risk as
compared to its peers. The Bank is exempt from filing the interest rate risk
schedule with its Thrift Financial Reports and the OTS has not required it to
file such a schedule. The interest rate risk rule did not have a material
effect on the Bank's risk based capital at December 31, 1997. See also
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Market Risk."
In addition to requiring generally applicable capital standards for savings
institutions, the OTS is authorized to establish the minimum level of capital
for a savings institution at such amount or at such ratio of capital-to-assets
as the OTS determines to be necessary or appropriate for such institution in
light of the particular circumstances of the institution. Such circumstances
would include a high degree of exposure to interest rate risk, concentration of
credit
87
<PAGE>
risk and certain risks arising from non-traditional activity. The OTS may treat
the failure of any savings institution to maintain capital at or above such
level as an unsafe or unsound practice and may issue a directive requiring any
savings institution which fails to maintain capital at or above the minimum
level required by the OTS to submit and adhere to a plan for increasing capital.
Such an order may be enforced in the same manner as an order issued by the FDIC.
Liquidity Requirements. The Bank generally is required to maintain average
daily balances of liquid assets (generally, cash, certain time deposits,
bankers' acceptances, highly rated corporate debt and commercial paper,
securities of certain mutual funds, and specified United States government,
state or federal agency obligations) equal to 4% of its net withdrawable
accounts plus short-term borrowings either at the end of the preceding calendar
quarter or on an average daily basis during the preceding quarter. The Bank
also is required to maintain sufficient liquidity to ensure its safe and sound
operation. Monetary penalties may be imposed for failure to meet liquidity
requirements. The average daily balance of liquid assets ratio of the Bank for
December 1997 was 24.0%.
Qualified Thrift Lender Test. A savings institution that does not meet the
Qualified Thrift Lender ("QTL") test must either convert to a bank charter or
comply with the following restrictions on its operations: (i) the institution
may not engage in any new activity or make any new investment, directly or
indirectly, unless such activity or investment is permissible for both a
national bank and a savings institution; (ii) the branching powers of the
institution shall be restricted to those of a national bank; (iii) the
institution shall not be eligible to obtain any advances from its FHLB; and (iv)
payment of dividends by the institution shall be subject to the rules regarding
payment of dividends by a national bank. In addition, any company that controls
a savings institution that fails to qualify as a QTL will be required to
register as, and to be deemed, a bank holding company subject to all of the
provisions of the Bank Holding Company Act of 1956 (the "BHCA") and other
statutes applicable to bank holding companies. Upon the expiration of three
years from the date the institution ceases to be a QTL, it must cease any
activity and not retain any investment not permissible for a national bank and a
savings institution and immediately repay any outstanding FHLB advances (subject
to safety and soundness considerations).
To meet the QTL test, an institution's "Qualified Thrift Investments" must
total at least 65% of "portfolio assets." Under OTS regulations, portfolio
assets are defined as total assets less intangibles, property used by a savings
institution in its business and liquidity investments in an amount not exceeding
20% of assets. Qualified Thrift Investments consist of (i) loans, equity
positions or securities related to domestic, residential real estate or
manufactured housing, (ii) 50% of the dollar amount of residential mortgage
loans subject to sale under certain conditions, and (iii) stock in an FHLB or
the FHLMC or FNMA. In addition, subject to a 20% of portfolio assets limit,
savings institutions are able to treat as Qualified Thrift Investments 200% of
their investments in loans to finance "starter homes" and loans for
construction, development or improvement of housing and community service
facilities or for financing small businesses in "credit-needy" areas. In order
to maintain QTL status, the savings institution must maintain a weekly average
percentage of Qualified Thrift Investments to portfolio assets equal to 65% on a
monthly average basis in nine out of 12 months. A savings institution that
fails to maintain QTL status will be permitted to requalify once, and if it
fails the QTL test a second time, it will become immediately subject to all
penalties as if all time limits on such penalties had expired.
At December 31, 1997, the percentage of the Bank's portfolio assets
invested in Qualified Thrift Investments was in excess of the percentage
required to qualify the Bank under the QTL test.
Dividend Limitations. Federal regulations impose additional limitations on
the payment of dividends and other capital distributions (including stock
repurchases and cash mergers) by the Bank. Under these regulations, a savings
institution that, immediately prior to, and on a pro forma basis after giving
effect to, a proposed capital distribution, has total capital (as defined by OTS
regulation) that is equal to or greater than the amount of its fully phased-in
capital requirements (a "Tier 1 Association") is generally permitted, without
OTS approval after notice, to make capital distributions during a calendar year
in the amount equal to the greater of: (i) 75% of its net income for the
previous four quarters; or (ii) up to 100% of its net income to date during the
calendar year plus an amount that would reduce by one-half the amount by which
its capital-to-assets ratio exceeded regulatory requirements at the beginning of
the
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calendar year. A savings institution with total capital in excess of current
minimum capital ratio requirements (a "Tier 2 Association") is permitted after
notice to make capital distributions without OTS approval of up to 75% of its
net income for the previous four quarters, less dividends already paid for such
period. A savings institution that fails to meet current minimum capital
requirements (a "Tier 3 Association") is prohibited from making any capital
distributions without the prior approval of the OTS. A Tier 1 Association that
has been notified by the OTS that it is in need of more than normal supervision
will be treated as either a Tier 2 or Tier 3 Association. The Bank is a Tier 1
Association. Under the OTS' prompt corrective action regulations, the Bank is
also prohibited from making any capital distributions if after making the
distribution, the Bank would have: (i) a total risk-based capital ratio of less
than 8.0%; (ii) a Tier 1 risk-based capital ratio of less than 4.0%; or (iii) a
leverage ratio of less than 4.0%. The OTS, after consultation with the FDIC,
however, may permit an otherwise prohibited stock repurchase if made in
connection with the issuance of additional shares in an equivalent amount and
the repurchase will reduce the institution's financial obligations or otherwise
improve the institution's financial condition. See "-- Prompt Corrective
Regulatory Action."
The OTS has proposed amendments to its capital distribution regulations
which would conform OTS regulations to the existing requirements of other
banking agencies, as well as simplify the existing OTS regulations. These
proposed rules would eliminate the requirement of notifying the OTS when cash
dividends of a certain amount will be paid for institutions that will remain at
least adequately capitalized. However, applications for capital distributions
will be required for all distributions over a specified amount. Notices will
still be required for distributions that would "reduce the amount of or retire
common or preferred stock, or debt instruments included in the capital.
In addition to the foregoing, earnings of the Bank appropriated to bad debt
reserves and deducted for federal income tax purposes are not available for
payment of cash dividends or other distributions to the Company without payment
of taxes at the then current tax rate by the Bank on the amount of earnings
removed from the reserves for such distributions. See "Taxation." The Company
intends to make full use of this favorable tax treatment afforded to the Bank
and the Company and does not contemplate use of any earnings of the Bank in a
manner which would limit either institution's bad debt deduction or create
federal tax liabilities.
Deposit Insurance. FDCIA required the FDIC to establish a risk-based
assessment system for insured depository associations that takes into account
the risks attributable to different categories and concentrations of assets and
liabilities. Under the rule, the FDIC assigns an association to one of three
capital categories consisting of (i) well capitalized, (ii) adequately
capitalized, or (iii) undercapitalized, and one of three supervisory
subcategories. The supervisory subgroup to which an association is assigned is
based on a supervisory evaluation provided to the FDIC by the association's
primary federal regulator and information which the FDIC determines to be
relevant to the association's financial condition and the risk posed to the
deposit insurance funds (which may include, if applicable, information provided
by the association's state supervisor). An association's assessment rate
depends on the capital category and supervisory category to which it is
assigned. There are nine assessment risk classifications (i.e., combinations of
capital groups and supervisory subgroups) to which different assessment rates
are applied. Assessment rates range from zero basis points for an association
in the highest category (i.e., well-capitalized and healthy) to 27 basis points
for an association in the lowest category (i.e., undercapitalized and of
substantial supervisory concern.)
Federal Home Loan Bank System. The Bank is a member of the FHLB System,
which consists of 12 district Federal Home Loan Banks subject to supervision and
regulation by the Federal Housing Finance Board ("FHFB"). The Federal Home Loan
Banks provide a central credit facility primarily for member institutions. As a
member of the FHLB of Atlanta, the Bank is required to acquire and hold shares
of capital stock in the FHLB of Atlanta in an amount at least equal to 1% of the
aggregate unpaid principal of its home mortgage loans, home purchase contracts,
and similar obligations at the beginning of each year, or 1/20 of its advances
(borrowings) from the FHLB of Atlanta, whichever is greater. The Bank was in
compliance with this requirement with investment in FHLB of Atlanta stock at
December 31, 1997, of $1.4 million. The FHLB of Atlanta serves as a reserve or
central bank for its member institutions within its assigned district. It is
funded primarily from proceeds derived from the sale of consolidated obligations
of the FHLB System. It offers advances to members in accordance with policies
and procedures established by the FHFB and the Board of Directors of the FHLB of
Atlanta. Long-term advances may only be made for the purpose of providing
funds
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for residential housing finance. At December 31, 1997, the Bank had no advances
outstanding from the FHLB of Atlanta. See "Business -- Deposit Activity and
Other Sources of Funds -- Borrowings."
Federal Reserve System. Pursuant to regulations of the Federal Reserve
Board, all FDIC-insured depository institutions must maintain average daily
reserves against their transaction accounts. No reserves are required on the
first $4.7 million of transaction accounts maintained; reserves of 3% are
required on the next $47.8 million of transaction accounts and a reserve of 10%
must be maintained against all remaining transaction accounts. These reserve
requirements are subject to adjustment by the Federal Reserve Board. Because
required reserves must be maintained in the form of vault cash or in a non-
interest bearing account at a Federal Reserve Bank, the effect of the reserve
requirement is to reduce the amount of the institution's interest-earning
assets. As of December 31, 1997, the Bank met its reserve requirements.
Prompt Corrective Regulatory Action. Under the Federal Deposit Insurance
Corporation Improvement Act of 1991 ("FDICIA"), the federal banking regulators
are required to take prompt corrective action if an insured depository
institution fails to satisfy certain minimum capital requirements, including a
leverage limit, a risk-based capital requirement, and any other measure of
capital deemed appropriate by the federal banking regulators for measuring the
capital adequacy of an insured depository institution. All institutions,
regardless of their capital levels, are restricted from making any capital
distribution or paying any management fees if the institution would thereafter
fail to satisfy the minimum levels for any of its capital requirements. An
institution that fails to meet the minimum level for any relevant capital
measure (an "undercapitalized institution") may be: (i) subject to increased
monitoring by the appropriate federal banking regulator; (ii) required to submit
an acceptable capital restoration plan within 45 days; (iii) subject to asset
growth limits; and (iv) required to obtain prior regulatory approval for
acquisitions, branching and new lines of businesses. The capital restoration
plan must include a guarantee by the institution's holding company that the
institution will comply with the plan until it has been adequately capitalized
on average for four consecutive quarters, under which the holding company would
be liable up to the lesser of 5% of the institution's total assets or the amount
necessary to bring the institution into capital compliance as of the date it
failed to comply with its capital restoration plan. A "significantly
undercapitalized" institution, as well as any undercapitalized institution that
did not submit an acceptable capital restoration plan, may be subject to
regulatory demands for recapitalization, broader application of restrictions on
transactions with affiliates, limitations on interest rates paid on deposits,
asset growth and other activities, possible replacement of directors and
officers, and restrictions on capital distributions by any bank holding company
controlling the institution. Any company controlling the institution could also
be required to divest the institution or the institution could be required to
divest subsidiaries. The senior executive officers of a significantly
undercapitalized institution may not receive bonuses or increases in
compensation without prior approval and the institution is prohibited from
making payments of principal or interest on its subordinated debt. In their
discretion, the federal banking regulators may also impose the foregoing
sanctions on an undercapitalized institution if the regulators determine that
such actions are necessary to carry out the purposes of the prompt corrective
action provisions. If an institution's ratio of tangible capital to total
assets falls below a "critical capital level," the institution will be subject
to conservatorship or receivership within 90 days unless periodic determinations
are made that forbearance from such action would better protect the deposit
insurance fund. Unless appropriate findings and certifications are made by the
appropriate federal bank regulatory agencies, a critically undercapitalized
institution must be placed in receivership if it remains critically
undercapitalized on average during the calendar quarter beginning 270 days after
the date it became critically undercapitalized.
Federal banking regulators, including the OTS, have adopted regulations
implementing the prompt corrective action provisions of FDICIA. Under these
regulations, the federal banking regulators will generally measure a depository
institution's capital adequacy on the basis of the institution's total risk-
based capital ratio (the ratio of its total capital to risk-weighted assets),
Tier 1 risk-based capital ratio (the ratio of its core capital to risk-weighted
assets) and leverage ratio (the ratio of its core capital to adjusted total
assets). Under the regulations, a savings institution that is not subject to an
order or written directive to meet or maintain a specific capital level will be
deemed "well capitalized" if it also has: (i) a total risk-based capital ratio
of 10% or greater; (ii) a Tier 1 risk-based capital ratio of 6.0% or greater;
and (iii) a leverage ratio of 5.0% or greater. An "adequately capitalized"
savings institution is a savings institution that
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does not meet the definition of well capitalized and has: (i) a total risk-based
capital ratio of 8.0% or greater; (ii) a Tier 1 capital risk-based ratio of 4.0%
or greater; and (iii) a leverage ratio of 4.0% or greater (or 3.0% or greater if
the savings institution has a composite 1 CAMEL rating). An "undercapitalized
institution" is a savings institution that has (i) a total risk-based capital
ratio less than 8.0%; or (ii) a Tier 1 risk-based capital ratio of less than
4.0%; or (iii) a leverage ratio of less than 4.0% (or 3.0% if the institution
has a composite 1 CAMEL rating). A "significantly undercapitalized" institution
is defined as a savings institution that has: (i) a total risk-based capital
ratio of less than 6.0%; or (ii) a Tier 1 risk-based capital ratio of less than
3.0%; or (iii) a leverage ratio of less than 3.0%. A "critically
undercapitalized" savings institution is defined as a savings institution that
has a ratio of "tangible equity" to total assets of less than 2.0%. "Tangible
equity" is defined as core capital plus the institution's outstanding cumulative
perpetual preferred stock (and related surplus) less all intangibles other than
qualifying supervisory goodwill and certain mortgage servicing rights. The OTS
may reclassify a well capitalized savings institution as adequately capitalized
and may require an adequately capitalized or undercapitalized institution to
comply with the supervisory actions applicable to institutions in the next lower
capital category (but may not reclassify a significantly undercapitalized
institution as critically undercapitalized) if the OTS determines, after notice
and an opportunity for a hearing, that the savings institution is in an unsafe
or unsound condition or that the institution has received and not corrected a
less-than-satisfactory rating for any CAMEL rating category. As of December 31,
1997, the Bank was classified as "well-capitalized" under these prompt
corrective action regulations.
Safety and Soundness Standards. Under FDICIA, as amended by the Riegle
Community Development and Regulatory Improvement Act of 1994 (the "CDRI Act"),
each Federal banking agency is required to establish safety and soundness
standards for institutions under its authority. On July 10, 1995, the Federal
banking agencies, including the OTS, released Interagency Guidelines
Establishing Standards for Safety and Soundness and published a final rule
establishing deadlines for submission and review of safety and soundness
compliance plans. The guidelines require savings institutions to maintain
internal controls and information systems and internal audit systems that are
appropriate for the size, nature and scope of the institution's business. The
guidelines also establish certain basic standards for loan documentation, credit
underwriting, interest rate risk exposure, and asset growth. The guidelines
further provide that savings institutions should maintain safeguards to prevent
the payment of compensation, fees and benefits that are excessive or that could
lead to material financial loss, and should take into account factors such as
comparable compensation practices at comparable institutions. If the OTS
determines that a savings institution is not in compliance with the safety and
soundness guidelines, it may require the institution to submit an acceptable
plan to achieve compliance with the guidelines. A savings institution must
submit an acceptable compliance plan to the OTS within 30 days of receipt of a
request for such a plan. Failure to submit or implement a compliance plan may
subject the institution to regulatory sanctions. Under the guidelines, a
savings institution should maintain systems, commensurate with its size and the
nature and scope of its operations, to identify problem assets and prevent
deterioration in those assets as well as to evaluate and monitor earnings and
ensure that earnings are sufficient to maintain adequate capital and reserves.
Management believes that these regulatory standards do not materially affect the
Bank's operations.
Lending Limits. Savings institutions generally are subject to the lending
limits applicable to national banks. With certain limited exceptions, the
maximum amount that a savings institution or a national bank may lend to any
borrower outstanding at one time and not fully secured by collateral having a
market value at least equal to the amount of the loan or extension of credit
(including certain related entities of the borrower) outstanding at one time and
not fully secured by collateral having a market value at least equal to the
amount of the loan or extension of credit may not exceed 15% of the unimpaired
capital and surplus of the institution. Loans and extensions of credit fully
secured by readily marketable collateral may comprise an additional 10% of
unimpaired capital and surplus. Savings institutions are additionally
authorized to make loans to one borrower, for any purpose: (i) in an amount not
to exceed $500,000, or (ii) by order of the Director of OTS, in an amount not to
exceed the lesser of $30,000,000 or 30% of unimpaired capital and surplus to
develop residential housing, provided: (a) the purchase price of each single-
family dwelling in the development does not exceed $500,000; (b) the savings
institution is and continues to be in compliance with its fully phased-in
capital requirements; (c) the loans comply with applicable loan-to-value
requirements, and; (d) the aggregate amount of loans made under this authority
does not exceed 150% of unimpaired capital and surplus, or (iii) loans to
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finance the sale of real property acquired in satisfaction of debts previously
contracted in good faith, not to exceed 50% of unimpaired capital and surplus of
the institution.
At December 31, 1997, the maximum amount that the Bank could have loaned to
any one borrower without prior OTS approval was $3.7 million. At such date, the
largest aggregate amount of loans that the Bank had outstanding to any one
borrower was $3.0 million.
Uniform Lending Standards. Under OTS regulations, savings institutions
must adopt and maintain written policies that establish appropriate limits and
standards for extensions of credit that are secured by liens or interests in
real estate or are made for the purpose of financing permanent improvements to
real estate. These policies must establish loan portfolio diversification
standards, prudent underwriting standards, including loan-to-value limits, that
are clear and measurable, loan administration procedures and documentation,
approval and reporting requirements. The real estate lending policies must
reflect consideration of the Interagency Guidelines for Real Estate Lending
Policies (the "Interagency Guidelines") that have been adopted by the federal
bank regulators.
The Interagency Guidelines, among other things, call upon depository
institutions to establish internal loan-to-value limits for real estate loans
that are not in excess of the following supervisory limits: (i) for loans
secured by raw land, the supervisory loan-to-value limit is 65% of the value of
the collateral; (ii) for land development loans (i.e., loans for the purpose of
improving unimproved property prior to the erection of structures), the
supervisory limit is 75%; (iii) for loans for the construction of commercial,
multifamily or other nonresidential property, the supervisory limit is 80%; (iv)
for loans for the construction of one-to-four family properties, the supervisory
limit is 85%; and (v) for loans secured by other improved property (e.g.,
farmland, completed commercial property and other income-producing property
including non-owner-occupied, one-to-four family property), the limit is 85%.
Although no supervisory loan-to-value limit has been established for owner-
occupied, one-to-four family and home equity loans, the Interagency Guidelines
state that for any such loan with a loan-to-value ratio that equals or exceeds
90% at origination, an institution should require appropriate credit enhancement
in the form of either mortgage insurance or readily marketable collateral.
The Interagency Guidelines state that it may be appropriate in individual
cases to originate or purchase loans with loan-to-value ratios in excess of the
supervisory loan-to-value limits, based on the support provided by other credit
factors. The aggregate amount of loans in excess of the supervisory loan-to-
value limits, however, should not exceed 100% of total capital and the total of
such loans secured by commercial, agricultural, multifamily and other non-one-
to-four family residential properties should not exceed 30% of total capital.
The supervisory loan-to-value limits do not apply to certain categories of loans
including loans insured or guaranteed by the U.S. government and its agencies or
by financially capable state, local or municipal governments or agencies, loans
backed by the full faith and credit of a state government, loans that are to be
sold promptly after origination without recourse to a financially responsible
party, loans that are renewed, refinanced or restructured without the
advancement of new funds, loans that are renewed, refinanced or restructured in
connection with a workout, loans to facilitate sales of real estate acquired by
the institution in the ordinary course of collecting a debt previously
contracted and loans where the real estate is not the primary collateral.
Management believes that the Bank's current lending policies conform to the
Interagency Guidelines.
Transactions with Related Parties. Generally, transactions between a
savings bank or its subsidiaries and its affiliates must be on terms as
favorable to the Bank as transactions with non-affiliates. In addition, certain
of these transactions are restricted to a percentage of the Bank's capital.
Affiliates of the Bank include the Company, the MHC and any company which would
be under common control with the Bank.
The Bank's authority to extend credit to executive officers, trustees and
10% shareholders, as well as entities under such persons control are currently
governed by Sections 22(g) and 22(h) of the Federal Reserve Act and Regulation O
promulgated by the Federal Reserve Board. Among other things, these regulations
require such loans to
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be made on terms substantially similar to those offered to unaffiliated
individuals, place limits on the amount of loans the Bank may make to such
persons based, in part, on the Bank's capital position, and require certain
approval procedures to be followed.
Alteration of Financial Services Industry. On May 21, 1997, the Clinton
Administration announced a plan to modernize the financial services industry.
The proposal, among other things, addresses the ongoing debate concerning mixing
banking and commerce, elimination of the savings association charter and the
merger of the SAIF and BIF. Under the proposal, companies that own banks (bank
holding companies) and meet certain qualifications would -- subject to certain
safeguards -- be permitted to engage in any financial activity, including the
full range of securities activities, insurance activities, investment advisory
activities and mutual fund sponsorship and merchant banking. Likewise,
financial companies could own banks.
Regarding financial activities of insured depository institutions and their
subsidiaries, the proposal provides that national banks (and state banks to the
extent permitted by state law) would be authorized, subject to certain
safeguards, to conduct any financial activity through subsidiaries (except that
national bank subsidiaries would not be authorized to engage in real estate
development). National banks would be permitted to engage in the full scope of
activities that have previously been permissible for national banks or federally
chartered savings associations (except engaging in the real estate development).
Moreover, national banks (and state banks to the extent permitted by state law)
would be permitted to act as general agents for the sale of insurance, but would
be prohibited from engaging directly in insurance underwriting other than what
is currently permissible (for instance, credit-related insurance).
Additionally, national banks (and state banks to the extent permitted by state
law) would be permitted to underwrite and deal in municipal revenue bonds in
addition to other securities activities currently permissible in the bank.
The Clinton Administration's proposal also addressed affiliations between
banking organizations and non-financial companies. The proposal recommended two
alternative approaches -- the "basket" approach and the "financial-only"
approach. Under the basket approach, bank holding companies that derive some
significant percentage (as specified by the U.S. Congress) of their gross
revenues in the U.S. from financial activities could derive the remainder of
their revenues from non-financial activities. In addition to the basket
limitation, the proposal suggested prohibiting any affiliation between a bank
holding company and a non-financial firm having assets in excess of a specified
amount (calculated to be approximately the 1,000 largest non-financial
companies). Moreover, banks would be prohibited from extending any credit to,
or for the benefit of, any non-financial affiliate.
Under the basket approach, the federal savings association charter would be
eliminated after two years (thereby requiring all federal thrifts to convert to
bank charters), and existing unitary thrift holding companies (which presently
have no activity restrictions) would be given a grandfather exemption from the
"basket" test (terminable upon a change of control). All remaining state-
chartered thrifts would be treated as banks for federal bank regulatory
purposes. The OTS and the OCC would be merged at the end of the two-year-
conversion period and the SAIF and BIF would be merged. The Federal Reserve
Board, however, would continue to approve the formation of, and to supervise and
regulate all bank holding companies.
Under the financial-only approach, bank holding companies would not be
permitted to engage in any non-financial activities. But the existing federal
savings association charter would be preserved, and thrift holding companies
would retain their current authority to engage in any lawful activity.
Furthermore, the OTS and OCC would be kept in tact, but the SAIF and BIF would
be merged.
The Administration's proposal also sets forth capital protections and other
safeguards associated with the new activities contemplated for banks. In order
for a bank holding company or a subsidiary of a bank to engage as a principal in
activities not permissible for a national bank to engage in directly, the bank
would have to remain "well capitalized" -- that is, to be in the highest
regulatory capital category, with regulatory capital exceeding normal
requirements -- and it would have to deduct from its regulatory capital the
entire amount of its equity investment in a subsidiary engaged in such
activities. The Bank also would have to be well-managed.
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On June 20, 1997, the House Committee on Banking and Financial Services of
the U.S. House of Representatives passed H.R. 10 (the "Act"), the "Financial
Services Competition Act of 1997," by a vote of 28 to 26. Like the proposal
announced by the Clinton Administration on May 2, 1997, H.R. 10 is a sweeping
proposal for financial modernization of the banking system that would permit
affiliations between commercial banks, securities firms, insurance companies
and, subject to certain limitations, other commercial enterprises. The stated
purposes of the Act are to enhance consumer choice in the financial services
marketplace, level the playing field among providers of financial services and
increase competition.
H.R. 10 removes the restrictions contained in the Glass-Steagall Act of
1933 and the Bank Holding Company Act of 1956, thereby allowing qualified
financial holding companies to control banks, securities firms, insurance
companies, and other financial firms. Conversely, securities firms, insurance
companies and financial firms would be allowed to own or affiliate with a
commercial bank. The Act also provides that subsidiaries of national banks may
engage in financial activities not allowed in the bank itself (except real
estate investment and development, merchant banking and insurance underwriting),
but only if the bank and all of its depository institutions are well capitalized
and well managed and have achieved a "satisfactory" rating under the Community
Reinvestment Act.
Under the new framework, the Federal Reserve would serve as an umbrella
regulator to oversee the new financial holding company structure. Securities
affiliated would be required to comply with all applicable federal securities
laws, including registration and other requirements applicable to broker-
dealers. The Act also would provide that insurance affiliates be subject to
applicable state insurance regulations and supervision.
With respect to the thrift industry, H.R. 10 would eliminate the federal
savings association charter by requiring all federal thrifts to convert to
national banks, state-chartered savings associations or state-chartered banks
within two years after the date of the Act's adoption. State-chartered savings
associations would be treated as commercial banks for purposes of federal
banking law. After conversion, the new institution would be permitted to retain
its existing investments, affiliations and branches. In addition, the Act would
merge the OTS with the OCC, and merge the SAIF and BIF. Unitary savings and
loan holding companies could maintain their affiliations with nonfinancial
enterprises and engage in all currently permissible activities.
The U.S. Congress has been considering the Administration's proposal, as
well as proposals offered by others, in recent months. H.R. 10, specifically,
was considered by the Commerce Committee of the House of Representatives, which
adopted a bill with different provisions. The two Committees have agreed on a
compromise bill under which the thrift charter would be preserved, but thrifts
would have to dedicate 10% of their assets to home mortgages. Thrifts and their
holding companies would continue under current regulations until January 1,
2000. Existing unitary thrift holding companies would be grandfathered, but
after that date would be regulated by the Board of Governors of the Federal
Reserve System. At this time, it is unknown whether legislation will be enacted
that alters the financial services industry, or if enacted, what form such
legislation might take.
REGULATION OF THE COMPANY
Upon consummation of the Reorganization, the Company will be a savings and
loan holding company within the meaning of Section 10 of the HOLA. As such, the
Company will be required to register with and be subject to OTS examination and
supervision as well as certain reporting requirements. In addition, because the
Bank's deposits are insured by the SAIF maintained by the FDIC, the Bank is
subject to certain restrictions in dealing with the Company and with other
persons affiliated with the Bank.
One of the requirements for OTS approval of the Reorganization is that the
Company will operate under the activities restrictions applicable to multiple
savings and loan holding companies. The HOLA limits the activities of a
multiple savings and loan holding company and its non-insured institution
subsidiaries primarily to activities specifically permissible by statute for
multiple savings and loan holding companies and to activities of bank holding
companies which the Federal Reserve Board has deemed permissible by regulation
under Section 4(c)(8) of the Bank Holding Company Act, as amended the ("BHCA"),
subject to prior approval of the OTS, and to other activities authorized by
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OTS regulation. In addition, under the terms of the Company's federal stock
charter, the purpose of the Company is to pursue any or all of the lawful
objectives of a federal mutual holding company.
Assuming that approval of the Reorganization is conditioned upon the
Company being restricted to those activities permissible to be engaged in by a
mutual holding company, and in accordance with terms of the Company's Charter,
the Company would be permitted to, among other things: (i) invest in the stock
of a savings institution; (ii) acquire a mutual institution through the merger
of such institution into a savings institution subsidiary of such mutual holding
company or an interim savings institution of such mutual holding company; (iii)
merge with or acquire another mutual holding company, one of whose subsidiaries
is a savings institution; (iv) acquire non-controlling amounts of the stock of
savings institutions and savings institution holding companies, subject to
certain restrictions; (v) invest in a corporation the capital stock of which is
available for purchase by a savings institution under Federal law or under the
law of any state where the subsidiary savings institution or institutions have
their home offices; (vi) furnish or perform management services for a savings
institution subsidiary of such company; (vi) hold, manage, or liquidate assets
owned or acquired from a savings institution subsidiary of such company; (viii)
hold or manage properties used or occupied by a savings institution subsidiary
of such company; and (ix) acting as a trustee under deed or trust.
The OTS has not adopted rules governing the establishment of a mid-tier
holding company in a mutual holding company structure such as the Company.
Pending promulgation, the OTS has advised the Bank that applications for mid-
tier holding companies may be approved pursuant to enumerated conditions of
approval in lieu of regulations, one of such conditions being that the mid-tier
holding company must be federally chartered. The conditions are significant and
may restrict the activities, securities and corporate governance of mid-tier
entities as well as the rights of shareholders of the Company in the event of a
mutual to stock conversion. The Bank believes that it is likely that some or
all of the conditions described herein will be imposed as conditions of approval
of the Reorganization by the OTS.
The HOLA prohibits a savings and loan holding company, such as the Company,
directly or indirectly, from (1) acquiring control (as defined) of a savings
institution (or holding company thereof) without prior OTS approval, (2)
acquiring more than 5% of the voting shares of a savings institution (or holding
company thereof) which is not a subsidiary, subject to certain exceptions,
without prior OTS approval, or (3) acquiring through merger, consolidation or
purchase of assets, another savings institution (or holding company thereof) or
acquiring all or substantially all of the assets, another savings institution
(or holding company thereof) without prior OTS approval, or (4) acquiring
control of an uninsured institution. A savings and loan holding company may not
acquire as a separate subsidiary a savings institution which has its principal
offices outside of the state where the principal offices of its subsidiary
institution is located, except (i) in the case of certain emergency acquisitions
approved by the FDIC, (ii) if the holding company controlled (as defined) such
savings institution as of March 5, 1987, (iii) when the laws of the state in
which the savings institution to be acquired is located specifically authorize
such an acquisition. No director or officer of a savings and loan holding
company or person owning or controlling more than 25% of such holding company's
voting shares may, except with the prior approval of the OTS, acquire control of
any savings institution which is not a subsidiary of such holding company.
REGULATION OF THE MHC
Upon completion of the Reorganization and Stock Issuance, the MHC will
become a federal mutual holding company within the meaning of Section 10(o) of
the HOLA. As such, the MHC will be required to register with and be subject to
OTS examination and supervision as well as certain reporting requirements. In
addition, the OTS has enforcement authority over the MHC and its non-savings
association subsidiaries, if any. Among other things, this authority permits
the OTS to restrict or prohibit activities that are determined to be a serious
risk to the financial safety, soundness, or stability of a subsidiary savings
association. The MHC will be subject to the same activities limitations to
which the Company is subject. See " -- Regulation of the Company."
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FEDERAL SECURITIES LAW
The Company has filed with the SEC a Registration Statement under the
Securities Act of 1933, as amended (the "Securities Act"), for the registration
of the Common Stock to be issued in the Offering. Upon completion of the
Offering, the Common Stock will be registered with the SEC under the Exchange
Act and, under OTS regulations, generally may not be deregistered for at least
three years thereafter. The Company will be subject to the information, proxy
solicitation, insider trading restrictions and other requirements of the
Exchange Act.
The registration under the Securities Act of the Common Stock does not
cover the resale of such shares. Shares of the Common Stock purchased by
persons who are not affiliates of the Company may be resold without
registration. Shares purchased by an affiliate of the Company will be subject
to the resale restrictions of Rule 144 under the Securities Act. If the Company
meets the current public information requirements of Rule 144 under the
Securities Act, each affiliate of the Company who complies with the other
conditions of Rule 144 (including those that require the affiliate's sale to be
aggregated with those of certain other persons) would be able to sell in the
public market, without registration, a number of shares not to exceed, in any
three-month period, the greater of (i) 1% of the outstanding shares of the
Company or (ii) the average weekly volume of trading in such shares during the
preceding four calendar weeks. Provision may be made in the future by the
Company to permit affiliates to have their shares registered for sale under the
Securities Act under certain circumstances. There are currently no demand
registration rights outstanding. However, in the event the Company at some
future time determines to issue additional shares from its authorized but
unissued shares, the Company might offer registration rights to certain of its
affiliates who want to sell their shares.
TAXATION
GENERAL
The Bank files a consolidated federal income tax return based on the fiscal
year. After the Reorganization and Stock Issuance, it is expected that the
Company and the Bank, together with the Bank's subsidiaries, will file a
consolidated federal income tax return based on a fiscal year ending September
30. Consolidated returns have the effect of deferring gain or loss on
intercompany transactions and allowing companies included within the
consolidated return to offset income against losses under certain circumstances.
FEDERAL INCOME TAXATION
Thrift institutions are subject to the provisions of the Code in the same
general manner as other corporations. Prior to recent legislation, institutions
such as the Bank which met certain definitional tests and other conditions
prescribed by the Code benefitted from certain favorable provisions regarding
their deductions from taxable income for annual additions to their bad debt
reserve. For purposes of the bad debt reserve deduction, loans were separated
into "qualifying real property loans," which generally are loans secured by
interests in certain real property, and nonqualifying loans, which are all other
loans. The bad debt reserve deduction with respect to nonqualifying loans was
based on actual loss experience, however, the amount of the bad debt reserve
deduction with respect to qualifying real property loans could be based upon
actual loss experience (the "experience method") or a percentage of taxable
income determined without regard to such deduction (the "percentage of taxable
income method"). Legislation recently signed by the President repealed the
percentage of taxable income method of calculating the bad debt reserve. The
Bank historically has elected to use the percentage method.
Earnings appropriated to an institution's bad debt reserve and claimed as a
tax deduction were not available for the payment of cash dividends or for
distribution to shareholders (including distributions made on dissolution or
liquidation), unless such amount was included in taxable income, along with the
amount deemed necessary to pay the resulting federal income tax.
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Beginning with the first taxable year beginning after December 31, 1995,
savings institutions, such as the Bank, will be treated the same as commercial
banks. Associations with $500 million or more in assets will only be able to
take a tax deduction when a loan is actually charged off. Associations with
less than $500 million in assets will still be permitted to make deductible bad
debt additions to reserves, but only using the experience method.
The Bank's tax returns were last audited for the year ended September 30,
1994.
Under provisions of the Revenue Reconciliation Act of 1993 ("RRA"), enacted
on August 10, 1993, the maximum federal corporate income tax rate was increased
from 34% to 35% for taxable income over $10.0 million, with a 3% surtax imposed
on taxable income over $15.0 million. Also under provisions of RRA, a separate
depreciation calculation requirement has been eliminated in the determination of
adjusted current earnings for purposes of determining alternative minimum
taxable income, rules relating to payment of estimated corporate income taxes
were revised, and certain acquired intangible assets such as goodwill and
customer-based intangibles were allowed a 15-year amortization period.
Beginning with tax years ending on or after January 1, 1993, RRA also provides
that securities dealers must use mark-to-market accounting and generally reflect
changes in value during the year or upon sale as taxable gains or losses. The
IRS has indicated that financial institutions which originate and sell loans
will be subject to the rule.
STATE INCOME TAXATION
The State of Maryland imposes an income tax of approximately 7% on income
measured substantially the same as federally taxable income. In addition,
Maryland imposes a franchise tax, at a rate of 0.013% of the total withdrawal
value of the deposits that a savings and loan association holds in Maryland at
December 31 each year.
For additional information regarding taxation, see Note 13 of Notes to
Financial Statements.
MANAGEMENT OF THE COMPANY
The Board of Directors of the Company will consist of the same individuals
who serve as directors of the Bank. Their biographical information is set forth
under "Management of the Bank -- Directors." The Board of Directors of the
Company will be divided into three classes. Directors of the Company will serve
for three-year terms or until their successors are elected and qualified, with
approximately one-third of the directors being elected at each annual meeting of
stockholders. The entire Board of Directors of the Company will be elected at
the first annual meeting following the Stock Issuance, with one class serving
three years, the second class serving two years and the third class serving
until the next annual meeting. At the Company's first annual meeting following
the Stock Issuance, Messrs. Loraditch, Kahl and Meyers will be nominated for
election for terms of office expiring at the 1999 annual meeting, Messrs. Dietz,
Dunton and Loughran will be nominated for election for terms of office expiring
at the 2000 annual meeting and Messrs. Cox, Panzer and Rowe will be nominated
for election for terms of office expiring at the 2001 annual meeting.
The following individuals will hold the offices in the Company set forth
below opposite their names.
Name Title
---- -----
Michael J. Dietz President
William M. Loughran Vice President
Gary C. Loraditch Vice President, Secretary and Treasurer
The executive officers of the Company will be elected annually and will
hold office until their respective successors have been elected and qualified or
until death, resignation or removal by the Board of Directors of the Company.
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It is currently anticipated that the executive officers, directors or other
personnel of the Company initially will not receive remuneration from the
Company or the MHC. Information concerning the principal occupations and
employment during the past five years of the persons who will serve as directors
and executive officers of the Company is set forth under "Management of the Bank
- -- Directors." Executive officers and directors of the Company will be
compensated as described below under "Management of the Bank."
MANAGEMENT OF THE BANK
Directors
Because the Bank is a mutual savings bank, its members have elected its
Board of Directors. Upon completion of the Reorganization and Stock Issuance,
the directors of the Bank immediately prior to the Stock Issuance will continue
to serve as directors of the Bank until successors are eligible and qualified.
Currently, the term of each director is three years, and all of the members of
the Board of Directors stand for election upon the expiration of their term.
This will continue to be the case for the Bank following the Reorganization and
Stock Issuance. Because the Company will own all the issued and outstanding
capital stock of the Bank following the Reorganization and Stock Issuance, the
Board of Directors of the Company will elect the directors of the Bank.
The following table sets forth certain information with respect to the
individuals who serve currently as members of the Bank's Board of Directors.
There are no arrangements or understandings between the Bank and any director
pursuant to which such person has been elected a director of the Bank, and no
director is related to any other director or executive officer by blood,
marriage or adoption, except that Mr. Cox is the son-in-law of Mr. Rohe.
<TABLE>
<CAPTION>
AGE AT
DECEMBER 31,
Name 1997 Director Since Term to Expire
- ---- ----------- -------------- --------------
<S> <C> <C> <C>
H. Adrian Cox 53 1987 2000
Michael J. Dietz 58 1967 1999
Frank W. Dunton 69 1994 (1) 1998
Henry V. Kahl 54 1989 1999
Gary C. Loraditch 43 1991 1998
William M. Loughran 52 1991 1998
Martin Meyers 85 1955 1999
John J. Panzer 55 1991 1998
P. Louis Rohe, Jr. 75 1955 2000
</TABLE>
_____________
(1) Mr. Dunton was a director of the Bank since its incorporation in 1955
through 1990. He rejoined the Board in 1994.
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Presented below is certain information concerning the directors of the
Bank. Unless otherwise stated, all directors have held the positions indicated
for at least the past five years.
H. ADRIAN COX is an insurance agent with Rohe and Rohe Associates,
Inc. in Baltimore, Maryland. Mr. Cox also is employed as a real estate agent
with Century 21 Horizon Realty, Inc. in Baltimore, Maryland.
MICHAEL J. DIETZ serves as President of the Bank. Mr. Dietz joined the
Bank in 1966.
FRANK W. DUNTON has been retired since 1994. Prior to his retirement,
Mr. Dunton was a self-employed real estate appraiser. He was a director of the
Bank since its incorporation in 1955 through 1990. He rejoined the Board in
1994.
HENRY V. KAHL is an Assessor Supervisor with the State of Maryland
Department of Assessments & Taxation in Baltimore, Maryland.
GARY C. LORADITCH serves as Vice President, Secretary, and Treasurer
of the Bank. He is a certified public accountant and an attorney. Mr.
Loraditch joined the Bank in 1974.
WILLIAM M. LOUGHRAN serves as Vice President of the Bank in charge of
lending operations. Mr. Loughran joined the Bank in 1973.
MARTIN F. MEYERS has been retired for approximately 10 years. Prior
to his retirement, Mr. Meyers was self-employed in the farming industry. He has
been a director of the Bank since its incorporation in 1955.
JOHN J. PANZER, JR. has been a self-employed builder of residential
homes since 1971.
P. LOUIS ROHE has been retired for approximately 10 years. Prior to
his retirement, Mr. Rohe was an attorney. He has been a director of the Bank
since its incorporation in 1955.
MANAGEMENT SUCCESSION
Michael J. Dietz, the President of the Bank, has discussed with the
Board of Directors the possibility of his retirement. The Board of Directors
will begin shortly a search to select his successor, but has not determined who
that successor would be or whether the successor will be a member of current
management or someone not currently employed by the Bank. The Board of
Directors will seek to hire a successor who shares the Board of Directors' goal
of expanding the operations of the Company, the Bank and the MHC while
continuing to serve the credit needs of its community.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors of the Bank meets monthly and may have
additional special meetings. During the year ended September 30, 1997, the
Board had 12 regular meetings and three special meetings. No director attended
fewer than 75% in the aggregate of the total number of Board meetings held
during the year ended September 30, 1997 and the total number of meetings held
by committees on which he served during such fiscal year, except for Mr. Rohe
who attended 73% of such meetings. The Bank's Board of Directors has standing
Audit, Nominating, Pension, Executive and Loan Review Committees.
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The Board of Directors' Audit Committee consists of Directors Meyers
and Cox. The Committee met once during the year ended September 30, 1997 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 Bank
and to review internal accounting controls.
The Bank has a Nominating Committee, which consists of three
disinterested directors. The Nominating Committee currently consists of
Directors Cox, Kahl and Rohe. The purpose of the nominating committee is to
consider potential nominees to the Board of Directors. During the year ended
September 30, 1997, the nominating committee met once. Following the
Reorganization and Stock Issuance, it is expected that the Company's full Board
of Directors will act as a nominating committee for selecting the management
nominees for election as directors of the Company in accordance with the
Company's Bylaws. In its deliberations, the Board, functioning as a nominating
committee, considers the candidate's knowledge of the banking business and
involvement in community, business and civic affairs, and also considers whether
the candidate would provide for adequate representation of its market area.
The Board of Directors' Executive Committee serves as the compensation
committee. The Executive Committee consists of Directors Cox, Kahl, Rohe,
Panzer and Dunton. The Executive Committee evaluates the compensation and
benefits of the directors, officers and employees, recommends changes, and
monitors and evaluates employee performance. The Executive Committee reports
its evaluations and findings to the full Board of Directors and all compensation
decisions are ratified by the full Board of Directors. Directors of the Bank
who also are officers of the Bank abstain from discussion and voting on matters
affecting their compensation. The Executive Committee met ten times during the
fiscal year ended September 30, 1997.
EXECUTIVE COMPENSATION
The following table sets forth the cash and noncash compensation for
the last fiscal year awarded to or earned by the executive officers of the Bank
including salary and bonus in fiscal 1997 that exceeded $100,000 for services
rendered in all capacities to the Bank.
<TABLE>
<CAPTION>
Annual Compensation
----------------------------------------------------------------
Name and Fiscal Other Annual All Other
Principal Position Year Salary Bonus Compensation (1) Compensation
- ------------------------------ ---- --------- --------- ---------------- -------------
<S> <C> <C> <C> <C> <C>
Michael J. Dietz 1997 $ 118,897 $ 19,554 $ -- $ 14,162 (2)
President
William M. Loughran 1997 108,159 17,006 -- 12,335 (2)
Vice President
Gary C. Loraditch 1997 107,763 17,006 -- 12,335 (2)
Vice President, Secretary
and Treasurer
</TABLE>
- -------------------------
(1) Executive officers of the Bank receive indirect compensation in the form
of certain perquisites and other personal benefits. The amount of such
benefits received by the named executive officer in fiscal 1997 did not
exceed the lesser of 10% of the executive officer's salary and bonus or
$50,000.
(2) Amounts include $3,533, $3,090 and $3,090 of matching contributions paid
by the Bank pursuant to the Bank's 401(k) Plan and $10,629, $9,245 and
$9,245 accrued by the Bank under the Bank's pension plan for the benefit
of Messrs. Dietz, Loughran and Loraditch, respectively.
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<PAGE>
DIRECTOR COMPENSATION
The Chairman of the Board of Directors receives a monthly retainer of
$1,250 per month, and all other nonemployee directors receive $1,000 per month.
Each nonemployee director also receives a fee of $250 per each regular and
special Board and committee meeting attended, except for Loan Committee
meetings, for which a fee of $150 is paid for each meeting attended. Directors
who serve as officers of the Bank do not receive additional compensation for
their service as directors. Directors will participate in certain benefit plans
of the Company and the Bank. See " -- Certain Benefit Plans and Agreements."
CERTAIN BENEFIT PLANS AND AGREEMENTS
In connection with the Reorganization and Stock Issuance, the Bank's Board
of Directors has approved certain stock incentive plans and severance
agreements. In addition, the Bank has an existing defined contribution plan and
defined benefit plan, as well as an incentive compensation plan, which will
remain in effect after the Reorganization and Stock Issuance.
Basis for Awards of Benefits and Compensation. The Bank's Board of
Directors has evaluated and approved the terms of the severance agreements and
other benefits described below. In its review of the benefits and compensation
of the executive officers and the terms of the severance agreements, the Board
of Directors considered a number of factors, including the experience, tenure
and ability of the executive officers, their performance for the Bank during
their tenure and the various legal and regulatory requirements regarding the
levels of compensation which may be paid to employees of savings associations.
Tax-qualified Plans. The Bank maintains a money purchase pension plan and
a 401(k) plan (together, the "Retirement Plans"), which are designed to qualify
under Section 401(a) of the Code, as well as to comply with all the rights and
protection afforded employees pursuant to the Employee Retirement Income
Security Act of 1974, as amended. An employee is eligible to participate in the
Retirement Plans on or after having attained age 18 and having worked one year
from the date of hire (or during a calendar year). The 401(k) plan permits each
participant to make before-tax contributions, through regular salary reduction,
in amounts up to 9% of the participant's monthly salary. The Bank makes monthly
contributions, matching 50% of each participant's before-tax contributions (up
to 4%) of his or her compensation, subject to discrimination rules applicable to
highly compensated individuals. The Bank makes annual contributions to the
money purchase pension plan in an amount equal to 7% of each participant's base
salary. This percentage was 9% prior to 1998, but was reduced in connection
with the proposed implementation of the ESOP. Participants are at all times
100% vested in their contributions to the 401(k) plan. They become vested in
the employer matching and money purchase pension plan contributions at the rate
of 20% after two years of service, 40% after three years of service, 60% after
four years of service, 80% after five years of service, and 100% after six years
of service, provided that they become 100% vested upon their termination of
employment due in death, disability, or attainment of age 65. Benefits are paid
at the time of a participant's death, retirement, disability or termination of
employment, and, under limited circumstances, may be withdrawn from the 401(k)
plan prior to the participant's termination of service. Account balances are
paid, upon the participant's election, either in a lump sum or in installments
(or in an annuity from the money purchase pension plan). Contributions are not
taxable to participating employees until such funds are distributed to them.
The earnings attributable to a participant's account accumulate tax free until
they are distributed to the participant or his or her beneficiary.
The 401(k) plan is being amended in connection with the Reorganization and
Stock Issuance to allow participants to direct that all or part of their account
balances be invested in Common Stock. Voting rights for such stock, to be held
in trust for participants, will be exercisable by the participants.
Employee Stock Ownership Plan. The Company's Board of Directors has
adopted an employee stock ownership plan ("ESOP"), effective as of January 1,
1998. Employees of the Company and its subsidiaries who have attained age 18
and completed one year of service will be eligible to participate in the ESOP.
The Company will submit
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an application to the IRS for a letter of determination as to the tax-qualified
status of the ESOP. Although no assurances can be given, the Company expects the
ESOP to receive a favorable letter of determination from the IRS.
The ESOP is to be funded by contributions made by the Company or the Bank
in cash or shares of Common Stock. The ESOP intends to borrow funds from the
Company in an amount sufficient to purchase 8% of the Common Stock issued in the
Company's initial public offering. This loan will be secured by the shares of
Common Stock purchased and earnings thereon. Shares purchased with such loan
proceeds will be held in a suspense account for allocation among participants as
the loan is repaid. The Bank expects to contribute sufficient funds to the ESOP
to repay such loan over a ten-year period (or, if greater, an annual amount
equal to 6.5% of the W-2 compensation paid to participants), plus such other
amounts as the Company's Board of Directors may determine in its discretion.
Contributions to the ESOP and shares released from the suspense account
will be allocated among participants on the basis of their annual wages subject
to federal income tax withholding, plus any amounts withheld under a plan
qualified under Sections 125 or 401(k) of the Code and sponsored by the Company
or the Bank. Participants must be employed at least 500 hours in a plan year in
order to receive an allocation. Each participant's vested interest under the
ESOP is determined according to the following schedule: 0% for less than 2
years of service with the Company or the Bank, 20% for 2 years of service, 40%
for 3 years of service, 60% for 4 years of service, 80% for 5 years of service,
and 100% for 6 years of service. For vesting purposes, a year of service means
any plan year in which an employee completes at least 1,000 hours of service
(whether before or after the ESOP's January 1, 1998 effective date). Vesting
accelerates to 100% upon a participant's attainment of age 65, death or
disability. Forfeitures will be reallocated to participants on the same basis
as other contributions. Benefits are payable upon a participant's retirement,
death, disability or separation from service and will be paid in a lump sum in
whole shares of Common Stock (with cash paid in lieu of fractional shares).
Benefits paid to a participant in Common Stock that is not publicly traded on an
established securities market will be subject both to a right of first refusal
by the Company and to a put option by the participant. Dividends paid on
allocated shares are expected to be paid to participants, and dividends on
unallocated shares are expected to be used to repay the ESOP loan.
Upon the occurrence of a "change in control" (as defined in the ESOP), the
outstanding balance of any outstanding securities acquisition loans under the
ESOP will be discharged through a transfer or sale of shares held as collateral
under such loan, with any remaining shares allocated to participant accounts pro
rata based on their account balances. Participants terminating employment on or
after the change in control will be entitled to receive a cash payment from the
Company equal to the amount, if any, plus earnings thereon, which would have
been allocated to the participant's account immediately following the change in
control but was precluded from allocation based on allocation limits applicable
under federal tax laws.
It is expected that the Company will administer the ESOP and that Directors
Cox, Dunton, and Kahl will be appointed as trustees of the ESOP (the "ESOP
Trustees"). The ESOP Trustees must vote all allocated shares held in the ESOP
in accordance with the instructions of the participants. Unallocated shares and
allocated shares for which no timely direction is received will be voted by the
ESOP Trustees in the same proportion as the participant-directed voting of
allocated shares.
Stock Option Plan. The Board of Directors intends to submit the Option
Plan for approval to the Company's stockholders at a meeting which is expected
to be held not earlier than six months following completion of the
Reorganization and Stock Issuance. No options will be awarded under the Option
Plan unless stockholder approval is obtained.
The purpose of the Option Plan is to provide additional incentive to
directors and employees by facilitating their purchase of Common Stock. The
Option Plan will have a term of 10 years from the date of its approval by the
Company's stockholders, after which no awards may be made, unless the plan is
earlier terminated by the Board of Directors of the Company. Pursuant to the
Option Plan, a number of shares equal to 10% of the shares of Common Stock that
are issued in connection with the Stock Issuance would be reserved for future
issuance by the Company, in
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the form of newly issued shares or treasury shares or shares held in a grantor
trust, upon exercise of stock options ("Options"). If Options should expire,
become unexercisable or be forfeited for any reason without having been
exercised or having become vested in full, the shares of Common Stock subject to
such Options would be available for the grant of additional Options under the
Option Plan, unless the Option Plan shall have been terminated.
It is expected that the Option Plan will be administered by a committee
(the "Option Committee") of at least two directors of the Company who (i) are
designated by the Board of Directors and (ii) are non-employee directors within
the meaning of the federal securities laws. It is expected that the Option
Committee will initially consist of Directors Cox, Dunton and Kahl. The Option
Committee will select the employees to whom Options are to be granted, the
number of shares to be subject to such Options, and the terms and conditions of
such Options (provided that any discretion exercised by the Option Committee
must be consistent with the terms of the Option Plan). Options will be
available for grants to directors and key employees of the Company and any
subsidiaries. Although no specific award determinations have been made,
consistent with applicable regulations, if the Option Plan is implemented within
one year following completion of the Reorganization, no employee will receive
Options covering more than 25% of the shares reserved for issuance under the
Option Plan, and non-employee directors will not receive awards individually
exceeding 5% of the shares available under the Option Plan or 30% in the
aggregate. The initial grant of Options under the Option Plan is expected to
occur on the date the Option Plan receives stockholder approval.
It is intended that Options granted under the Option Plan will constitute
both incentive stock options (Options that afford favorable tax treatment to
recipients upon compliance with certain restrictions pursuant to Section 422 of
the Code and that do not result in tax deductions to the Company unless
participants fail to comply with Section 422 of the Code) ("ISOs"), and Options
that do not so qualify ("Non-ISOs"). The exercise price for Options may not be
less than 100% of the fair market value of the shares on the date of the grant.
The Option Plan permits the Option Committee to impose transfer restrictions,
such as a right of first refusal, on the Common Stock that optionees may
purchase. Options may be transferred to family members or trusts under
specified circumstances, but may not otherwise be sold, pledged, assigned,
hypothecated, transferred or disposed of in any manner other than by will or by
the laws of descent and distribution.
No Option shall be exercisable after the expiration of ten years from the
date it is granted; provided, however, that in the case of any employee who owns
more than 10% of the outstanding Common Stock at the time an ISO is granted, the
option price for the ISO shall not be less than 110% of the fair market value of
the shares on the date of the grant, and the ISO shall not be exercisable after
the expiration of five years from the date it is granted. If the Option Plan
is implemented within one year after completion of the MHC Reorganization,
Options are expected to become exercisable at the rate of 20% per year,
beginning one year from the date of grant. If an optionee dies or terminates
service due to disability while serving as an employee or non-employee director,
all unvested Options will become 100% vested and immediately exercisable. If
the Option Plan is implemented more than one year after the completion of the
Reorganization, the vesting schedule may be different and vesting would
accelerate to 100% upon an optionee's retirement or termination of service in
connection with a change in control. An otherwise unexpired Option shall,
unless otherwise determined by the Option Committee, cease to be exercisable
upon (i) an employee's termination of employment for "just cause" (as defined in
the Option Plan), (ii) the date one year after an employee terminates service
due to disability, (iii) the date two years after termination of such service
due to the employee's death, or (iv) the date one year after an employee
terminates service for any other reason. Options granted to non-employee
directors will automatically expire one year after termination of service on the
Board of Directors (two years in the event of death).
An SAR may be granted in tandem with all or any part of any Option or
without any relationship to any Option. Whether or not an SAR is granted in
tandem with an Option, exercise of the SAR will entitle the optionee to receive,
as the Option Committee prescribes in the grant, all or a percentage of the
excess of the then fair market value of the shares of Common Stock subject to
the SAR at the time of its exercise over the aggregate exercise price of the
shares subject to the SAR when granted. Payment to the optionee may be made in
cash or shares of Common Stock, as determined by the Option Committee.
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The Company will receive no monetary consideration for the granting of
Options under the Option Plan, and will receive no monetary consideration other
than the Option exercise price for each share issued to optionees upon the
exercise of Options. The Option exercise price may be paid in cash or Common
Stock or a combination of cash and Common Stock. Upon an optionee's exercise of
any Option, the Company may, in its discretion, pay the optionee a cash amount
equal to any dividends declared on the underlying shares between the date of
grant and the date of exercise of the Option. The exercise of Options will be
subject to such terms and conditions established by the Option Committee as are
set forth in a written agreement between the Option Committee and the optionee
(to be entered into at the time an Option is granted).
Management Recognition Plan. The Board of Directors intends to submit the
MRP for stockholder approval at a meeting of the Company's stockholders expected
to be held not earlier than six months following completion of the
Reorganization. The purpose of the MRP is to enable the Company and the Bank to
retain personnel of experience and ability in key positions of responsibility.
Those eligible to receive benefits under the MRP will be such directors and key
employees as are selected by a committee the Company's Board of Directors (the
"MRP Committee"). It is expected that the MRP Committee will initially consist
of Directors Cox, Dunton and Kahl. The MRP Committee is expected to act as
trustees of the trust associated with the MRP (the "MRP Trust"). The trustees
of the MRP Trust (the "MRP Trustees") will have the responsibility to hold and
invest all funds contributed to the MRP Trust. Shares held in the MRP Trust
will be voted by the MRP Trustees in the same proportion as the trustee of the
Company's ESOP trust votes Common Stock held therein, and will be distributed as
the award vests.
At any time following completion of the Reorganization, the Bank or the
Company will contribute sufficient funds to the MRP Trust so that the MRP Trust
can purchase a number of shares of Common Stock equal to up to a 4% of the
number of shares of Common Stock issued in the Stock Issuance. Whether such
shares purchased will be purchased in the open market or newly issued by the
Company, and the timing of such purchases, will depend on market and other
conditions and the alternative uses of capital available to the Company. The
compensation expense for the Company for MRP awards will equal the fair market
value of the Common Stock on the date of the grant pro rated over the years
during which vesting occurs. The shares awarded pursuant to the MRP will be in
the form of awards which may be transferred to family members or trusts under
specified circumstances, but may not otherwise be sold, pledged, assigned,
hypothecated, transferred or disposed of in any manner other than by will or by
the laws of descent and distribution. Awards made under the MRP will be at no
cost to the recipients. If the MRP is implemented within one year following
completion of the Reorganization, the MRP awards will become vested at the rate
of 20% per year, beginning one year from the date of the award. Participants in
the MRP may elect to defer all or a percentage of their MRP awards that would
have otherwise been transferred to the participants upon the vesting of said
awards. Dividends on unvested shares will be held in the MRP trust for payment
as vesting occurs. All shares subject to an MRP award held by a participant
whose service with the Company or the Bank terminates due to death or disability
shall be deemed 100% vested as of the participant's last day of service with the
Bank or Company. If the MRP is implemented more than one year after the
completion of the Reorganization, it is expected that the awards will also
become 100% vested upon a participant's retirement or termination of service
with the Bank or the Company in connection with a change in control of the Bank
or the Company. If a participant terminates employment for reasons other than
death or disability (or retirement or a change in control, if applicable), he or
she forfeits all rights to the allocated shares under restriction.
The Company's Board of Directors can terminate the MRP at any time, and, if
it does so, any shares not allocated will revert to the Company. Although no
specific award determinations have been made, if the MRP is implemented within
one year following completion of the MHC Reorganization, no employee will
receive MRP awards covering more than 25% of the shares reserved for issuance
under the MRP, and non-employee directors will not receive awards individually
exceeding 5% of the shares available under the MRP or 30% in the aggregate. The
initial grant of awards under the MRP is expected to occur on the date the MRP
receives stockholder approval. No awards shall be made prior to stockholder
approval of the MRP.
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Deferred Compensation Plan. The Bank established a Deferred Compensation
Plan (the "Plan"), which is a restatement of the Bank's Directors' Retirement
Plan, for directors and select executive officers, effective October 22, 1997.
Pursuant to the terms of the Plan, the accounts of Directors Rohe, Dietz,
Dunton, Loraditch, Loughran, Cox, Kahl, Meyers, and Panzer were credited, on the
Plan's effective date, with the amounts of deferrals made under the Bank's
Incentive Compensation Plan through October 31, 1997, and with the following
approximate amounts: $80,000, $80,000, $80,000, $43,000, $43,000, $67,000,
$55,000, $80,000 and $43,000, respectively. Prior to each Plan year, each non-
employee director may elect to defer receipt of all or part of his future fees
(including retainers), and any other participant may elect to defer receipt of
up to 25% of salary or 100% of bonus compensation. On each September 30
beginning with 1998, each Plan participant who has between three and 12 years of
service as a director will have his account credited with $6,000. A participant
who, after the Plan's effective date, completes three years of service as a
director, will have his account credited with $24,000 on the September 30
following completion of three years of service. All amounts credited to a
participant's account shall be credited with the investment return which would
have resulted if such amounts had been invested, based upon the participant's
choice, between the dividend-adjusted rate of return on the Common Stock and the
Bank's highest annual rate of interest on certificates of deposit having a one-
year term. Each participant may make an election to receive distributions
either in a lump sum or in annual installments over a period up to ten
years.
The Bank has established a grantor trust and may, at any time or from time
to time, make additional contributions to the trust. In the event of a change
in control, the Bank will contribute to the trust an amount sufficient to
provide the trust with assets having an overall value equal to the aggregate
account balances under the Plan. The trust's assets are subject to the claims
of the Bank's general creditors and are available for eventual payments to
participants.
Incentive Compensation Plan. The Bank's Board of Directors adopted the
Incentive Compensation Plan (the "Plan"), effective October 1, 1994. The Plan
is administered by the Executive Committee, which is appointed by the Bank's
Board of Directors. Under the Plan, each eligible director and employee
receives annual cash bonus awards equal to 2.5% of his compensation times the
Multiplier. For each plan year, the Multiplier equals the lesser of 10.0 and
the sum of the following factors: 100% of the ROA Factor, 100% of the ROE
Factor, 100% of the NPL Factor, 100% of the Efficiency Factor, 50% of the CRA
Rating Factor, 50% of the CAMEL Rating Factor, 50% of the Deposit Factor, and
50% of the Compliance Rating Factor, as defined in the Plan's Adoption
Agreement. In addition, pursuant to the terms of the Plan, directors are
permitted to make deferral elections, and to elect to have the rate of return on
their deferrals measured by either the Multiplier times 1.5% or the highest 12-
month CD rate.
The Plan has an indefinite term, and the Bank has the right at any time to
terminate or amend the Plan for any reason; provided that no amendment or
termination may, without the consent of the participant or, if applicable, the
participant's beneficiary, adversely affect such participant's or beneficiary's
rights with respect to benefits accrued as of the date of such amendment or
termination.
Reimbursement for Tax Advice. The Bank's Board of Directors has also
adopted a policy to reimburse designated directors and officers for expenses
they incur in connection with professional tax, estate planning or financial
advice they obtain related to the benefits they receive under the stock and non-
stock related benefit plans of the Bank and the Company. Reimbursements are
limited to $1,000 for each eligible individual during any fiscal year, with a
one-time allowance not to exceed $5,000 for estate planning expenses. The level
of annual reimbursements may be increased to $2,000 on a one-time basis in the
event of a change in control of the Company. No reimbursements were made by the
Bank during the year ended September 30, 1997.
Change-in-Control Severance Agreements. The Bank's Severance Agreements
with Officers Dietz, Loraditch, and Loughran (collectively, the "Employees")
have a term ending on the earlier of (a) 36 months after their recent renewal on
October 22, 1997, and (b) the date on which one of the Employees terminates
employment with the Bank. On each annual anniversary date from the date of
commencement of the Severance Agreements, the term of the Severance Agreements
may be extended for additional one-year periods beyond the then effective
expiration date upon
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a determination by the Board of Directors that the performance of these
individuals has met the required performance standards and that such Severance
Agreements should be extended. An Employee becomes entitled to collect severance
benefits under the Severance Agreement in the event of the Employee's (a)
voluntary termination of employment (i) within 30 days following a change of
control or (ii) within 30 days of certain specified events that both occur
during the Covered Period (defined below) and constitute a Change in Duties, or
(b) involuntary termination of employment for any reason other than "for Cause"
during the period that begins 12 months before a change in control and ends 18
months after a change in control (the "Covered Period"). Because the MHC will
own between 56.7% and 57.2% of the Company following the Reorganization and
Stock Issuance, it is unlikely that there will be a change-in-control of the
Company that would trigger a payment obligation under the Severance Agreements.
In the event an Employee becomes entitled to receive severance benefits,
the Employee will (i) be paid an amount equal to (i) 2.99 times the annualized
base salary paid to the Employee in the immediately preceding 12-month period
(excluding board fees and bonuses) and (ii) will receive either cash in an
amount equal to the cost to the Employee of obtaining all health, life,
disability and other benefits which the Employee would have been eligible to
participate in through the second annual anniversary date of his termination of
employment or continued participation in such benefit plans through the second
annual anniversary date of his termination of employment, to the extent the
Employee would continue to qualify for participation therein. The Severance
Agreements provide that within 10 business days of a change of control, the Bank
shall fund, or cause to be funded, a trust in the amount necessary to pay
amounts owed to the Employees as a result of the change of control. The amount
to be paid to an Employee from this trust upon his or her termination is
determined according to the procedures outlined in the Severance Agreements, and
any money not paid to the Employee is returned to the Bank.
The aggregate payments that would be made to Officers Dietz, Loraditch, and
Loughran, assuming termination of employment under the foregoing circumstances
at December 31, 1997, would have been approximately $1.2 million. These
provisions may have an anti-takeover effect by making it more expensive for a
potential acquiror to obtain control of the Company. For more information, see
"Certain Restrictions on Acquisition of the Company and the Bank -- Certain
Anti-Takeover Provisions in the Charter and Bylaws." In the event that one of
these Employees prevails over the Bank in a legal dispute as to the Severance
Agreement, he or she will be reimbursed for legal and other expenses.
TRANSACTIONS WITH MANAGEMENT
The Bank offers loans to its directors and officers. These loans currently
are made in the ordinary course of business with the same collateral, interest
rates and underwriting criteria as those of comparable transactions prevailing
at the time and to not involve more than the normal risk of collectibility or
present other unfavorable features. Under current law, the Bank's loans to
directors and executive officers are required to be made on substantially the
same terms, including interest rates, as those prevailing for comparable
transactions and must not involve more than the normal risk of repayment or
present other unfavorable features. Furthermore, all loans to such persons must
be approved in advance by a disinterested majority of the Board of Directors.
At December 31, 1997, the Bank had $482,521 in loans outstanding to directors
and executive officers, which represented 2.1% of the Bank's retained earnings
at such date. All such loans were made by the Bank in the ordinary course of
business and were not made with favorable terms nor did they involve more than
the normal risk of collectibility.
THE REORGANIZATION AND STOCK ISSUANCE
THE OTS HAS APPROVED THE PLAN OF REORGANIZATION, THE PLAN OF STOCK ISSUANCE
AND THE OFFERING SUBJECT TO THE APPROVAL OF THE PLAN OF REORGANIZATION BY THE
MEMBERS OF THE BANK ENTITLED TO VOTE ON THE MATTER AND SUBJECT TO THE
SATISFACTION OF CERTAIN OTHER CONDITIONS IMPOSED BY THE OTS IN ITS APPROVALS.
APPROVAL BY THE OTS, HOWEVER, DOES NOT CONSTITUTE A RECOMMENDATION OR
ENDORSEMENT OF THE PLAN OF REORGANIZATION, THE PLAN OF STOCK ISSUANCE AND THE
OFFERING.
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GENERAL
On October 22, 1997, the Board of Directors of the Bank unanimously
adopted, subject to approval by the OTS and the members of the Bank, the Plan of
Reorganization, an integral part of which is the Plan of Stock Issuance.
Pursuant to the Plan of Reorganization, the Bank will convert to a federally
chartered stock savings bank as a wholly owned subsidiary of the Company, and
the Company will become a majority-owned subsidiary of the MHC. The Plan of
Stock Issuance provides that concurrently with the Reorganization, the Company
will sell less than a majority of its to-be-outstanding Common Stock in the
Offering and establish the Foundation. Upon consummation of the Reorganization
and the Stock Issuance, the resulting organizational structure will be as
follows:
<TABLE>
<CAPTION>
- ----------------------------------- ------------------------- ----------------------------------
Baltimore County Public
Savings Bank, M.H.C. Stockholders Foundation
- ----------------------------------- ------------------------- --------------------------------
<S> <C> <C>
61.0% (1) of 37.4% (1) of 1.6% (1) of
Common Stock Common Stock Common Stock
- --------------------------------------------------------------------------------------------------------------------
BCSB Bankcorp, Inc.
- --------------------------------------------------------------------------------------------------------------------
100% of common stock
- --------------------------------------------------------------------------------------------------------------------
Baltimore County Savings Bank, F.S.B.
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
_______________
(1) Assumes the sale of 1,729,000 shares of Common Stock to public stockholders
and the issuance of 2,821,000 shares to the MHC at the midpoint of the
Estimated Valuation Range and the subsequent issuance of 75,000 shares to
the Foundation.
The OTS has approved the Plan of Reorganization subject to its approval by the
members of the Bank at the Special Meeting called for that purpose to be held on
_________, 1998.
The following is a brief summary of material aspects of the Reorganization
and Stock Issuance. The summary is qualified in its entirety by reference to the
provisions of the Plan of Reorganization and the Plan of Stock Issuance. Copies
of the Plan of Reorganization and the Plan of Stock Issuance are available for
inspection at any office of the Bank and at the office of the OTS. The Plan of
Reorganization and the Plan of Stock Issuance are also filed as an exhibit to
the Registration Statement of which this Prospectus is a part, copies of which
may be obtained from the SEC. See "Additional Information."
THE OFFERING
Under the Plan of Reorganization, the Company is offering shares of the
Common Stock first to the Bank's Eligible Account Holders, second to the ESOP,
third to Supplemental Eligible Account Holders and fourth to its Other Members
in the Subscription Offering. Subscription Rights received in any of the
foregoing categories will be subordinated to the Subscription Rights received by
those in a prior category, with the exception that any shares of Common Stock
sold in excess of the maximum of the Estimated Valuation Range may first be sold
to the ESOP. To the extent shares remain available for purchase after the
Subscription Offering, the Company may offer any such remaining shares to the
general public in the Community Offering, with preference given to purchasers
who are permanent residents of the Local Community.
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The Plan of Stock Issuance further provides that, if feasible, all shares
of Common Stock not purchased in the Subscription and Community Offerings, if
any, may be offered for sale to the general public in a Syndicated Community
Offering through selected dealers to be formed and managed by Trident
Securities.
If the Community Offering is determined not to be feasible, the Bank will
immediately consult with the OTS to determine the most viable alternative
available to effect the completion of the Offering. Should no viable
alternative exist, the Bank may terminate the Offering with the concurrence of
OTS. The Plan of Stock Issuance provides that the Offering must be completed
within 24 months after the date of the approval of the Plan of Reorganization by
the members of the Bank. In the event that the Offering is not effected, the
Bank will remain a federal mutual savings bank, all subscription funds will be
promptly returned to subscribers with interest earned thereon and all withdrawal
authorizations will be canceled.
BUSINESS PURPOSES
In adopting the Plan of Reorganization and the Plan of Stock Issuance, the
Board of Directors determined that the Reorganization and Stock Issuance are in
the best interest of the Bank. The primary purpose of the Reorganization is to
establish a structure that will enable the Bank to compete and expand more
effectively in the financial services marketplace, and that will enable
depositors, employees, management and directors to obtain an equity ownership
interest in the Bank. The new structure will permit the Company to issue
capital stock, which is a source of capital not available to a mutual savings
bank, and the Company 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 MHC), the Reorganization and Stock Issuance will
result in less capital raised in comparison to a standard mutual-to-stock
conversion. The Reorganization and Stock Issuance, however, will also offer the
Bank the opportunity to raise additional capital since the stock held by the MHC
will be available for sale in the future in the event the MHC decides to convert
to the capital stock form of organization. See "MHC Conversion to Stock Form."
The Reorganization and Stock Issuance also will give the Bank greater
flexibility to structure and finance the expansion of its 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
the Bank has no current arrangements, understandings or agreements regarding any
such opportunities, the Company will be in a position after the Reorganization
and Stock Issuance, subject to regulatory limitations and the Company's
financial position, to take advantage of any such opportunities that may arise.
Lastly, the Reorganization and Stock Issuance will enable the Bank to better
manage its capital by providing broader investment opportunities through the
holding company structure, and enabling the Company to distribute capital to its
stockholders in the form of dividends and stock repurchases. Because only a
minority of the Common Stock will be offered for sale in the Offering, the
Bank's current mutual form of ownership and 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 Directors 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 MHC 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
MHC 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 MHC, which is a mutual institution that will be controlled by the existing
Board of Directors 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 directors of the Bank. The MHC
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
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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 Company or other proposals put forth by the minority
stockholders.
The Reorganization does not preclude the later conversion of the MHC from
the mutual to stock form of organization. Such a Conversion Transaction would
be effected through a merger of the MHC into the Company or the Bank and the
concurrent sale of the shares held by the MHC in a subscription offering. A
Conversion Transaction is not anticipated for the foreseeable future. See "MHC
Conversion to Stock Form."
EFFECT OF REORGANIZATION AND STOCK ISSUANCE ON DEPOSITORS AND BORROWERS OF THE
BANK
General. Each depositor in a mutual savings institution such as the Bank
has both a deposit account and a pro rata ownership interest in the retained
earnings of that institution based upon the balance in his or her deposit
account. However, this ownership interest is tied to the depositor's account
and has no tangible market value separate from such deposit account. Any other
depositor who opens a deposit account obtains a pro rata interest in the
retained earnings of the institution without any additional payment beyond the
amount of the deposit. A depositor who reduces or closes his or her account
receives a portion or all of the balance in the account but nothing for his or
her ownership interest, which is lost to the extent that the balance in the
account is reduced.
Consequently, depositors normally do not have a way to realize the value of
their ownership, which has realizable value only in the unlikely event that the
mutual institution is liquidated. In such event, the depositors of record at
that time, as owners, would share pro rata in any residual retained earnings
after other claims are paid.
Upon consummation of the Reorganization and Stock Issuance, permanent
nonwithdrawable capital stock will be created to represent the ownership of the
institution. The stock is separate and apart from deposit accounts and is not
and cannot be insured by the FDIC. Transferable certificates will be issued to
evidence ownership of the stock, which will enable the stock to be sold or
traded, if a purchaser is available, with no effect on any account held in the
Bank. Under the Plan of Reorganization, all of the capital stock of the Bank
will be acquired by the Company in exchange for a portion of the net proceeds
from the sale of the Common Stock in the Offering. The Common Stock will
represent an ownership interest in the Company and will be issued upon
consummation of the Stock Issuance to the MHC and persons who elect to
participate in the Offering by purchasing the shares being offered.
Continuity. During the Reorganization and Stock Issuance process, the
normal business of the Bank of accepting deposits and making loans will continue
without interruption. Following consummation of the Reorganization and Stock
Issuance, the Bank will continue to be subject to regulation by the OTS, and
FDIC insurance of accounts will continue without interruption. After the
Reorganization and Stock Issuance, the Bank will continue to provide services
for depositors and borrowers under current policies and by its present
management and staff.
The Board of Directors presently serving the Bank will serve as the Board
of Directors of the Bank after the Reorganization and Stock Issuance. The Board
of Directors of the Company will consist of the individuals currently serving on
the Board of Directors of the Bank. All current officers of the Bank will
retain their positions with the Bank after the Reorganization and Stock
Issuance.
Voting Rights. Upon the completion of the Reorganization and Stock
Issuance, depositor and borrower members as such will have no voting rights in
the Bank or the Company and, therefore, will not be able to elect directors of
the Bank or the Company or to control their affairs. Currently these rights are
accorded to depositors of the Bank. Subsequent to the Reorganization and Stock
Issuance, voting rights will be vested exclusively in the stockholders of the
Company which, in turn, will own all of the stock of the Bank. Each holder of
Common Stock shall be entitled to vote on any matter to be considered by the
stockholders of the Company, subject to the provisions of the Company's Articles
of Incorporation.
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As a federally chartered mutual holding company, the MHC will have no
authorized capital stock and, thus, no stockholders. The MHC will be controlled
by members of the Bank (i.e., depositors and certain borrowers), and such
members have granted proxies in favor of the Bank's management. According to
regulations of the OTS, the revocable proxies that members of the Bank have
granted to the Board of Directors of the Bank, which confer on the Board of
Directors of the Bank general authority to cast a member's vote on any and all
matters presented to the members, shall be deemed to cover the member's votes as
members of the MHC, and such authority shall be conferred on the Board of
Directors of the MHC. The Plan of Reorganization also provides for the transfer
of proxy rights to the Board of Directors of the MHC. Accordingly, the Board of
Directors of the MHC will, in effect, be able to govern the operations of the
MHC, and hence the Company, notwithstanding objections raised by members of the
MHC or stockholders of the Company, respectively, so long as the Board of
Directors has been appointed proxy for a majority of the outstanding votes of
members of the MHC and such proxies have not been revoked. In addition, all
persons who become depositors of the Bank following the Reorganization will have
membership rights with respect to the MHC. Borrowers who were borrowers of the
Bank on June 16, 1987 and whose loans continue in existence are members of the
Bank and will have membership rights in the MHC; all other borrowers are not
members of the Bank and, thus, will not receive membership rights in the MHC.
Liquidation Rights. In the event of a voluntary liquidation of the Bank
prior to the Reorganization, holders of deposit accounts in the Bank would be
entitled to distribution of any assets of the Bank remaining after the claims of
such depositors (to the extent of their deposit balances) and all other
creditors are satisfied. Following the Reorganization, the holder of the Bank's
common stock, i.e., the Company, would be entitled to any assets remaining upon
a liquidation, dissolution or winding-up of the Bank and, except through their
liquidation interests in the MHC, discussed below, holders of deposit accounts
in the Bank would have not interest in any such assets.
In the event of a voluntary or involuntary liquidation, dissolution or
winding up of the MHC following consummation of the Reorganization, holders of
deposit accounts in the Bank would be entitled, pro rata to the value of their
accounts, to distribution of any assets of the MHC remaining after the claims of
all creditors of the MHC are satisfied. Stockholders of the Company will have
no liquidation or other rights with respect to the MHC in their capacities as
such.
In the event of a liquidation, dissolution or winding up of the Company,
each holder of shares of the Common Stock would be entitled to receive, after
payment of all debts and liabilities of the Company, a pro rata portion of all
assets of the Company available for distribution to holders of the Common Stock.
There currently are no plans to liquidate the Bank, the Company or the MHC
in the future.
Deposit Accounts and Loans. THE BANK'S DEPOSIT ACCOUNTS, THE BALANCES OF
INDIVIDUAL ACCOUNTS AND EXISTING FEDERAL DEPOSIT INSURANCE COVERAGE WILL NOT BE
AFFECTED BY THE REORGANIZATION AND STOCK ISSUANCE. Furthermore, the
Reorganization and Stock Issuance will not affect the loan accounts, the
balances of these accounts and the obligations of the borrowers under their
individual contractual arrangements with the Bank.
Tax Effects. The Bank has received an opinion from its special counsel,
Housley Kantarian & Bronstein, P.C., Washington, D.C., as to the material
federal income tax consequences of the Reorganization and Stock Issuance to the
Bank, the Company and the MHC, and as to the generally applicable material
federal income tax consequences of the Reorganization and Stock Issuance to the
Bank's account holders and to persons who purchase Common Stock in the
Offering.
The opinion addresses the transactions that will occur in order to effect
the Reorganization. Pursuant to the Plan of Reorganization, the following will
all occur on approximately the same date:
(i) the Bank will organize an interim federal stock savings bank as a
wholly owned subsidiary ("Interim One");
(ii) Interim One will organize an interim federal stock savings bank as a
wholly owned subsidiary ("Interim Two"); and
(iii) Interim One will organize a Federal stock corporation (the Company)
as a wholly owned subsidiary of Interim One.
The following events will occur simultaneously:
(i) the Bank will exchange its charter for a federal stock savings bank
charter (referred to in the opinion as "Stock Bank"). Such charter
exchange is referred to in the opinion as the "Conversion." In the
Conversion, members of the Bank will constructively receive common stock of
Stock Bank in exchange for their mutual interests in the Bank.
(ii) Interim One will cancel its outstanding stock and exchange its
charter for a federal mutual holding company charter (MHC).
(iii) Interim Two will merge with and into Stock Bank, with Stock Bank
surviving. In connection with the merger, the shares of Interim Two
common stock owned by the MHC prior to the merger shall be converted into
and become shares of Stock Bank common stock, and the shares of Stock Bank
common stock constructively received by the Stock Bank stockholders
(formerly the members holding mutual interests in the Bank) will be
transferred to the MHC by such persons in exchange for mutual interests in
the MHC.
(iv) the MHC will transfer all of the outstanding shares of Stock Bank to
the Company.
The opinion provides that (i) the Conversion is a mere change in identity
and form and therefore qualifies as a reorganization within the meaning of Code
Section 368(a)(1)(F); (ii) no gain or loss will be recognized by the Bank or
Stock Bank in the Conversion; (iii) Stock Bank's holding period in the assets
received from Bank will include the period during which such assets were held by
the Bank; (iv) 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; (v) the contribution of Stock Bank by its owners to MHC in exchange
for mutual ownership interests in MHC will constitute a transfer of property
solely in exchange for stock pursuant to Section 351(a) of the Code; (vi) the
membership interests in MHC will be treated as stock within the meaning of
Section 351(a) of the Code; (vii) no gain or loss will be recognized by the
mutual interest holders of the Bank on the exchange of their interests in the
Bank solely for a constructive stock interest in the Stock Bank followed by an
exchange of their interests in the Stock Bank solely for mutual interests in
MHC; (viii) each of Bank's mutual interest holder's basis in their mutual
interest in MHC received in the transaction will be the same as their basis in
their mutual interest in Bank surrendered in the transaction; (ix) the
requirement of Section 1.368-1(b) of the treasury regulations that there be
continuity of interest on the part of the owners of the enterprise prior to the
Reorganization is satisfied by the constructive exchange of the depositors'
mutual ownership interests in the Bank for stock interests in Stock Bank,
notwithstanding the depositors' constructive exchange of that stock for mutual
ownership interests in MHC thereafter; (x) the holding period of the mutual
interests of MHC to be received by the mutual interest holders of Bank includes
the period during which the mutual interest in Bank surrendered in exchange
therefor was held, provided that the mutual interest in Bank was held as a
capital asset in the hands of the mutual interest holder of Bank on the date of
the exchange; (xi) MHC will recognize no gain or loss upon the receipt of
property from Stock Bank stockholders in exchange for membership interests in
the MHC; (xii) MHC'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 transfer of Stock Bank common stock to the
MHC for membership interests; (xiii) MHC'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; (xiv) the transfer by MHC of
the stock of Stock Bank, a wholly owned subsidiary of MHC, to its other wholly
owned subsidiary, Company, will constitute a tax-free exchange of property
solely for voting stock pursuant to Code Section 351. MHC will not receive
additional Common Stock in the exchange. Since MHC owns one hundred percent of
the Common Stock at the time of the transfer, the issuance of additional Common
Stock to MHC would be meaningless; (xv) MHC will recognize no gain or loss upon
the transfer of Stock Bank common stock to Company in the exchange; (xvi) the
Company will recognize no gain or loss on its receipt of Stock Bank common
stock; (xvii) the Company's basis in the Stock Bank common stock will equal the
basis of the Stock Bank common stock in MHC's hands immediately before the
constructive exchange; (xviii) the MHC will increase its basis in its shares of
Common Stock by MHC's basis in its Stock Bank common stock; and (xix) the
Company's holding period for the shares of Stock Bank stock received from the
MHC will include the period that MHC held, or is deemed to have held the
shares.
With respect to the Stock Issuance, among other things, the opinion
provides that: (i) no gain or loss will be recognized by the Stock Bank upon its
receipt of money from the Company. The Company will not receive additional
Common Stock in exchange for the money received. Since the Company owns one
hundred percent of the Stock Bank common stock at the time of the transfer, the
issuance of additional Stock Bank common stock to the Company would be
meaningless. The Company will be transferring solely cash to the Stock Bank and
therefore will not recognize any gain or loss upon such transfer; (ii) no gain
or loss will be recognized by the Company upon its receipt of money in exchange
for shares of the Common Stock; (iii) no gain or loss will be recognized by the
Bank's account holders upon the issuance to them of accounts in the Stock Bank
in the same dollar amounts and on the same terms and conditions as their
accounts at the Bank immediately prior to the Reorganization; (iv) the tax basis
of the savings accounts of account holders in the Stock Bank received as part of
the Reorganization and Stock Issuance will equal the tax basis of such account
holders' corresponding deposit accounts in the Bank surrendered in exchange
therefor; (v) the tax basis of the Common Stock purchased in the Offering will
be equal to the amount paid therefor increased, in the case of Common Stock
acquired pursuant to the exercise of Subscription Rights, by the fair market
value, if any, of the Subscription Rights exercised; (vi) the holding period for
the Common Stock purchased pursuant to the exercise of Subscription Rights will
commence upon the exercise of such holder's Subscription Rights and otherwise on
the date following the date of such purchase; and (vii) each depositor of the
Bank will recognize gain upon the receipt of his or her subscription rights
deemed to have been received for federal income tax purposes, but only to the
extent of the excess of the fair market value of a depositor's interest in such
subscription rights over the depositor's basis in the former interests in the
Bank other than deposit accounts. Persons who subscribe in the Offering but who
are not depositors of the Bank will recognize gain upon the receipt of
subscription rights deemed to have been received for federal income tax
purposes, but only to the extent of the excess of the fair market value of such
subscription rights over such person's former interests in the Bank, if any.
Any such gain realized in the Stock Issuance would be subject to immediate
recognition.
The opinion further provides that the establishment of the Foundation by
the Bank and the Company and the subsequent contribution of 75,000 shares of
Common Stock to the Foundation by the Company will not affect any of the
foregoing opinions in the preceding two paragraphs.
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The opinion of Housley Kantarian & Bronstein, P.C. is based in part upon,
and subject to the continuing validity in all material respects through the date
of the Reorganization and Stock Issuance of, various representations of the Bank
and upon certain assumptions and qualifications, including that the
Reorganization and Stock Issuance are consummated in the manner and according to
the terms provided in the Plan of Reorganization and Plan of Stock Issuance.
Such opinion is also based upon the Code, regulations now in effect or proposed
thereunder, current administrative rulings and practice and judicial authority,
all of which are subject to change and such change may be made with retroactive
effect. Unlike private letter rulings received from the Internal Revenue
Service ("IRS"), an opinion is not binding upon the IRS and there can be no
assurance that the IRS will not take a position contrary to the positions
reflected in such opinion, or that such opinion will be upheld by the courts if
challenged by the IRS.
Housley Kantarian & Bronstein, P.C. has further advised the Bank that the
federal income tax treatment of the receipt of Subscription Rights pursuant to
the Offering is uncertain, and recent private letter rulings issued by the IRS
have been in conflict. For instance, the IRS adopted the position in one
private ruling that Subscription Rights will be deemed to have been received to
the extent of the minimum pro rata distribution of such rights, together with
the rights actually exercised in excess of such pro rata distribution, and with
gain recognized to the extent of the combined fair market value of the pro rata
distribution of Subscription Rights plus the Subscription Rights actually
exercised. Persons who do not exercise their Subscription Rights under this
analysis would recognize gain upon receipt of rights equal to the fair market
value of such rights, regardless of exercise, and would recognize a
corresponding loss upon the
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expiration of unexercised rights that may be available to offset the previously
recognized gain. Under another IRS private ruling, Subscription Rights were
deemed to have been received only to the extent actually exercised. This private
ruling required that gain be recognized only if the holder of such rights
exercised such rights, and that no loss be recognized if such rights were
allowed to expire unexercised. There is no authority that clearly resolves this
conflict among these private rulings, which may not be relied upon for
precedential effect. However, based upon express provisions of the Internal
Revenue Code and in the absence of contrary authoritative guidance, Housley
Kantarian & Bronstein, P.C. has provided in its opinion that gain will be
recognized upon the receipt rather than the exercise of Subscription Rights.
Further, also based upon a published IRS ruling and consistent with recognition
of gain upon receipt rather than exercise of the Subscription Rights, Housley
Kantarian & Bronstein, P.C. has provided in its opinion that the subsequent
exercise of the Subscription Rights will not give rise to gain or loss.
Regardless of the position eventually adopted by the IRS, the tax consequences
of the receipt of the Subscription Rights will depend, in part, upon their
valuation for federal income tax purposes.
If the Subscription Rights are deemed to have a fair market value, the
receipt of such rights will be taxable to Eligible Account Holders, Supplemental
Eligible Account Holders and Other Members who exercise their Subscription
Rights, even though such persons would have received no cash from which to pay
taxes on such taxable income. The Bank could also recognize a gain on the
distribution of such Subscription Rights in an amount equal to their aggregate
value. In the view of RP Financial, whose belief is not binding upon the IRS,
the Subscription Rights do not have any value, based on the fact that such
rights are acquired by the recipients without cost, are non-transferable and of
short duration and afford the recipients the right only to purchase shares of
the Common Stock at a price equal to its estimated fair market value, which will
be the same price as the price paid by purchasers in the Community Offering for
unsubscribed shares of Common Stock. Eligible Account Holders, Supplemental
Eligible Account Holders and Other Members are encouraged to consult with their
own tax advisors as to the tax consequences in the event that the Subscription
Rights are deemed to have a fair market value. Because the fair market value,
if any, of the Subscription Rights issued in the Offering depends primarily upon
the existence of certain facts rather than the resolution of legal issues,
Housley Kantarian & Bronstein, P.C., has neither adopted the belief of RP
Financial as its own nor incorporated such belief of RP Financial in its opinion
issued in connection with Reorganization and Stock Issuance.
The Bank has also obtained an opinion from Anderson Associates, LLP that
the tax effects of the Reorganization and Stock Issuance under Maryland tax laws
will be substantially the same as described above with respect to federal income
tax laws.
THE FEDERAL AND STATE INCOME TAX DISCUSSION SET FORTH ABOVE DOES NOT
PURPORT TO CONSIDER ALL ASPECTS OF FEDERAL AND STATE INCOME TAXATION WHICH MAY
BE RELEVANT TO EACH ELIGIBLE ACCOUNT HOLDER, SUPPLEMENTAL ACCOUNT HOLDER AND
OTHER MEMBER ENTITLED TO SPECIAL TREATMENT UNDER THE INTERNAL REVENUE CODE, SUCH
AS TRUSTS, INDIVIDUAL RETIREMENT ACCOUNTS, OTHER EMPLOYEE BENEFIT PLANS,
INSURANCE COMPANIES AND ELIGIBLE ACCOUNT HOLDERS, SUPPLEMENTAL ELIGIBLE ACCOUNT
HOLDERS AND OTHER MEMBERS WHO ARE NOT CITIZENS OR RESIDENTS OF THE UNITED
STATES. DUE TO THE INDIVIDUAL NATURE OF TAX CONSEQUENCES, EACH ELIGIBLE ACCOUNT
HOLDER, SUPPLEMENTAL ELIGIBLE ACCOUNT HOLDER AND OTHER MEMBER IS URGED TO
CONSULT HIS OR HER OWN TAX AND FINANCIAL ADVISOR AS TO THE EFFECT OF SUCH
FEDERAL AND STATE INCOME TAX CONSEQUENCES ON HIS OR HER OWN PARTICULAR FACTS AND
CIRCUMSTANCES, INCLUDING THE RECEIPT AND EXERCISE OF SUBSCRIPTION RIGHTS, AND
ALSO AS TO ANY OTHER TAX CONSEQUENCES ARISING OUT OF THE REORGANIZATION AND
STOCK ISSUANCE.
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SUBSCRIPTION RIGHTS
Nontransferable Subscription Rights to subscribe for shares of the Common
Stock have been issued to all persons entitled to subscribe for stock in the
Subscription Offering at no cost to such persons. The amount of the Common
Stock which these parties may subscribe for will be determined, in part, by the
total stock to be issued, and the availability of stock for purchase under the
categories set forth in the Plan of Stock Issuance.
Preference categories have been established for the allocation of the
Common Stock to the extent that shares are available. These categories are as
follows:
Subscription Category No. 1 is reserved for the Bank's Eligible
Account Holders, i.e., qualifying depositors of the Bank on September 30,
1996, who will each receive nontransferable Subscription Rights to
subscribe for Common Stock in the Subscription Offering up to 1% of the
total numbers of shares to be issued in the Offering. See "-- Limitations
on Purchase of Shares." If the exercise of Subscription Rights in this
category results in an oversubscription, shares shall be allocated among
subscribing Eligible Account Holders so as to permit each such Eligible
Account Holder, to the extent possible, to purchase a number of shares
sufficient to make his total allocation equal 100 shares or the amount
subscribed for, whichever is less. Any shares not so allocated shall be
allocated among the subscribing Eligible Account Holders on an equitable
basis related to the amounts of their respective qualifying deposits, as
compared to the total qualifying deposits of all subscribing Eligible
Account Holders. TO ENSURE A PROPER ALLOCATION OF COMMON STOCK, EACH
ELIGIBLE ACCOUNT HOLDER MUST LIST ON HIS STOCK ORDER FORM ALL ACCOUNTS IN
WHICH HE HAS AN OWNERSHIP INTEREST. FAILURE TO LIST ALL SUCH DEPOSIT
ACCOUNTS MAY RESULT IN THE INABILITY OF THE COMPANY OR THE BANK TO FILL ALL
OR PART OF A SUBSCRIPTION ORDER. NEITHER THE COMPANY, THE BANK NOR ANY OF
THEIR AGENTS SHALL BE RESPONSIBLE FOR ORDERS ON WHICH ALL DEPOSIT ACCOUNTS
HAVE NOT BEEN FULLY AND ACCURATELY DISCLOSED. A qualifying deposit is the
amount (required to be at least $50.00) contained in a deposit account in
the Bank on September 30, 1996. In the event of an oversubscription,
Subscription Rights received by directors and officers of the Bank and
their associates in this category based on their increased deposits in the
Bank in the one-year period preceding September 30, 1996 are subordinated
to the Subscription Rights of other Eligible Account Holders.
Subscription Category No. 2 is reserved for the Bank's tax-qualified
employee stock benefit plans, i.e., the ESOP, which shall receive
nontransferable Subscription Rights to purchase in the aggregate up to 10%
of the shares issued in the Stock Issuance and which is expected to
purchase 8% of the Common Stock sold in the Offering. Any shares of Common
Stock sold in excess of the maximum of the Estimated Valuation Range may be
first sold to the ESOP.
Subscription Category No. 3 is reserved for the Bank's Supplemental
Eligible Account Holders, i.e., qualifying depositors of the Bank on the
last day of the calendar quarter preceding OTS approval of the Plan of
Reorganization (March 31, 1998) who will each receive nontransferable
Subscription Rights to subscribe for Common Stock in the subscription
offering up to 1% of the total number of shares to be sold in the Offering.
See " -- Limitations on Purchase of Shares." If the exercise of
Subscription Rights in this category results in an oversubscription, shares
shall be allocated among subscribing Supplemental Eligible Account Holders,
so as to permit each such Supplemental Eligible Account Holder, to the
extent possible, to purchase a number of shares sufficient to make his
total allocation equal 100 shares or the amount subscribed for, whichever
is less, and any shares not so allocated shall be allocated among the
subscribing Supplemental Eligible Account Holders on an equitable basis
related to the amounts of their respective qualifying deposits, as compared
to the total qualifying deposits of all subscribing Supplemental Eligible
Account Holders. TO ENSURE A PROPER ALLOCATION OF COMMON STOCK, EACH
SUPPLEMENTAL ELIGIBLE ACCOUNT HOLDER MUST LIST ON HIS STOCK ORDER FORM ALL
ACCOUNTS IN WHICH HE HAS AN OWNERSHIP INTEREST. FAILURE TO LIST ALL SUCH
DEPOSIT ACCOUNTS MAY RESULT IN THE INABILITY OF THE COMPANY OR THE BANK TO
FILL ALL OR PART OF A SUBSCRIPTION ORDER. NEITHER THE COMPANY, THE BANK NOR
ANY OF THEIR AGENTS SHALL BE RESPONSIBLE FOR ORDERS ON WHICH ALL
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DEPOSIT ACCOUNTS HAVE NOT BEEN FULLY AND ACCURATELY DISCLOSED. A qualifying
deposit is the amount (required to be at least $50.00) contained in a
deposit account in the Bank on March 31, 1998. Subscription Rights received
by directors and officers of the Bank and their associates in this category
based on their increased deposits in the Bank in the one-year period
preceding March 31, 1998 are subordinated to the Subscription Rights of
other Supplemental Eligible Account Holders. Subscriptions in this Category
No. 3 will be filled only to the extent that there are sufficient shares of
Common Stock remaining after satisfaction of subscriptions by Category Nos.
1 and 2.
Subscription Category No. 4 is reserved for Other Members, i.e.,
certain depositors and borrowers who are members of the Bank as of the
Voting Record Date entitled to vote at the Special Meeting but who are not
Eligible Account Holders or Supplemental Eligible Account Holders. To the
extent then available following subscriptions by Eligible Account Holders,
tax-qualified employee stock benefit plans and Supplemental Eligible
Account Holders, Other Members will receive, without payment therefor,
nontransferable Subscription Rights to subscribe for Common Stock in the
Subscription Offering up to 1% of the total number of shares to be sold in
the Offering. See "-- Limitations on Purchase of Shares." In the event that
Other Members subscribe for a number of shares which, when added to the
shares subscribed for by Eligible Account Holders, tax-qualified employee
stock benefit plans and Supplemental Eligible Account Holders, is in excess
of the total number of shares offered in the Offering, the subscriptions of
such Other Members will be allocated among subscribing Other Members, so as
to permit each such Other Members, to the extent possible, to purchase a
number of shares sufficient to make his total allocation equal 100 shares
or the amount subscribed for, whichever is less, and any shares not so
allocated shall be allocated among the subscribing Other Members on an
equitable basis related to the amounts of their respective qualifying
deposits, as compared to the total qualifying deposits of all subscribing
Other Members.
The Company will make reasonable efforts to comply with the securities laws
of all states in the United States in which persons entitled to subscribe for
the Common Stock pursuant to the Plan of Reorganization reside. However, no
person will be offered or allowed to purchase any Common Stock under the Plan of
Reorganization if he resides in a foreign country or in a state of the United
States with respect to which any or all of the following apply: (i) a small
number of persons otherwise eligible to subscribe for shares under the Plan of
Reorganization reside in such state or foreign country; (ii) the granting of
Subscription Rights or the offer or sale of shares of Common Stock to such
persons would require the Company or the Bank or their employees to register,
under the securities laws of such state, as a broker, dealer, salesman or agent
or to register or otherwise qualify its securities for sale in such state or
foreign country; and (iii) such registration or qualification would be
impracticable for reasons of cost or otherwise. No payments will be made in
lieu of the granting of Subscription Rights to any such person.
COMMUNITY OFFERING
To the extent shares remain available for purchase after the Subscription
Offering, the Company may offer any such remaining shares of the Common Stock to
members of the general public to whom the Company delivers a copy of this
Prospectus and a Stock Order Form in the Community Offering, with the preference
given to purchasers who are permanent residents of the Local Community. The
occurrence of the Community Offering is subject to the availability of shares of
Common Stock for purchase after satisfaction of all orders received in the
Subscription Offering. THE COMMUNITY OFFERING, IF ANY, MAY TERMINATE AT ANY
TIME WITHOUT NOTICE, BUT MAY NOT TERMINATE LATER THAN __________, 1998. THE
RIGHT OF ANY PERSON TO PURCHASE SHARES IN THE COMMUNITY OFFERING, IF ANY, IS
SUBJECT TO THE ABSOLUTE RIGHT OF THE COMPANY AND THE BANK TO ACCEPT OR REJECT
SUCH PURCHASES IN WHOLE OR IN PART. THE COMPANY PRESENTLY INTENDS TO TERMINATE
THE COMMUNITY OFFERING, IF ANY, AS SOON AS IT HAS RECEIVED ORDERS FOR ALL SHARES
AVAILABLE FOR PURCHASE IN THE STOCK ISSUANCE.
If all of the Common Stock offered in the Subscription Offering is
subscribed for, there will be no Community Offering. Orders received in the
Community Offering shall be allocated on an equal number of shares per order
until all orders have been filled, with a preference given to permanent
residents of the Local Community. The term "resident"
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as used in relation to the preference afforded natural persons in the Local
Community means any natural person who occupies a dwelling within the Local
Community, has an intention to remain within the Local Community for a period of
time (manifested by establishing a physical, ongoing, nontransitory presence
within the Local Community) and continues to reside in the Local Community at
the time of the Subscription and Community Offerings. The Bank may utilize
deposit or loan records or such other evidence provided to it to make the
determination whether a person is residing in the Local Community. To the extent
the person is a corporation or other business entity, the principal place of
business or headquarters shall be within the Local Community. To the extent the
person is a personal benefit plan, the circumstances of the beneficiary shall
apply with respect to this definition. In the case of all other benefit plans,
circumstances of the trustee shall be examined for purposes of this definition.
In all cases, however, such determination shall be in the sole discretion of the
Bank.
If the Community Offering extends beyond 45 days following the expiration
of the Subscription Offering, subscribers will have the right to increase,
decrease or rescind subscriptions for stock previously submitted. Purchasers in
the Community Offering, together with their associates and groups acting in
concert, are each eligible to purchase up to 1% of the total number of shares to
be issued in the Offering.
Except as noted below, cash and checks received in the Community Offering
will be placed in segregated savings accounts (each insured by the FDIC up to
the applicable $100,000 limit) established specifically for this purpose.
Interest will be paid on orders made by check, in cash or by money order at the
Bank's passbook rate from the date the payment is received by the Company until
the consummation of the Offering. In the event that the Offering is not
consummated for any reason, all funds submitted pursuant to the Community
Offering will be promptly refunded with interest as described above.
SYNDICATED COMMUNITY OFFERING
As part of the Community Offering, all shares of Common Stock not purchased
in the Subscription and Community Offerings, if any, may be offered for sale to
the general public in a Syndicated Community Offering through selected dealers
to be formed and managed by Trident Securities. The Syndicated Community
Offering, if any, will be conducted to achieve the widest distribution of Common
Stock subject to the Company and the Bank having the right to reject orders in
whole or in part in their sole discretion in the Syndicated Community Offering.
Neither Trident Securities nor any registered broker-dealer shall have any
obligation to take or purchase any shares of the Common Stock in the Syndicated
Community Offering. Common Stock sold in the Syndicated Community Offering will
be sold at the same price as in the Subscription and Community Offerings.
Individual purchasers in the Syndicated Community Offering may purchase up
to 1% of the total number of shares to be issued in the Offering of the Common
Stock in the Stock Issuance with any associate or group of persons acting in
concert. The Bank shall be directly responsible for the payment of selling
commissions to other NASD firms and licensed brokers participating in the
Syndicated Community Offering. Other firms may participate under selected
dealers agreements, and Trident Securities and such selected dealers may receive
fees aggregating up to a maximum percentage to be agreed upon by Trident, the
Bank and the Company, which percentage will not exceed 7.0%, of the amount of
the stock sold by the selected dealers in the Syndicated Community Offering.
During the Syndicated Community Offering, selected dealers may only solicit
indications of interest from their customers to place orders with the Company as
of a certain date ("Order Date") for the purchase of shares of Common Stock.
When and if Trident Securities and the Company believe that enough indications
and orders have been received in the Offerings to consummate the Offering,
Trident Securities will request, as of the Order Date, selected dealers to
submit orders to purchase shares for which they have received indications of
interest from their customers. Selected dealers will send confirmations of the
orders to such customers on the next business day after the Order Date.
Selected dealers may debit the accounts of their customers on a date which will
be three business days from the Order Date ("Settlement Date"). Customers who
authorize selected dealers to debit their brokerage accounts are required to
have the funds for payment in their account on but not before the Settlement
Date. On the Settlement Date, selected dealers
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will remit funds to the account that the Company established for each selected
dealer. After payment has been received by the Company from selected dealers,
funds will earn interest at the Bank's passbook savings rate until the
consummation of the Stock Issuance. In the event the Stock Issuance is not
consummated as described above, funds with interest will be returned promptly to
the selected dealers, who, in turn, will promptly credit its customers'
brokerage account.
The Syndicated Community Offering, if any, will terminate no more than 45
days following the completion of the Subscription Offering, unless extended by
the Company with the approval of the OTS. In the event the Community Offering
is extended beyond 45 days following the expiration of this Subscription
Offering, subscribers will have the right to increase, decrease or rescind
subscriptions for stock previously submitted. The Syndicated Community Offering
may run concurrently with the Subscription and Community Offerings or subsequent
to such offerings.
SUBSCRIPTIONS FOR STOCK IN SUBSCRIPTION AND COMMUNITY OFFERINGS
Expiration Date. The Subscription Offering will expire at 12:00 Noon,
Eastern Time, on _________, 1998 unless extended by the Board of Directors of
the Bank for up to an additional 45 days, to no later than _________, 1998.
Such date and time are referred to herein as the "Expiration Date."
Subscription rights not exercised prior to the Expiration Date will be void.
The Community Offering, if any, may terminate at any time without notice, but
may not terminate later than ____________, 1998.
Orders will not be executed by the Company until at least the minimum
number of shares of Common Stock offered hereby have been subscribed for or
sold. If all shares of Common Stock have not been subscribed for or sold within
45 days of the end of the Subscription Offering (unless such period is extended
with consent of the OTS), all funds delivered to the Company pursuant to the
Subscription Offering will be promptly returned to the subscribers with interest
and all charges to savings accounts will be rescinded.
Use of Stock Order Forms and Certification Forms. Rights to subscribe may
only be exercised by completion of Stock Order Forms and certification forms.
Any person receiving a Stock Order Form who desires to subscribe for shares of
stock must do so prior to the Expiration Date by delivering (by mail or in
person) to any office of the Bank a properly executed and completed Stock Order
Form and certification form, together with full payment for all shares for which
the subscription is made. All checks or money orders must be made payable to
"BCSB Bankcorp, Inc." The Stock Order Form and certification form must be
received by the Expiration Date. All subscription rights under the Plan of
Reorganization will expire on the Expiration Date, whether or not the Company
has been able to locate each person entitled to such subscription rights. ONCE
TENDERED, SUBSCRIPTION ORDERS CANNOT BE REVOKED.
Each subscription right may be exercised only by the person to whom it is
issued and only for his or her own account. THE SUBSCRIPTION RIGHTS GRANTED
UNDER THE PLAN OF STOCK ISSUANCE ARE NONTRANSFERABLE; PERSONS WHO ATTEMPT TO
TRANSFER THEIR SUBSCRIPTION RIGHTS MAY LOSE THE RIGHT TO SUBSCRIBE FOR STOCK IN
THE STOCK ISSUANCE AND MAY BE SUBJECT TO OTHER SANCTIONS AND PENALTIES IMPOSED
BY THE OTS. Each person subscribing for shares is required to represent to the
Company that he or she is purchasing such shares for his or her own account and
that he or she has no agreement or understanding with any other person for the
sale or transfer of such shares.
In the event Stock Order Forms (i) are not delivered and are returned to
the Company by the United States Postal Service or the Company is unable to
locate the addressee, or (ii) are not returned or are received after the
Expiration Date, or (iii) are defectively completed or executed, or (iv) are not
accompanied by the full required payment for the shares subscribed for
(including instances where a savings account or certificate balance from which
withdrawal is authorized is insufficient to fund the amount of such required
payment), the subscription rights of the person to whom such rights have been
granted will lapse as though such person failed to return the completed Stock
Order Form within the time period specified. However, the Company or the Bank
may, but will not be required to, waive any irregularity on any Stock Order Form
or require the submission of corrected Stock Order Forms or the remittance of
full payment
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for subscribed shares by such date as the Company or the Bank may specify. The
interpretation by the Company and the Bank of the terms and conditions of the
Plan of Reorganization and of the Stock Order Form will be final.
Payment for Shares. Payment for all subscribed shares of Common Stock will
be required to accompany all completed Stock Order Forms for subscriptions to be
valid. Payment for subscribed shares may be made (i) in cash, if delivered in
person, (ii) by check or money order, or (iii) by authorization of withdrawal
from deposit accounts maintained with the Bank. Appropriate means by which such
withdrawals may be authorized are provided in the Stock Order Form. Once such a
withdrawal has been authorized, none of the designated withdrawal amount may be
used by a subscriber for any purpose other than to purchase stock for which
subscription has been made while the Plan of Reorganization remains in effect.
In the case of payments authorized to be made through withdrawal from deposit
accounts, all sums authorized for withdrawal will continue to earn interest at
the contract rate until the date of consummation of the sale. In the case of
payments made in cash or by check or money order such funds will be placed in a
segregated savings account established for each subscriber specifically for this
purpose (each insured by the FDIC up to the applicable $100,000 limit) and
interest will be paid at the Bank's passbook rate from the date payment is
received 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 partial
withdrawal results in a certificate account with a balance less than the
applicable minimum balance requirement, the certificate evidencing the remaining
balance will earn interest at the Bank's passbook rate subsequent to the
withdrawal. An executed Stock Order Form, once received by the Company, may not
be modified, amended or rescinded without the consent of the Company, unless the
Offering is not completed within 45 days of the termination of the Subscription
Offering. If an extension of the period of time to complete the Stock Issuance
is approved by the OTS, subscribers will be resolicited and must affirmatively
reconfirm their orders prior to the expiration of the resolicitation offering,
or their subscription funds will be promptly refunded. Subscribers may also
modify or cancel their subscriptions. Interest will be paid on such funds at
the Bank's passbook rate during the 45-day period and any approved extension
period.
Owners of self-directed IRAs may use the assets of such IRAs to purchase
shares of Common Stock in the Subscription and Community Offerings, provided
that such IRAs are not maintained at the Bank. Persons with IRAs maintained at
the Bank must have their accounts transferred to an unaffiliated institution or
broker to purchase shares of Common Stock in the Subscription and Community
Offerings. Depositors interested in using funds in a Bank IRA to purchase
Common Stock should contact the Bank's Stock Information Center at (410) 256-
0460 as soon as possible so that the necessary forms may be forwarded for
execution and returned prior to the Expiration Date of the Subscription
Offering.
The ESOP will not be required to pay for the shares subscribed for at the
time it subscribes, but may pay for such shares upon consummation of the
Subscription and Community Offerings, if all shares are sold, or upon
consummation of any subsequent offering, if shares remain to be sold in such an
offering.
Shares Purchased. Certificates representing shares of the Common Stock
will be delivered to subscribers as soon as practicable after closing of the
Offering.
PLAN OF DISTRIBUTION AND MARKETING AGENT
Officers of the Bank are available at the Bank's offices to provide
offering materials to prospective investors, to answer their questions (but only
to the extent such information is derived from this Prospectus) and to receive
completed Stock Order Forms and certification forms from prospective investors
interested in subscribing for shares of the Common Stock. None of the Bank's
directors, officers or employees will receive any commissions or other
compensation for their efforts in connection with sales of shares of the Common
Stock. ALTHOUGH INFORMATION REGARDING THE STOCK OFFERING IS AVAILABLE AT THE
BANK'S OFFICES, AN INVESTMENT IN THE COMMON STOCK IS NOT A DEPOSIT, AND THE
COMMON STOCK IS NOT FEDERALLY INSURED.
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The directors, officers and employees of the Bank who will be involved in
selling stock are expected to be exempt from the requirement to register with
the SEC as broker-dealers within the meaning of Rule 3a4-1 under the Exchange
Act. Such persons will qualify under the safe harbor provisions of that rule on
the basis of paragraphs (a)(4)(ii) and/or (iii), i.e., management of the Bank
expects that such persons either (x) will perform substantial duties for the
Company in its business, will not otherwise be broker-dealers and are not
expected to participate in another offering in the next twelve months or (y)
will limit their activities to preparing written communications, responding to
customer inquiries and/or performing ministerial/clerical functions.
The Bank and the Company have engaged Trident Securities as financial
advisor to provide sales assistance in connection with the Subscription and
Community Offerings of the Common Stock. The services of Trident Securities
will include, but are not limited to, (i) training and educating the Bank's
employees who will be performing certain ministerial functions in the
Subscription and Community Offerings regarding the mechanics and regulatory
requirements of the stock sales process and the solicitation of proxies from
members, (ii) providing employees to staff the Stock Information Center,
assisting Bank customers and interested stock purchasers and keeping records of
orders for shares of Common Stock, and (iii) supervising the Bank's sales
efforts, including preparation of marketing materials. For all its services
rendered in the Stock Issuance, Trident Securities will receive a commission
equal to 1.5% of the aggregate dollar amount of Common Stock sold in the
Subscription and Community Offerings, excluding any shares of stock sold to the
Bank's directors, officers and employees, and the ESOP. Additionally,
commissions will be excluded on shares sold to "associates" (as defined in the
Plan of Reorganization) of the Bank's directors and executive officers. In the
event Common Stock is sold by other NASD member firms under selected dealer's
agreements, the aggregate commissions to be received by Trident Securities and
selected dealers would be up to a maximum of 7.0% of the amount of Common Stock
sold by such selected dealers. Trident Securities will also be reimbursed for
its reasonable out-of-pocket expenses in an amount not to exceed $9,000 and its
legal fees in an amount not to exceed $27,500. The Company and the Bank have
agreed to indemnify Trident Securities for reasonable costs and expenses in
connection with certain claims or liabilities, including certain liabilities
under the Securities Act.
STOCK PRICING AND NUMBER OF SHARES TO BE ISSUED
The Plan of Stock Issuance and Federal 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 $20,000 (which amount does not include a fee of $5,000 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 mutual holding companies; the aggregate size
of the Offering; the impact of the Reorganization and Stock Issuance 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 March 27, 1998, the estimated
pro forma market value of the Common Stock ranged from a minimum of $39,312,500
to a maximum of $53,187,500 with a midpoint of $46,250,000 (the Estimated
Valuation Range). The Independent Valuation will be further updated immediately
prior to the completion of the Offering and could be increased to up to
$61,165,620 without a resolicitation of subscribers based on market and
financial conditions at the completion of the Offering. The Board determined to
offer the shares in the
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Offering at the Subscription Price of $10.00 per share. Based on the Estimated
Valuation Range and the Purchase Price, the number of shares of Common Stock
that the Company will issue will range from between 3,931,250 shares to
5,318,750 shares, with a midpoint of 4,625,000 shares, subject to adjustment to
up to 6,116,562 shares to reflect market and financial conditions at the
termination of the Offering and to fill the order of the ESOP. The Board has
established a public offering range such that the public ownership of the
Company will constitute a 38.0% ownership interest prior to the issuance of
shares to the Foundation, or between 1,469,650 shares and 1,988,350 shares with
a midpoint of 1,729,000 shares, subject to adjustment to up to 2,286,602 shares
to reflect market and financial conditions at the termination of the Offering
and to fill the order of the ESOP. The anticipated issuance of 75,000 shares of
Common Stock to the Foundation as part of the Stock Issuance will result in
shareholders other than the MHC and the Foundation owning 37.4% of the shares of
the Common Stock outstanding at the conclusion of the Reorganization and Stock
Issuance. The remaining shares of the Company's Common Stock that are not sold
in the Offering or contributed to the Foundation will be issued to the MHC.
In the event members do not approve the establishment of the Foundation,
the Company and the Bank intend to complete the Reorganization and Stock
Issuance without establishing the Foundation. If the Foundation is not
established, RP Financial has indicated that the Independent Valuation would
increase to a range of from $39,950,000 to $54,050,000 with a midpoint of
$47,000,000 (the Increased Range) . In such event, the public offering range
would be structured such that the public will have a 39.0% ownership interest in
the Company, and, as a result, the shares to be sold in the Offering would be
1,558,266, 1,833,254, 2,108,242 and 2,424,478 and the total purchase price would
be $15,582,660, $18,332,540, $21,082,420 and $24,244,780 at the minimum,
midpoint, maximum and maximum, as adjusted, respectively of the Increased
Range.
The Board reviewed the Independent Valuation and, in particular, considered
(i) the Bank's financial condition and results of operations for the three
months ended December 31, 997 and the year ended September 30, 1997, (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 OTS (if required), if necessitated by subsequent developments in
the financial condition of the Bank or market conditions generally.
The minimum of the Estimated Valuation Range may not be decreased, and the
maximum, as adjusted of the Estimated Valuation Range may not be increased,
without a resolicitation of subscribers. The Subscription Price of $10.00 per
share will remain fixed. See "--Limitations on Purchase of Shares" as to the
method of distribution and allocation of additional shares that may be issued in
the event of an increase in the 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 and the Company as going concerns 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
Purchase 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 $61,165,620 and a corresponding increase in the shares being
offering in the Offering to more than 2,286,602 shares, or a decrease in the
minimum of the Estimated Valuation Range to less than $39,312,500 and a
corresponding decrease in the shares being offered to fewer than 1,469,650
shares, then the Company, after
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consulting with the OTS, may terminate the Plan of Stock Issuance and return all
funds promptly with interest at the Bank's passbook rate of interest on payments
made by check, certified or cashier's check, bank draft or money order, extend
or hold a new Subscription Offering, Community Offering, or both, establish a
new Estimated Valuation Range, commence a resolicitation of subscribers or take
such other actions as permitted by the OTS 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 OTS
or periods of up to 90 days not to extend beyond 24 months following the Special
Meeting, 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."
No sale of shares of Common Stock may be consummated unless, prior to such
consummation, RP Financial confirms to the Bank and the OTS that, to the best of
its knowledge, nothing of a material nature has occurred that, taking into
account all relevant factors, would cause RP Financial 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 OTS 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 OTS or take such other actions as permitted by the OTS in order
to complete the Offering.
LIMITATIONS ON PURCHASE OF SHARES
The Plan of Reorganization provides for certain additional limitations to
be placed upon the purchase of shares by eligible subscribers and others in the
Offering. Each subscriber must subscribe for a minimum of 25 shares. The ESOP
may purchase up to an aggregate of 10% of the shares of the Common Stock to be
issued in the Offering and is expected to purchase 8% of such shares. No
Eligible Account Holder, Supplemental Eligible Account Holder or Other Member,
in their capacity as such, may subscribe in the Subscription Offering for more
than $200,000 of the of Common Stock to be issued in the Offering; no person,
together with associates of or persons acting in concert with such person,
including individuals on a joint account or having the same address, may
purchase in the Community Offering in the aggregate more than $200,000 of the
Common Stock to be issued in the Offering; and no person, together with
associates of or persons acting in concert with such person, including
individuals on a joint account or having the same address, may purchase in the
Stock Issuance more than the overall maximum purchase limitation of $300,000 of
the Common Stock to be issued in the Offering; except for the ESOP. Shares
purchased by the ESOP and attributable to a participant thereunder shall not be
aggregated with shares purchased by such participant or any other purchaser of
Common Stock in the Offering. For purposes of the Plan of Stock Issuance, the
directors of the Company and the Bank are not deemed to be associates or a group
acting in concert solely by reason of their Board membership.
Subject to any required regulatory approval and the requirements of
applicable laws and regulations, but without further approval of the Bank's
members, purchase limitations may be increased or decreased at the sole
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discretion of the Company and the Bank at any time. OTS regulations authorize a
plan of stock issuance to provide a minimum purchase limitation of a percentage
as low as 1% and a maximum purchase limitation of a percentage not to exceed
10%, provided that orders for shares exceeding 5% of the shares being offered in
the Offering shall not exceed in the aggregate 10% of the shares being offered
in the Offering. If such amount is increased, subscribers for the maximum
amount will be given the opportunity to increase their subscriptions up to the
then applicable limit, subject to the rights and preferences of any person who
has priority Subscription Rights. In the event that the purchase limitation is
decreased after commencement of the Subscription and Community Offerings, the
orders of any person who subscribed for the maximum number of shares of Common
Stock shall be decreased by the minimum amount necessary so that such person
shall be in compliance with the then maximum number of shares permitted to be
subscribed for by such person.
The term "associate" of a person is defined to mean: (i) any corporation or
organization (other than the Bank, the Company, the MHC or a majority-owned
subsidiary of the Bank, the Company or the MHC) of which such person is an
officer or partner or is directly or indirectly the beneficial owner of 10% or
more of any equity securities; (ii) any trust or other estate in which such
person has a substantial beneficial interest or as to which such person serves
as a trustee or in a similar fiduciary capacity, provided, however, such term
shall not include any employee stock benefit plan of the Bank in which such
person has a substantial beneficial interest or serves as a trustee or in a
similar fiduciary capacity; and (iii) any relative or spouse of such person, or
any relative of such spouse, who either has the same home as such person or who
is a director of the Bank, the Company or the MHC or any of their subsidiaries.
Directors are not treated as associates solely because of their Board
membership.
In addition to the above purchase limitation, the Plan of Stock Issuance
sets forth certain additional limitations on purchases of shares of Common Stock
in the Offering, as follows: (i) The aggregate amount of Common Stock acquired
in the Offering by any non-tax-qualified employee stock benefit plan or any
insider of the Bank and his or her associates, exclusive of any Common Stock
acquired by said plan, or such insider and his or her associates, in the
secondary market, shall not exceed 10% of (a) the outstanding shares of Common
Stock, or (b) the stockholders' equity of the Company, held by persons other
than the MHC at the close of the Offering; and (ii) the aggregate amount of
Common Stock acquired in the Offering by all non-tax-qualified employee stock
benefit plans and insiders of the Bank and their associates shall not exceed
thirty percent (30%) of the (a) outstanding shares of Common Stock, or (b)
stockholders' equity of the Company, held by persons other than the MHC at the
close of the Offering.
Each person purchasing Common Stock in the Offering shall be deemed to
confirm that such purchase does not conflict with the purchase limitations under
the Plan of Stock Issuance or otherwise imposed by law, rule or regulation. In
the event that such purchase limitations are violated by any person (including
any associate or group of persons affiliated or otherwise acting in concert with
such person), the Company shall have the right to purchase from such person at
the aggregate purchase price all shares acquired by such person in excess of
such purchase limitations or, if such excess shares have been sold by such
person, to receive the difference between the aggregate purchase price paid for
such excess shares and the price at which such excess shares were sold by such
person. This right of the Company to purchase such excess shares is assignable
by the Company. In addition, persons who violate the purchase limitations may
be subject to sanctions and penalties imposed by the OTS.
Stock purchased in the Offering will be freely transferable, except for
shares purchased by directors and officers of the Bank and the Company. See "--
Limitations on Resales by Management." In addition, under guidelines of the
National Association of Securities Dealers, Inc. ("NASD"), members of the NASD
and their associates are subject to certain restrictions on the transfer of
securities purchased in accordance with Subscription Rights and to certain
reporting requirements upon purchase of such securities.
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REGULATORY RESTRICTIONS ON ACQUISITION OF THE COMMON STOCK
Current federal regulations prohibit any person from making an offer,
announcing an intent to make an offer, entering into any other arrangement to
purchase Common Stock or acquiring Common Stock or Subscription Rights in the
Company from another person prior to completion of the Offering. Further, no
person may make an offer or announcement of an offer to purchase shares or
actually acquire shares in the Company for a period of three years from the date
of the completion of the Stock Issuance, if, upon the completion of such offer
or acquisition, that person would become the beneficial owner of more than 10%
of the Company's outstanding stock, without the prior written approval of the
OTS. The OTS has defined the word "person" to include any individual, group
acting in concert, corporation, partnership, association, joint stock company,
trust, unincorporated organization or similar company, a syndicate or any group
formed for the purpose of acquiring, holding or disposing of securities of an
insured institution. However, offers made exclusively to the Company or
underwriters or members of a selling group acting on behalf of the Company for
resale to the general public are excepted. The regulations also provide civil
penalties for willful violation or assistance of any such violation of the
regulation by any person connected with the management of the Company following
the Reorganization and Stock Issuance. Moreover, when any person, directly or
indirectly, acquires beneficial ownership of more than 10% of the Company's
capital stock following the Stock Issuance within such three-year period without
the prior approval of the OTS, the Company's Common Stock beneficially owned by
such person in excess of 10% shall not be counted as shares entitled to vote and
shall not be voted by any person or counted as voting shares in connection with
any matter submitted to the stockholders for a vote. The Charter of the Company
include a similar 10% beneficial ownership limitation. See "Certain
Restrictions on Acquisition of the Company and the Bank -- Certain Anti-Takeover
Provisions in the Charter and Bylaws."
In addition to the foregoing restrictions, any person or group of persons
acting in concert who propose to acquire 10% or more of the Company's
outstanding shares will be presumed under OTS regulations to be acquiring
control of the Company and will be required to submit prior notice to the OTS
under the Change in Bank Control Act. See "Certain Restrictions on Acquisition
of the Company and the Bank."
Purchases of Common Stock of the Company by directors, executive officers
and their associates during the three-year period following completion of the
Reorganization and Stock Issuance may be made only through a broker or dealer
registered with the SEC, except with the prior written approval of the OTS.
This restriction does not apply, however, to negotiated transactions involving
more than 1% of the Company's outstanding Common Stock or to the purchase of
Common Stock pursuant to any tax-qualified employee stock benefit plan, such as
the ESOP, or by any non-tax-qualified employee stock benefit plan.
RESTRICTIONS ON REPURCHASE OF STOCK
Subject to the exceptions described herein, for a period of three years
following the Stock Issuance, the Company may not repurchase any of its stock
from any person, unless the repurchase (i) is part of a general repurchase made
on a pro rata basis pursuant to an offer approved by the OTS and made to all
stockholders (except that the MHC may be excluded from the repurchase with OTS
approval), (ii) is limited to repurchase of qualifying shares of a director, or
(iii) is made following one year after consummation of the Stock Issuance and is
part of an open-market program not involving more than 5% of the Company's
outstanding capital stock during a 12-month period, if the repurchases do not
cause the Bank to become undercapitalized and the Bank provides to the Regional
Director of the OTS no later than ten days prior to the commencement of a
repurchase program written notice containing a full description of the program
to be undertaken and such program is not disapproved by the Regional Director.
However, the Regional Director has authority to permit repurchases during the
first year following consummation of the Reorganization and Stock Issuance and
to permit repurchases in excess of 5% during the second and third years upon the
establishment of exceptional circumstances, as determined by the Regional
Director. Any purchase of Common Stock within a period of three years following
the Stock Issuance in the open market by a tax-qualified or non-tax-qualified
employee benefit plan of the Company can be done only with prior OTS
approval.
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LIMITATIONS ON RESALES BY MANAGEMENT
Shares of the Common Stock purchased by directors or officers of the
Company and the Bank in the Stock Issuance will be subject to the restriction
that such shares may not be sold for a period of one year following completion
of the Stock Issuance, except in the event of the death of the original
purchaser or in any exchange of such shares in connection with a merger or
acquisition of the Company approved by the OTS. Accordingly, shares of the
Common Stock issued by the Company to directors and officers shall bear a legend
giving appropriate notice of the restriction imposed upon it and, in addition,
the Company will give appropriate instructions to the transfer agent for the
Common Stock with respect to the applicable restriction for transfer of any
restricted stock. Any shares issued to directors and officers as a stock
dividend, stock split or otherwise with respect to restricted stock shall be
subject to the same restrictions. Shares acquired otherwise than in the Stock
Issuance, such as under the Company's Option Plan of Reorganization, would not
be subject to such restrictions. To the extent directors and officers are
deemed affiliates of the Company, all shares of the Common Stock acquired by
such directors and officers will be subject to certain resale restrictions and
may be resold pursuant to Rule 144 under the Securities Act. See "Regulation --
Regulation of the Company -- Federal Securities Law."
INTERPRETATION AND AMENDMENT OF THE PLAN OF REORGANIZATION
To the extent permitted by law, all interpretations of the Plan of
Reorganization and the Plan of Stock Issuance by the Company and the Bank will
be final. The plans provide that the Company's or the Bank's Board of
Directors, as the case may be, shall have the sole discretion to interpret and
apply the provisions of the plans to particular facts and circumstances and to
make all determinations necessary or desirable to implement such provisions,
including but not limited to matters with respect to giving preference in the
Community Offering to natural persons and trusts of natural persons who are
permanent residents of the Local Community, and any and all interpretations,
applications and determinations made by the Board of Directors in good faith and
on the basis of such information and assistance as was then reasonably available
for such purpose shall be conclusive and binding upon the Bank and its members
and subscribers in the Subscription and Community Offerings, subject to the
authority of the OTS.
The Plan of Reorganization provides that, if deemed necessary or desirable
by the Board of Directors, the Plan of Reorganization may be substantively
amended by the Board of Directors at any time prior to submission of the Plan of
Reorganization and proxy materials to the Bank's members. After submission of
the Plan of Reorganization and proxy materials to the members, the Plan of
Reorganization may be amended by the Board of Directors at any time prior to the
Special Meeting and at any time following the Special Meeting with the
concurrence of the OTS. In its discretion, the Board of Directors may modify or
terminate the Plan of Reorganization upon the order of the regulatory
authorities without a resolicitation of proxies or another Special Meeting.
However, any modification of the Plan of Reorganization resulting in a material
change in the terms of the Reorganization would require a resolicitation of
proxies and another meeting of stockholders.
The Plan of Stock Issuance may be substantively amended by the Board of
Directors of the Company or the Bank, as applicable, as a result of comments
from regulatory authorities or otherwise prior approval of the Plan of Stock
Issuance by the OTS, and at any time thereafter with the concurrence of the OTS.
CONDITIONS AND TERMINATION
Completion of the Reorganization requires the approval of the Plan of
Reorganization by the affirmative vote of not less than a majority of the total
outstanding votes of the members of the Bank and the sale of all shares of the
Common Stock within 24 months following approval of the Plan of Reorganization
by the members. If these conditions are not satisfied, the Plan of
Reorganization will be terminated, and the Bank will continue its business in
the mutual form of organization. The Plan of Reorganization may be terminated
by the Board of Directors at any time prior to the Special Meeting and, with the
approval of the OTS, by the Board of Directors at any time thereafter. The Plan
of Stock
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Issuance may be terminated by the Board of Directors of the Company or the Bank,
as applicable, at any time prior to approval of the Plan of Stock Issuance by
the OTS, and at any time thereafter with the concurrence of the OTS.
CERTAIN RESTRICTIONS ON ACQUISITION OF THE COMPANY
AND THE BANK
OTS REGULATIONS
OTS regulations prohibit a person from making an offer, announcing an
intent to make an offer or other arrangement to purchase stock, or acquiring
stock or Subscription Rights in the Bank or the Company from another person
prior to completion of the Stock Issuance. Further, upon consummation of the
Stock Issuance, no person may make an offer or announcement of an offer to
purchase shares or actually acquire shares in the Bank or the Company for a
period of three years from the date of the completion of the Stock Issuance if,
upon the completion of such offer or acquisition, that person would become the
beneficial owner of more than 10% of the stock of the Bank or the Company
without the prior written approval of the Director of the OTS. For purposes of
the regulations, "person" is defined to include any individual, group acting in
concert, corporation, partnership, association, joint stock company, trust,
unincorporated organization or similar company, a syndicate or any other group
formed for the purpose of acquiring, holding or disposing of securities of the
Bank or the Company. Offers made exclusively to the Company or the MHC,
however, or underwriters or members of a selling group acting on the Company's
or the MHC's behalf for resale to the general public, are excepted, as are
purchases not exceeding 1% per annum of the shares outstanding, and the
acquisition of securities by one or more Tax-Qualified Employee Stock Benefit
Plan of Reorganizations of the Company or the Bank provided that the plan or
plans do not have beneficial ownership in the aggregate of more than 25% of any
class of Common Stock. Where any person, directly or indirectly, acquires
beneficial ownership of more than 10% of any class of Common Stock within such
three-year period, without the prior approval of the OTS, Common Stock
beneficially owned by such person in excess of 10% shall not be counted as
shares entitled to vote and shall not be voted by any person or counted as
voting shares in connection with any matter submitted to the stockholders for a
vote.
CERTAIN ANTI-TAKEOVER PROVISIONS IN THE CHARTER AND BYLAWS
General. While the Boards of Directors of the Bank and the Company are not
aware of any effort that might be made to obtain control of the Company after
the Stock Issuance, the Board of Directors, as discussed below, believes that it
is appropriate to include certain provisions as part of the Company's Charter to
protect the interests of the Company and its stockholders from hostile takeovers
which the Board of Directors might conclude are not in the best interests of the
Bank, the MHC, the Company or the Company's stockholders. These provisions may
have the effect of discouraging a future takeover attempt which is not approved
by the Board of Directors but which individual stockholders may deem to be in
their best interests or in which stockholders may receive a substantial premium
for their shares over then current market prices. As a result, stockholders who
might desire to participate in such a transaction may not have an opportunity to
do so. Such provisions also will render the removal of the current Board of
Directors or management of the Company more difficult.
The following discussion is a general summary of certain provisions of the
Charter and Bylaws of the Company which may be deemed to have such an "anti-
takeover" effect. The description of these provisions is necessarily general
and reference should be made in each case to the Charter and Bylaws of the
Company. For information regarding how to obtain a copy of these documents
without charge, see "Additional Information."
Classified Board of Directors and Related Provisions. The Company's
Charter provides that the Board of Directors is to be divided into three classes
which shall be as nearly equal in number as possible. The directors in each
class will be elected at the first stockholders' meeting following the Stock
Issuance to hold office for terms of one year, two years and three years,
respectively, and, upon reelection, will serve for terms of three years
thereafter. Each director will serve until his or her successor is elected and
qualified.
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A classified board of directors could make it more difficult for
stockholders, including those holding a majority of the outstanding shares, to
force an immediate change in the composition of a majority of the Board of
Directors. Since the terms of only one-third of the incumbent directors expire
each year, it requires at least two annual elections for the shareholders to
change a majority, whereas a majority of a non-classified board may be changed
in one year. In the absence of the provisions of the Charter classifying the
Board, all of the directors would be elected each year.
Management of the Company believes that the staggered election of directors
tends to promote continuity of management because only one-third of the Board of
Directors is subject to election each year. Staggered terms guarantee that in
the ordinary course approximately two-thirds of the Directors, or more, at any
one time have had at least one year's experience as Directors of the Company,
and moderate the pace of changes in the Board of Directors by extending the
minimum time required to elect a majority of Directors from one to two years.
Limitations on Call of Meetings of Stockholders. The Company's Charter
provides that for a period of five years special meetings of stockholders may be
called only upon direction of the Company's Board of Directors, for matters
relating to changes in control of the Company or amendments to its charter.
Absence of Cumulative Voting. The Company's Charter provides that there
shall not be cumulative voting by stockholders for the election of the Company's
directors. The absence of cumulative voting rights effectively means that the
holders of a majority of the shares voted at a meeting of stockholders (i.e.,
the MHC) may, if they so choose, elect all directors of the Company to be
selected at that meeting, thus precluding minority stockholder representation on
the Company's Board of Directors.
Restrictions on Acquisitions of Securities. The Charter provides that for
a period of five years from the effective date of the Stock Issuance, no person
other than the MHC may directly or indirectly offer to acquire or acquire the
beneficial ownership of more than 10% of any class of the equity security of the
Company. This provision does not apply to any employee stock benefit plan of
the Company or to an underwriter or member of an underwriting or selling group
involving the public sale or resale of securities of the Company or a subsidiary
thereof; provided, that upon completion of the sale or resale, no such
underwriter or member of the selling group is a beneficial owner of more than
10% of any class of equity securities of the Company. In addition, during such
five-year period, no shares beneficially owned in violation of the foregoing
percentage limitation, as determined by the Company's Board of Directors, shall
be entitled to vote in connection with any matter submitted to stockholders for
a vote.
Authorization of Preferred Stock. The Company's Charter authorizes the
issuance of up to 1,500,000 shares of preferred stock, which conceivably could
represent an additional class of stock required to approve any proposed
acquisition. 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 powers, designations, preferences
and relative, participating, optional and other special rights of such shares,
including voting rights and conversion rights. Issuance of the preferred stock
could adversely affect the relative voting rights of holders of the Common
Stock. In the event of a proposed merger, tender offer or other attempt to gain
control of the Company that the Board of Directors did 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
and does not intend to issue any preferred stock except on terms which the Board
of Directors deems to be in the best interests of the Company and its
stockholders. This preferred stock, none of which has been issued by the
Company, together with authorized but unissued shares of Common Stock (the
Charter authorizes the issuance of up to 13,500,000 shares of Common Stock),
also could represent additional capital required to be purchased by the
acquiror.
Procedures for Stockholder Nominations. The Company's Bylaws provide that
any stockholder desiring to make a nomination for the election of directors or a
proposal for new business at a meeting of stockholders must submit written
notice to the Secretary of the Company not less than 30 or more than 60 days in
advance of the meeting. The
125
<PAGE>
Bylaws further provide that if a stockholder seeking to make a nomination or a
proposal for new business fails to follow the prescribed procedures, the
chairman of the meeting may disregard the defective nomination or proposal.
Management believes that it is in the best interests of the Company and its
stockholders to provide sufficient time to enable management to disclose to
stockholders information about a dissident slate of nominations for directors.
This advance notice requirement may also give management time to solicit its own
proxies in an attempt to defeat any dissident slate of nominations should
management determine that doing so is in the best interest of stockholders
generally. Similarly, adequate advance notice of stockholder proposals will give
management time to study such proposals and to determine whether to recommend to
the stockholders that such proposals be adopted.
BENEFIT PLANS
In addition to the provisions of the Company's Charter and Bylaws described
above, certain benefit plans of the Company and the Bank adopted in connection
with the Reorganization and Stock Issuance contain provisions which also may
discourage hostile takeover attempts which the Boards of Directors of the Bank
might conclude are not in the best interests of the Company, the Company and the
Bank or the Company's stockholders. For a description of the benefit plans and
the provisions of such plans relating to changes in control of the Company or
the Bank, see "Management of the Bank -- Certain Benefit Plan of Reorganizations
and Agreements."
DESCRIPTION OF CAPITAL STOCK
GENERAL
The Company is authorized to issue 13,500,000 shares of Common Stock and
1,500,000 shares of serial preferred stock, $0.01 par value per share. The
Company currently expects to issue between 1,469,650 and 1,988,350 shares,
subject to adjustment up to 2,286,602 shares, of the Common Stock and no shares
of serial preferred stock in the Stock Issuance. The Company will reserve for
future issuance under the Option Plan an amount of authorized but unissued
shares of Common Stock equal to 10% of the shares to be issued in the Offering.
THE CAPITAL STOCK OF THE COMPANY WILL REPRESENT NONWITHDRAWABLE CAPITAL, WILL
NOT BE AN ACCOUNT OF AN INSURABLE TYPE, AND WILL NOT BE INSURED BY THE FDIC OR
ANY OTHER FEDERAL OR STATE GOVERNMENTAL AGENCY.
COMMON STOCK
Voting Rights. Each share of the Common Stock will have the same relative
rights and will be identical in all respects with every other share of the
Common Stock. The holders of the Common Stock will possess exclusive voting
rights in the Company, except to the extent that shares of serial preferred
stock issued in the future may have voting rights, if any. Each holder of
shares of the Common Stock will be entitled to one vote for each share held of
record on all matters submitted to a vote of holders of shares of the Common
Stock. For information regarding a possible reduction in voting rights, see
"Certain Restrictions on Acquisition of the Company and the Bank -- Certain
Anti-Takeover Provisions in the Charter and Bylaws -- Restrictions on
Acquisitions of Securities."
Dividends. The Company may, from time to time, declare dividends to the
holders of the Common Stock, who will be entitled to share equally in any such
dividends. For information as to cash dividends, see "Dividend Policy,"
"Regulation -- Dividend Limitations" and "Taxation." For information as to the
possible waiver of dividends by the MHC, see "Waiver of Dividends by the
MHC."
Liquidation. In the event of any liquidation, dissolution or winding up of
the Bank, the Company, as holder of all of the Bank's capital stock, would be
entitled to receive all assets of the Bank after payment of all debts and
liabilities of the Bank and after distribution or provisions for distributions
in settlement of any liquidation account, and distributions or provisions for
distributions to holders of any class or series of stock having preference over
Common Stock. In the event of a liquidation, dissolution or winding up of the
Company, each holder of shares of the Common
126
<PAGE>
Stock would be entitled to receive, after payment of all debts and liabilities
of the Company, a pro rata portion of all assets of the Company available for
distribution to holders of the Common Stock.
Restrictions on Acquisition of the Common Stock. For information regarding
limitations on acquisition of shares of the Common Stock, see "Certain
Restrictions on Acquisition of the Company and the Bank -- Certain Anti-Takeover
Provisions in the Charter and Bylaws" and "The Reorganization and Stock Issuance
- -- Regulatory Restrictions on Acquisition of the Common Stock."
Other Characteristics. Holders of the Common Stock will not have
preemptive rights with respect to any additional shares of the Common Stock
which may be issued. The Common Stock is not subject to call for redemption,
and the outstanding shares of the Common Stock, when issued and upon receipt by
the Company of the full purchase price therefor, will be fully paid and
nonassessable.
Transfer Agent and Registrar. The transfer agent and registrar for the
Common Stock will be Chase-Mellon Shareholder Services, New York, New York.
SERIAL PREFERRED STOCK
None of the 1,500,000 authorized shares of serial preferred stock of the
Company will be issued in the Stock Issuance. After the Stock Issuance is
completed, the Board of Directors of the Company will be authorized to issue
serial preferred stock and to fix and state voting powers, designations,
preferences or other special rights of such shares and the qualifications,
limitations and restrictions thereof. The serial preferred stock may rank prior
to the Common Stock as to dividend rights or liquidation preferences, or both,
and may have full or limited voting rights. The Board of Directors has no
present intention to issue any of the serial preferred stock. Should the Board
of Directors of the Company subsequently issue serial preferred stock, no holder
of any such stock shall have any preemptive right to subscribe for or purchase
any stock or any other securities of the Company other than such, if any, as the
Board of Directors, in its sole discretion, may determine and at such price or
prices and upon such other terms as the Board of Directors, in its sole
discretion, may fix.
REGISTRATION REQUIREMENTS
The Company will register its Common Stock with the SEC pursuant to the
Exchange Act upon the completion of the Stock Issuance and will not deregister
said shares for a period of at least three years following the completion of the
Stock Issuance. Upon such registration, the proxy and tender offer rules,
insider trading reporting and restrictions, annual and periodic reporting and
other requirements of the Exchange Act will be applicable. The Company intends
to have a fiscal year end of September 30.
LEGAL OPINIONS
The legality of the Common Stock will be passed upon for the Company by
Housley Kantarian & Bronstein, P.C., Washington, D.C. Housley Kantarian &
Bronstein, P.C. has consented to the references herein to its opinion. Certain
legal matters will be passed upon for Trident Securities by Malizia, Spidi,
Sloane & Fisch, P.C., Washington, D.C.
TAX OPINIONS
The federal income tax consequences of the Reorganization and Stock
Issuance will be passed upon by Housley Kantarian & Bronstein, P.C., Washington,
D.C. Housley Kantarian & Bronstein, P.C. has consented to the references herein
to its opinion. The income tax consequences of the Reorganization and Stock
Issuance under Maryland law will be passed upon by Anderson Associates, LLP,
Baltimore, Maryland. Anderson Associates, LLP has consented to the references
herein to its opinion.
127
<PAGE>
EXPERTS
The financial statements of Baltimore County Savings Bank, F.S.B. as of
September 30, 1997 and 1996 and for the two years ended September 30, 1997 and
1996 have been included herein and elsewhere in the registration statement and
the Bank's Application on Form MHC-2 in reliance upon the report of Anderson
Associates, 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
letter to the Bank setting forth its belief as to the estimated pro forma
aggregate market value of the Common Stock to be issued in the Stock Issuance
and the value of Subscription Rights to purchase the Common Stock and to the use
of its name and statements with respect to it appearing herein.
ADDITIONAL INFORMATION
The Company has filed with the SEC a Registration Statement on Form SB-2
(File No. 333-44831) under the Securities Act with respect to the Common Stock
offered hereby. Such information may be inspected at the public reference
facilities maintained by the SEC at 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549. Copies may be obtained at prescribed rates from the
Public Reference Section of the SEC at 450 Fifth Street, N.W., Washington, D.C.
20549. The SEC also maintains an internet address ("Web site") that contains
reports, proxy and information statements and other information regarding
registrants, including the Company, that file electronically with the SEC. The
address for this Web site is "http://www.sec.gov."
The Bank has filed with the OTS an Application on Form MHC-1, an
Application on Form MHC-2 and an Application H-(e)1. This document omits
certain information contained in such applications. The applications can be
inspected, without charge, at the offices of the OTS, 1700 G Street, N.W.,
Washington, D.C. 20552, and at the office of the OTS Regional Director,
Southeastern Regional Office, at 1475 Peachtree Street, N.E., Atlanta, Georgia
30309.
128
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditors' Report F-1
Consolidated Statements of Financial Condition as of F-2
December 31, 1997 (unaudited) and September 30, 1997 and 1996
Consolidated Statements of Operations for the Three Months Ended F-3
December 31, 1997 and 1996 (unaudited) and the Years Ended
September 30, 1997 and 1996
Consolidated Statements of Retained Earnings for the Three Months Ended F-4
December 31, 1997 (unaudited) and the Years Ended September 30, 1997
and 1996
Consolidated Statements of Cash Flows for the Three Months Ended F-5
December 31, 1997 and 1996 (unaudited) and the Years Ended
September 30, 1997 and 1996
Notes to Financial Statements F-8
</TABLE>
Schedules - All schedules are omitted because the required information is not
applicable or is presented in the financial statements or accompanying notes.
All financial statements of BCSB Bankcorp, Inc. have been omitted
because BCSB Bankcorp, 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.
129
<PAGE>
[LETTERHEAD OF ANDERSON ASSOCIATES, LLP]
INDEPENDENT AUDITOR'S REPORT
----------------------------
Board of Directors
Baltimore County Savings Bank, F.S.B.
Baltimore, Maryland
We have audited the consolidated statements of financial condition of
Baltimore County Savings Bank, F.S.B. and Subsidiaries as of September 30, 1997
and September 30, 1996 and the related consolidated statements of operations,
retained earnings and cash flows for each of the two years in the two year
period ended September 30, 1997. These 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 audits to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated 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 Baltimore
County Savings Bank, F.S.B. and Subsidiaries as of September 30, 1997 and 1996,
and the results of its operations and its cash flows for each of the two years
in the two year period ended September 30, 1997, in conformity with generally
accepted accounting principles.
/s/ ANDERSON ASSOCIATES, LLP
November 18, 1997
Baltimore, Maryland
F-1
<PAGE>
BALTIMORE COUNTY SAVINGS BANK, F.S.B.
-------------------------------------
AND SUBSIDIARIES
----------------
Baltimore, Maryland
-------------------
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
----------------------------------------------
<TABLE>
<CAPTION>
December 31, September 30,
--------------------------
1997 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
(Unaudited)
Assets
------
Cash $ 2,857,216 $ 3,909,276 $ 4,785,532
Interest bearing deposits in other banks 20,158,923 8,206,119 9,064,700
Federal funds sold 5,816,775 7,102,231 6,224,501
Investment securities, available for
sale (Note 2) - - 101,376
Investment securities, held to maturity
(Note 2) 20,093,162 30,323,460 36,298,266
Loans receivable, net (Note 3) 159,531,559 158,676,168 154,560,174
Mortgage backed securities, held to
maturity (Note 4) 36,110,374 37,189,081 39,771,008
Foreclosed real estate, net (Note 5) 119,124 - 133,981
Investment in real estate development and
loans to joint ventures (Note 6) 12,732 12,732 365,566
Premises and equipment, net (Note 7) 2,791,227 2,856,988 2,691,109
Federal Home Loan Bank of Atlanta stock 1,433,200 1,433,200 1,301,200
Accrued interest receivable - loans 667,376 738,906 733,971
- investments 381,691 456,687 761,159
- mortgage backed
securities 216,318 218,686 238,682
Prepaid income taxes 700 314,384 533,453
Deferred income taxes (Note 13) - - 528,249
Intangible assets acquired, net 44,531 51,209 77,921
Other assets 346,607 249,097 714,419
------------ ------------ ------------
Total assets $250,581,515 $251,738,224 $258,885,267
============ ============ ============
Liabilities and Retained Earnings
---------------------------------
Liabilities
- -----------
Deposits (Note 8) $222,245,038 $224,656,081 $233,310,599
Advance payments by borrowers for
taxes and insurance 1,474,864 727,272 690,591
Income taxes payable (Note 13) 92,365 1,909 2,843
Deferred income taxes (Note 13) 105,773 83,538 -
Payables to disbursing agents 119,508 120,459 224,244
Other liabilities 2,028,206 2,290,516 2,743,999
------------ ------------ ------------
Total liabilities 226,065,754 227,879,775 236,972,276
Commitments and contingencies (Notes 3, 7 and 11)
Retained earnings (substantially restricted)
Notes 12 and 13 24,515,761 23,858,449 21,881,456
Net unrealized gain on investment
securities, net of taxes - - 31,535
------------ ------------ ------------
Total retained earnings 24,515,761 23,858,449 21,912,991
------------ ------------ ------------
Total liabilities and retained earnings $250,581,515 $251,738,224 $258,885,267
============ ============ ============
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
F-2
<PAGE>
BALTIMORE COUNTY SAVINGS BANK, F.S.B. AND SUBSIDIARIES
------------------------------------------------------
Baltimore, Maryland
-------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
<TABLE>
<CAPTION>
Three Months Ended For Years Ended
December 31, September 30,
------------------------ ----------------------------
1997 1996 1997 1996
----------- ----------- ------------ --------------
(Unaudited)
<S> <C> <C> <C> <C>
Interest and fees on loans (Note 3) $3,328,159 $3,315,893 $13,239,659 $13,094,010
Interest on mortgage backed
securities 596,712 632,013 2,427,932 2,309,012
Interest and dividends on
investment securities 386,412 760,407 2,877,840 2,439,000
Other interest income 330,135 225,148 912,078 1,222,199
---------- ---------- ----------- -----------
Total interest income 4,641,418 4,933,461 19,457,509 19,064,221
Interest on deposits (Note 8) 2,449,123 2,683,453 10,312,464 10,620,571
Interest on borrowings - short term 1,589 1,826 10,474 15,346
---------- ---------- ----------- -----------
Total interest expense 2,450,712 2,685,279 10,322,938 10,635,917
---------- ---------- ----------- -----------
Net interest income 2,190,706 2,248,182 9,134,571 8,428,304
Provision (reduction of provision)
for losses on loans (Note 3) 36,250 (835) 285,942 433,742
---------- ---------- ----------- -----------
Net interest income after provision
(reduction of provision) for
losses on loans 2,154,456 2,249,017 8,848,629 7,994,562
Other Income (Loss)
- ------------------
Gain (loss) on sale of foreclosed
real estate (1,949) 10,794 (694) 112,018
Servicing fee income 3,891 4,582 17,928 23,624
Fees and charges on loans 43,975 63,370 191,596 160,914
Fees on transaction accounts 41,469 46,699 167,888 155,906
Rental income 21,848 40,434 144,395 118,905
Gain (loss) from real estate
development and joint venture - (1,417) 34,900 651,867
Gain (loss) on sale of investment
securities - 51,376 51,376 (194,390)
Gain on sale of branch deposits 339,000 - - -
Miscellaneous income 35,220 8,705 79,128 44,962
---------- ---------- ----------- -----------
Net other income 483,454 224,543 686,517 1,073,806
Non-Interest Expenses
- ---------------------
Salaries and related expense 933,330 853,265 3,746,128 3,269,172
Provision for losses on
foreclosed real estate 13,236 - - 12,593
Occupancy expense 117,615 135,161 570,539 491,413
Deposit insurance premiums 54,422 122,472 289,038 1,877,761
Data processing expense 101,064 92,393 407,501 394,767
Property and equipment expense 88,893 77,842 338,764 327,180
Professional fees 28,895 14,385 78,203 73,348
Advertising 78,853 31,414 197,642 75,701
Telephone, postage and office
supplies 69,764 63,407 288,975 300,319
Amortization of excess of cost
over fair value of net assets
acquired 6,678 6,678 27,259 26,712
Other expenses 61,473 54,909 313,191 303,873
---------- ---------- ----------- -----------
Total non-interest expenses 1,554,223 1,451,926 6,257,240 7,152,839
---------- ---------- ----------- -----------
Income before tax provision 1,083,687 1,021,634 3,277,906 1,915,529
Income tax provision (Note 13) 426,375 414,740 1,300,913 711,709
---------- ---------- ----------- -----------
Net income $ 657,312 $ 606,894 $ 1,976,993 $ 1,203,820
========== ========== =========== ===========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
F-3
<PAGE>
BALTIMORE COUNTY SAVINGS BANK, F.S.B.
-------------------------------------
AND SUBSIDIARIES
----------------
Baltimore, Maryland
-------------------
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
--------------------------------------------
FOR THE YEARS ENDED SEPTEMBER 30, 1997 AND 1996 AND
---------------------------------------------------
THE THREE MONTHS ENDED DECEMBER 31, 1997 (UNAUDITED)
----------------------------------------------------
<TABLE>
<CAPTION>
Net Unrealized
Gains/Losses
on Investment
Retained Securities, Net
Earnings of Taxes Total
-------- --------------- -----
<S> <C> <C> <C>
Balance - September 30, 1995 $20,677,636 $ 19,503 $20,697,139
Change in net unrealized gains on
investment securities available for sale - 12,032 12,032
Net income for the year ended
September 30, 1996 1,203,820 - 1,203,820
----------- -------- -----------
Balance - September 30, 1996 - restated 21,881,456 31,535 21,912,991
Change in net unrealized gains on
investment securities available for sale - (31,535) (31,535)
Net income for the year ended
September 30, 1997 1,976,993 - 1,976,993
----------- -------- -----------
Balance - September 30, 1997 23,858,449 - 23,858,449
Net income for the three month period
ended December 31, 1997 (unaudited) 657,312 - 657,312
----------- -------- -----------
Balance - December 31, 1997 (unaudited) $24,515,761 $ - $24,515,761
=========== ======== ===========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
F-4
<PAGE>
BALTIMORE COUNTY SAVINGS BANK, F.S.B. AND SUBSIDIARIES
------------------------------------------------------
Baltimore, Maryland
-------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Year Ended
December 31, September 30,
------------------------- ------------------------
1997 1996 1997 1996
---------- --------- --------- ----------
(Unaudited)
<S> <C> <C> <C> <C>
Operating Activities
- --------------------
Net income $ 657,312 $ 606,894 $1,976,993 $ 1,203,820
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities
-------------------------------------
Accretion of discount on
investments (29,743) (57) (162,705) (721)
(Gain) loss on sale of
investment securities - (51,376) (51,376) 194,390
Dividends on investment
securities reinvested - - - (574,169)
Loans originated for sale (133,000) (225,000) (225,000) (4,914,000)
Proceeds from loans sold 133,000 225,000 225,000 4,914,000
Loan fees deferred 39,336 46,448 118,796 289,738
Amortization of deferred loan
fees (65,467) (113,392) (374,439) (572,916)
Provision (reduction of
provision) for losses
on loans 36,250 (835) 285,942 433,742
Amortization of premium on
mortgage backed securities 7,944 14,836 48,313 106,994
(Gain) loss on sale of
foreclosed real estate 1,949 (10,794) 694 (112,018)
Provision for losses on
foreclosed real estate 13,236 - - 12,593
(Gain) loss from real estate
development and joint
venture - 1,417 (34,900) (651,867)
Provision for depreciation 70,764 59,647 269,711 215,737
(Increase) decrease in
accrued interest receivable
on loans 71,530 86,151 (4,935) (46,113)
(Increase) decrease in accrued
interest receivable on
investments 74,996 129,799 304,472 (129,785)
(Increase) decrease in accrued
interest receivable on
mortgage backed securities 2,368 10,351 19,996 (21,888)
(Increase) decrease in prepaid
income taxes 313,684 193,212 219,069 (340,357)
(Increase) decrease in deferred
income taxes 22,235 213,491 631,628 (94,661)
Amortization of excess of cost
over fair value of net
assets acquired 6,678 6,678 26,712 26,713
(Increase) decrease in other
assets (97,510) 339,575 465,322 (112,600)
Gain on sale of deposits (339,000) - - -
Increase (decrease) in
accrued interest payable
on deposits (48,244) (53,115) 205,738 145,228
Increase (decrease) in income
taxes payable 90,456 1,065 (934) (38,382)
Increase (decrease) in other
liabilities and payables to
disbursing agents (263,261) (1,597,802) (557,268) 1,560,846
--------- ----------- ---------- -----------
Net cash provided (used)
by operating activities 565,513 (117,807) 3,386,829 1,494,324
</TABLE>
F-5
<PAGE>
BALTIMORE COUNTY SAVINGS BANK, F.S.B. AND SUBSIDIARIES
------------------------------------------------------
Baltimore, Maryland
-------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Year Ended
December 31, September 30,
--------------------------- ------------------------------
1997 1996 1997 1996
---- ---- ---- ----
(Unaudited)
<S> <C> <C> <C> <C>
Cash Flows from Investing Activities
- ------------------------------------
Proceeds from maturing interest
bearing deposits $ 99,000 $ 198,000 $ 1,882,000 $ 4,305,000
Purchase of interest bearing
deposits (5,000,000) - - -
Purchases of investment
securities - held to
maturity (6,750,000) (3,748,766) (44,022,489) (41,048,253)
Proceeds from maturities of
investment securities - held
to maturity 17,010,041 2,604,608 50,160,000 16,650,708
Proceeds from sale of
investment securities -
available for sale - 101,376 101,376 16,385,705
Longer term loans originated (8,189,550) (6,637,756) (25,294,948) (25,896,827)
Principal collected on longer
term loans 5,334,268 4,860,183 16,987,666 18,208,077
Net (increase) decrease in
short-term loans 1,853,463 1,678,024 4,185,132 (998,482)
Principal collected on mortgage
backed securities 3,060,708 1,443,069 6,554,445 6,781,039
Purchase of mortgage backed
securities (1,989,945) - (4,020,831) (11,612,298)
Proceeds from sales of
foreclosed real estate 2,000 112,250 139,477 386,762
Net investment and loans to
joint ventures - - 357,401 -
Investment in premises and
equipment (5,003) (335,037) (435,590) (229,775)
Purchase of Federal Home Loan
Bank of Atlanta stock - - (132,000) (8,900)
----------- ------------ ------------- -------------
Net cash provided (used)
by investing activities 5,424,982 275,951 6,461,639 (17,077,244)
Cash Flows from Financing Activities
- ------------------------------------
Proceeds from deposits sold (5,827,235) - - -
Net (decrease) increase in demand
deposits, money market, passbook
accounts and advances by borrowers
for taxes and insurance 2,222,161 244,653 (4,113,692) 1,433,421
Net (decrease) increase in
certificates of deposit 2,328,867 3,469,203 (4,709,883) 13,885,513
----------- ------------ ------------- -------------
Net cash provided (used)
by financing activities (1,276,207) 3,713,856 (8,823,575) 15,318,934
----------- ------------ ------------- -------------
Increase (decrease) in cash and
cash equivalents 4,714,288 3,872,000 1,024,893 (263,986)
Cash and cash equivalents at
beginning of period 12,136,626 11,111,733 11,111,733 11,375,719
----------- ------------ ------------- -------------
Cash and cash equivalents at
end of period $16,850,914 $ 14,983,733 $ 12,136,626 $ 11,111,733
=========== ============ ============= =============
</TABLE>
F-6
<PAGE>
BALTIMORE COUNTY SAVINGS BANK, F.S.B.
-------------------------------------
AND SUBSIDIARIES
----------------
Baltimore, Maryland
-------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Year Ended
December 31, September 30,
-------------------------------- ------------------------
1997 1996 1997 1996
---- ---- ---- ----
(Unaudited)
<S> <C> <C> <C> <C>
The following is a summary of cash
and cash equivalents:
Cash $ 2,857,216 $ 4,280,701 $ 3,909,276 $ 4,785,532
Interest bearing deposits
in other banks 20,158,923 8,891,557 8,206,119 9,064,700
Federal funds sold 5,816,775 10,576,475 7,102,231 6,224,501
----------- ----------- ----------- -----------
Balance of cash items
reflected on Statement of
Financial Condition 28,832,914 23,748,733 19,217,626 20,074,733
Less - certificate of deposit with a
maturity of more than three months 11,982,000 8,765,000 7,081,000 8,963,000
----------- ----------- ----------- -----------
Cash and cash equivalents reflected
on the Statement of Cash Flows $16,850,914 $14,983,733 $12,136,626 $11,111,733
=========== =========== =========== ===========
Supplemental Disclosures of Cash Flows Information:
Cash paid during the period for:
Interest $ 2,497,367 $ 2,736,568 $10,117,200 $10,492,271
=========== =========== =========== ===========
Income taxes $ - $ - $ 574,491 $ 1,184,208
=========== =========== =========== ===========
Transfer from loans to real estate
acquired through foreclosure $ 132,360 $ - $ - $ 373,425
=========== =========== =========== ===========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
F-7
<PAGE>
BALTIMORE COUNTY SAVINGS BANK, F.S.B.
-------------------------------------
AND SUBSIDIARIES
----------------
Baltimore, Maryland
-------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
Note 1 - Summary of Significant Accounting Policies
------------------------------------------
A. Principles of Consolidation - The Bank owns 100% of Baltimore
County Service Corporation and Ebenezer Road, Inc. Baltimore County
Service Corporation owns 100% of Route 543, Inc. The accompanying
consolidated financial statements include the accounts and
transactions of these companies on a consolidated basis since date
of acquisition. All intercompany transactions have been eliminated
in the consolidated financial statements. Ebenezer Road, Inc. sells
insurance products. Baltimore County Service Corporation and Route
543, Inc. have invested in several joint ventures formed for the
purpose of developing real estate. These investments have been
accounted for on the equity method and separate summary statements
are not presented since the data contained therein is not material
in relation to the consolidated financial statements.
B. Business - The Bank's primary business activity is the acceptance
of deposits from the general public in their market area and using
the proceeds for investments and loan originations. The Bank is
subject to competition from other financial institutions. The Bank
is subject to the regulations of certain federal agencies and
undergoes periodic examinations by those regulatory authorities.
C. Basis of Financial Statement Presentation - The consolidated
financial statements have been prepared in conformity with
generally accepted accounting principles. In preparing the
financial statements, management is required to make estimates and
assumptions that affect the reported amounts of assets and
liabilities as of the date of the statement of financial condition
and revenues and expenses for the period. Actual results could
differ significantly from those estimates. Material estimates that
are particularly susceptible to significant change in the near-term
relate to the determination of the allowance for loan losses and
the valuation of foreclosed real estate and real estate
development.
D. Federal Funds - Federal funds sold are carried at cost which
approximates market.
E. Investments and Mortgage Backed Securities - Investment securities
in equity mutual funds may be held for an indefinite period of time
and are carried at fair value. Investment securities consisting of
federal agency notes and bonds and all of the mortgage backed
securities are carried at cost, since management has the ability
and intention to hold them to maturity. Amortization of related
premiums and discounts are computed using the level yield method
over the life of the security. Gains and losses on all investments
and mortgage backed securities are determined using the specific
identification method.
F-8
<PAGE>
BALTIMORE COUNTY SAVINGS BANK, F.S.B.
- -------------------------------------
AND SUBSIDIARIES
----------------
Baltimore, Maryland
- -------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
Note 1 - Summary of Significant Accounting Policies - Continued
------------------------------------------
F. Loans Receivable - Loans receivable are stated at unpaid principal
balances, less undisbursed portion of loans in process, unearned
interest on consumer loans, deferred loan origination fees and the
allowance for loan losses, since management has the ability and
intention to hold them to maturity.
Loans held for sale are carried at the lower of cost or estimated
market value, determined in the aggregate. In computing cost,
deferred loan origination fees are deducted from the principal
balances of the related loans. There were no loans held for sale at
December 31, 1997, September 30, 1997 and 1996.
The Bank services loans for others and pays the participant its
share of the Bank's collections, net of a stipulated servicing fee.
Loan servicing fees are credited to income when earned and
servicing costs are charged to expense as incurred.
Unearned interest on consumer loans is amortized to income over the
terms of the related loans on the level yield method.
G. Allowance for Loan Losses - An allowance for loan losses is
provided through charges to income in an amount that management
believes will be adequate to absorb losses on existing loans that
may become uncollectible, based on evaluations of the
collectibility of loans and prior loan loss experience. The
evaluations take into consideration such factors as changes in the
nature and volume of the loan portfolio, overall portfolio quality,
review of specific problem loans, and current economic conditions
that may affect the borrowers' ability to pay. Management believes
the allowance for losses on loans is adequate. While management
uses available information to estimate losses on loans, future
additions to the allowances may be necessary based on changes in
economic conditions, particularly in the State of Maryland. In
addition, various regulatory agencies, as an integral part of their
examination process, periodically review the Bank's allowances for
losses on loans. Such agencies may require the Bank to recognize
additions to the allowances based on their judgments about
information available to them at the time of their examination.
F-9
<PAGE>
BALTIMORE COUNTY SAVINGS BANK, F.S.B.
-------------------------------------
AND SUBSIDIARIES
----------------
Baltimore, Maryland
- -------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
Note 1 - Summary of Significant Accounting Policies - Continued
------------------------------------------
G. For the fiscal year ended September 30, 1996, the Bank implemented
the provisions of Statement of Financial Accounting Standards
("SFAS") No. 114, as amended by SFAS No. 118. The Statement
addresses the accounting by creditors for impairment of certain
loans. It is generally applicable for all loans except large groups
of smaller balance homogeneous loans that are collectively
evaluated for impairment, including residential mortgage loans and
consumer installment loans. It also applies to all loans that are
restructured in a troubled debt restructuring involving a
modification of terms. SFAS No. 114 requires that impaired loans be
measured based on the present value of expected future cash flows
discounted at the loan's effective interest rate, or at the loan's
observable market price or the fair value of the collateral if the
loan is collateral dependent. A loan is considered impaired when,
based on current information and events, it is probable that a
creditor will be unable to collect all amounts due according to the
contractual terms of the loan agreement. The impact of adoption of
SFAS No. 114 and as amended by SFAS No. 118 was not material.
Accrual of interest is discontinued on a loan when management
believes, after considering economic and business conditions and
collection efforts, that the borrower's financial condition is such
that collection of interest is doubtful or when payment of
principal and interest has become ninety days past due unless the
obligation is well secured and in the process of collection. When a
payment is received on a loan on non-accrual status, the amount
received is allocated to principal and interest in accordance with
the contractual terms of the loan.
Loan origination fees and certain direct loan origination costs are
deferred and recognized by the interest method over the contractual
life of the related loan as an adjustment of yield.
H. Foreclosed Real Estate - Real estate acquired through foreclosure
is recorded at the lower of cost or fair value. Management
periodically evaluates the recoverability of the carrying value of
the real estate acquired through foreclosure using estimates as
described above in Allowance for Loan Losses. In the event of a
subsequent decline, management provides an additional allowance to
reduce real estate acquired through foreclosure to its fair value
less estimated disposal cost. Costs relating to holding such real
estate are charged against income in the current period while costs
relating to improving such real estate are capitalized until a
saleable condition is reached.
F-10
<PAGE>
BALTIMORE COUNTY SAVINGS BANK, F.S.B. AND SUBSIDIARIES
- ------------------------------------------------------
Baltimore, Maryland
- -------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
Note 1 - Summary of Significant Accounting Policies - Continued
------------------------------------------
I. Investment in Real Estate Development and Loans to Joint Ventures -
Land development costs not in excess of net realizable value are
capitalized and charged to expense as revenue is recognized.
Revenues are recognized when a sale has been consummated. Indirect
costs and administrative expenses are charged as incurred to
periodic income and are not allocated to land development costs.
The Bank capitalizes interest on land development projects in
accordance with Statement 34 of the Financial Accounting Standards
Board. No interest was capitalized during the three month periods
ended December 31, 1997 and 1996 and for the years ended September
30, 1997 and 1996.
J. Premises and Equipment - Premises and equipment are recorded at
cost. Depreciation is computed on the straight-line method, based
on the useful lives of the respective assets.
K. Intangible Assets Acquired, Net - On September 16, 1994, Baltimore
County Savings Bank, F.S.B. purchased the deposits and certain
assets from the Resolution Trust Corporation, receiver of Second
National Federal Savings Association. The Bank classified as an
intangible asset the fair market value assigned to the capacity of
existing savings accounts acquired to generate future earnings
("the Core Deposit Value"). The core deposit value of $133,572 is
being amortized on a straight-line method over five years, the
estimated life of the core deposit value. Accumulated amortization
was $89,041, $82,363 and $55,561 at December 31, 1997 and September
30, 1997 and 1996, respectively.
L. Income Taxes - Deferred income taxes are recognized for temporary
differences between the financial reporting basis and income tax
basis of assets and liabilities based on enacted tax rates expected
to be in effect when such amounts are realized or settled. Deferred
tax assets are recognized only to the extent that is more likely
than not that such amounts will be realized based on consideration
of available evidence. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
M. On October 19, 1997, the Bank sold the deposits of one of its
branches and closed that branch. Deposits sold were approximately
$6,166,000. A gain of $339,000 was realized on the sale.
N. Statement of Cash Flows - In the statement of cash flows, cash and
equivalents include cash, Federal Home Loan Bank of Atlanta
overnight deposits, federal funds and certificates of deposit and
Federal Home Loan Bank of Atlanta time deposits with an original
maturity date less than ninety days.
F-11
<PAGE>
BALTIMORE COUNTY SAVINGS BANK, F.S.B.
- -------------------------------------
AND SUBSIDIARIES
----------------
Baltimore, Maryland
- -------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
Note 2 - Investment Securities
---------------------
The amortized cost and fair values of investment securities are as
follows as of December 31, 1997 and September 30, 1997 and 1996.
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
----------- ------------------ ------------------ -----------
<S> <C> <C> <C> <C>
Available for Sale:
September 30, 1996
Equity security $ 101,376 $ - $ - $ 101,376
=========== ================== ================== ===========
Held to Maturity:
December 31, 1997 (unaudited)
U.S. Government and Agency
Obligations, held to maturity $20,093,162 $ 100,997 $ 3,950 $20,190,209
=========== ================== ================== ===========
September 30, 1997
U.S. Government and Agency
Obligations, held to maturity $30,323,460 $ 100,524 $ 42,194 $30,381,790
=========== ================== ================== ===========
September 30, 1996
U.S. Government and Agency
Obligations, held to maturity $36,298,266 $ 145,720 $ 199,140 $36,244,846
=========== ================== ================== ===========
</TABLE>
The following is a summary of investment securities:
<TABLE>
<CAPTION>
December 31, 1997 September 30, 1997 September 30, 1996
------------------------------- -------------------------------------- ------------------------
Amortized Fair Amortized Fair Amortized Fair
Cost Value Cost Value Cost Value
----------------- ----------- ------------------ ------------------ ----------- -----------
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Available for Sale:
Equity security $ - $ - $ - $ - $ 101,376 $ 101,376
Held to Maturity:
U.S. Government and Agency Obligations
- --------------------------------------
Due within 12
months $ 998,930 $ 1,001,669 $10,981,268 $10,961,904 $ 250,000 $ 251,325
Due beyond 12
months but
within five
years 8,000,000 8,012,234 4,250,000 4,244,197 2,250,000 2,221,350
Due beyond five
years but
within ten
years 10,845,000 10,927,124 14,343,038 14,429,664 30,548,266 30,553,803
Due beyond ten
years 249,232 249,182 749,154 746,025 3,250,000 3,218,368
----------------- ----------- ------------------ ------------------ ----------- -----------
$20,093,162 $20,190,209 $30,323,460 $30,381,790 $36,298,266 $36,244,846
================= =========== ================== ================== =========== ===========
</TABLE>
F-12
<PAGE>
BALTIMORE COUNTY SAVINGS BANK, F.S.B.
- -------------------------------------
AND SUBSIDIARIES
----------------
Baltimore, Maryland
- -------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
Note 2 - Investment Securities - Continued
---------------------
Proceeds from maturities of held to maturity securities were
$17,010,041 and $2,604,608 for the three month periods ended December
31, 1997 and 1996, respectively. There were no gross gains or losses
for the three month period ended December 31, 1997. Proceeds from
sales of available for sale securities were $101,376 for the three
month period ended December 31, 1996. Gross gains of $51,376 and no
gross losses were realized for the three month period ended December
31, 1996.
Proceeds from maturities of held to maturity securities were
$50,160,000 and $16,605,708 for the years ended September 30, 1997 and
1996, respectively. Proceeds from sales and maturities of available
for sale securities were $101,376 and $16,385,705 for the years ended
September 30, 1997 and 1996, respectively. Gross gains realized were
$51,376 for the year ended September 30, 1997. There were no gross
losses realized for the year ended September 30, 1997. During 1996,
gross gains of $6,427 and gross losses of $200,817 were realized on
these sales.
Note 3 - Loans Receivable
----------------
Loans receivable at December 31, 1997, September 30, 1997 and
1996 consist of the following:
<TABLE>
<CAPTION>
December 31, September 30,
------------- --------------------------
1997 1997 1996
------------- ------------ ------------
(Unaudited)
<S> <C> <C> <C>
Single-family residential mortgages $106,909,478 $103,677,278 $ 94,275,041
Single-family rental property loans 6,221,498 6,408,729 7,065,488
Commercial loans 9,979,568 10,169,090 10,315,794
Construction loans 7,940,820 8,644,642 11,427,073
Commercial lines of credit 118,500 60,000 262,000
Automobile loans 30,342,010 32,632,981 39,924,708
Home equity loans 4,076,019 3,985,840 1,855,345
Savings account loans 754,324 825,154 1,028,727
------------ ------------ ------------
166,342,217 166,403,714 166,154,176
Less - undisbursed portion of
loans in process 2,271,081 2,807,231 5,087,519
- unearned interest 3,016,053 3,375,711 4,757,384
- deferred loan origination
fees 540,834 566,965 822,608
- allowance for loan
losses 982,690 977,639 926,491
------------ ------------ ------------
$159,531,559 $158,676,168 $154,560,174
============ ============ ============
</TABLE>
F-13
<PAGE>
BALTIMORE COUNTY SAVINGS BANK, F.S.B.
- -------------------------------------
AND SUBSIDIARIES
----------------
Baltimore, Maryland
- -------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
Note 3 - Loans Receivable - Continued
----------------
The following is a summary of the allowance for loan losses:
<TABLE>
<CAPTION>
December 31, September 30,
------------------------- -------------------------
1997 1996 1997 1996
---------- ---------- ---------- ------------
(Unaudited)
<S> <C> <C> <C> <C>
Balance - beginning of year $ 977,639 $ 926,491 $ 926,491 $ 787,959
Provision for (reduction of)
losses on loans 36,250 (835) 285,942 433,742
Charge-offs (105,009) (145,117) (392,963) (397,544)
Recoveries 73,810 34,050 158,169 102,334
--------- --------- --------- ---------
Balance - end of year $ 982,690 $ 814,589 $ 977,639 $ 926,491
========= ========= ========= =========
</TABLE>
Residential lending is generally considered to involve less risk
than other forms of lending, although payment experience on these
loans is dependent to some extent on economic and market conditions in
the Bank's lending area. Multifamily residential, commercial,
construction and other loan repayments are generally dependent on the
operations of the related properties or the financial condition of its
borrower or guarantor. Accordingly, repayment of such loans can be
more susceptible to adverse conditions in the real estate market and
the regional economy.
A significant portion of the Bank's loans receivable are mortgage
loans secured by residential and commercial real estate properties
located in the State of Maryland. Loans are extended only after
evaluation by management of customers' creditworthiness and other
relevant factors on a case-by-case basis. The Bank generally does not
lend more than 90% of the appraised value of a property and requires
private mortgage insurance on residential mortgages with loan-to-value
ratios in excess of 80%. In addition, the Bank generally obtains
personal guarantees of repayment from borrowers and/or others for
multifamily residential, commercial and construction loans and
disburses the proceeds of construction and similar loans only as work
progresses on the related projects. Automobile loans are secured by
vehicles and home equity loans are secured by subordinated real estate
properties. Repayments of automobile loans and home equity loans are
expected primarily from the cash flows of the borrowers.
Non-accrual loans for which interest has been reduced totaled
approximately $1,528,000, $1,843,000 and $2,287,000 at December 31,
1997 and September 30, 1997 and 1996, respectively. There were no
impaired loans as defined by SFAS No. 114 at December 31, 1996 and
September 30, 1997 and 1996. There was no interest income recognized
on impaired loans during these periods. The Bank was not committed to
fund additional amounts on these loans.
F-14
<PAGE>
BALTIMORE COUNTY SAVINGS BANK, F.S.B.
- -------------------------------------
AND SUBSIDIARIES
----------------
Baltimore, Maryland
- -------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
Note 3 - Loans Receivable - Continued
----------------
Interest income that would have been recorded under the original
terms of non-accrual loans and the interest actually recognized for
the three month periods ended December 31, 1997 and 1996 and for the
years ended September 30, are summarized below:
<TABLE>
<CAPTION>
December 31, September 30,
-------------------- --------------------
1997 1996 1997 1996
-------- -------- -------- --------
(Unaudited)
<S> <C> <C> <C> <C>
Interest income that would have
been recognized $70,048 $82,706 $96,732 $91,584
Interest income recognized 24,447 31,343 29,727 38,535
------- ------- ------- -------
Interest income not
recognized $45,601 $51,363 $67,005 $53,049
======= ======= ======= =======
</TABLE>
The following table set forth the amount and activity of the loans
outstanding to officers and directors at December 31, 1997 and
September 30, 1997 and 1996.
<TABLE>
<CAPTION>
December 31, September 30,
------------ ---------------------
1997 1997 1996
------------ ---------- ---------
(Unaudited)
<S> <C> <C> <C>
Beginning balance $509,375 $ 468,331 $ 503,071
New loans - 144,390 18,000
Loan repayments (26,854) (103,346) (52,740)
-------- --------- ---------
Ending balance $482,521 $ 509,375 $ 468,331
======== ========= =========
</TABLE>
The Bank services loans for others. The amount of such loans
serviced at December 31, 1997 and September 30, 1997 and 1996 was
$7,579,937, $8,155,940 and $9,830,194, respectively. At December 31,
1997 and September 30, 1997 and 1996, the balance of loans sold by the
Bank with recourse amounted to $963,604, $1,082,187 and $1,284,074,
respectively.
Custodial escrow balances maintained in connection with the
foregoing loan servicings were approximately $103,503, $54,466 and
$70,326 at December 31, 1997 and September 30, 1997 and 1996,
respectively.
The Bank is a party to financial instruments with off-balance-
sheet risk made in the normal course of business to meet the financing
needs of its customers. These financial instruments are standby
letters of credit, lines of credit and commitments to fund mortgage
loans and involve to varying degrees elements of credit risk in excess
of the amount recognized in the statement of financial position. The
contract amounts of those instruments express the extent of
involvement the Bank has in this class of financial instruments and
represents the Bank's exposure to credit loss from nonperformance by
the other party.
F-15
<PAGE>
BALTIMORE COUNTY SAVINGS BANK, F.S.B.
- -------------------------------------
AND SUBSIDIARIES
----------------
Baltimore, Maryland
- -------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
Note 3 - Loans Receivable - Continued
----------------
Unless noted otherwise, the Bank does not require collateral or
other security to support financial instruments with off-balance-sheet
credit risk.
<TABLE>
<CAPTION>
Financial Instruments Whose
Contract Amounts Represent Contract Amount At
----------------------------------------------------------
Credit Risk December 31, 1997 September 30, 1997 September 30, 1996
- ------------------------------- ------------------ ------------------ ------------------
(Unaudited)
<S> <C> <C> <C>
Standby letters of credit $2,717,067 $2,744,487 $1,311,632
Lines of credit $8,908,500 $8,240,400 $3,771,500
Mortgage loan commitments,
fixed rate $1,260,700 $1,146,600 $5,669,700
Mortgage loan commitments,
variable rate $ 290,500 $ 564,000 $ -
</TABLE>
Standby letters of credit are conditional commitments issued by
the Bank guaranteeing performance by a customer to a third party.
Those guarantees are issued primarily to support private borrowing
arrangements, generally limited to real estate transactions. Unless
otherwise noted, the standby letters of credit are not collateralized.
The credit risk involved in issuing letters of credit is essentially
the same as that involved in extending loan facilities to customers.
Lines of credit are loan commitments to individuals and companies
and have fixed expiration dates as long as there is no violation of
any condition established in the contract. The Bank evaluates each
customer's credit worthiness on a case-by-case basis.
Rates on mortgage loan commitments for fixed rate loans ranged
from 6.75% to 7.75%, 7.125% to 7.5% and 7.25% to 9.25% at December 31,
1997 and September 31, 1997 and 1996, respectively. Rates on mortgage
loan commitments for variable rate loans ranged from 7.0% to 7.5% and
prime less .25% at December 31, 1997 and 7.25% to 8.5% and prime plus
1% at September 30, 1997.
No amount was recognized in the statement of financial position
at December 31, 1997 and September 30, 1997 and 1996, as liability for
credit loss nor was any liability recognized for fees received for
standby letters of credit.
The Bank grants loans to customers, substantially all of whom are
residents of the Metropolitan Baltimore and Harford County areas.
F-16
<PAGE>
BALTIMORE COUNTY SAVINGS BANK, F.S.B.
- -------------------------------------
AND SUBSIDIARIES
----------------
Baltimore, Maryland
- -------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
Note 4 - Mortgage Backed Securities
--------------------------
The amortized cost and fair values of mortgage backed securities
are as follows as of December 31, 1997 and September 30, 1997 and
1996:
<TABLE>
<CAPTION>
Held to Maturity:
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
December 31, 1997
-----------------
(Unaudited)
GNMA certificates $ 494,051 $ 18,218 $ - $ 512,269
FNMA certificates 29,604,500 224,371 44,472 29,784,399
FHLMC participating
certificates 6,011,823 296,929 8,785 6,299,967
----------- -------- -------- -----------
$36,110,374 $539,518 $ 53,257 $36,596,635
=========== ======== ======== ===========
September 30, 1997
------------------
FNMA certificates $27,473,254 $ 8,278 $511,521 $26,970,011
FHLMC participating
certificates 9,715,827 96,236 30,352 9,781,711
----------- -------- -------- -----------
$37,189,081 $104,514 $541,873 $36,751,722
=========== ======== ======== ===========
September 30, 1996
------------------
FNMA certificates $29,196,918 $ 9,836 $578,111 $28,628,643
FHLMC participating
certificates 10,574,090 119,783 34,752 10,659,121
----------- -------- -------- -----------
$39,771,008 $129,619 $612,863 $39,287,764
=========== ======== ======== ===========
</TABLE>
No gains or losses were realized during the three month periods
ended December 31, 1997 and 1996 and for the years ended September 30,
1997 and 1996, respectively.
Note 5 - Foreclosed Real Estate
----------------------
Foreclosed real estate at December 31, 1997 and September 30,
1997 and 1996 is summarized by major classification as follows:
<TABLE>
<CAPTION>
December 31, September 30,
------------- --------------------------
1997 1997 1996
---- ---- ----
(Unaudited)
<S> <C> <C> <C>
EPIC loans $ 55,903 $ 55,903 $ 65,314
Residential real estate lot 132,360 - 156,632
Allowance for losses (69,139) (55,903) (87,965)
-------- -------- --------
$119,124 $ - $133,981
======== ======== ========
</TABLE>
F-17
<PAGE>
BALTIMORE COUNTY SAVINGS BANK, F.S.B.
- -------------------------------------
AND SUBSIDIARIES
----------------
Baltimore, Maryland
- -------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
Note 5 - Foreclosed Real Estate - Continued
----------------------
The following is a summary of the allowances for losses on
foreclosed real estate:
<TABLE>
<CAPTION>
December 31, September 30,
------------------- -------------------
1997 1996 1997 1996
---- ---- ---- ----
(Unaudited)
<S> <C> <C> <C> <C>
Balance - beginning of year $55,903 $ 87,965 $ 87,965 $ 94,699
Provision for losses 13,236 - - 12,593
Recoveries - (12,505) (32,062) (19,327)
------- -------- -------- --------
Balance - end of year $69,139 $ 75,460 $ 55,903 $ 87,965
======= ======== ======== ========
</TABLE>
Note 6 - Investment in Real Estate Development and Loans to Joint Ventures
-----------------------------------------------------------------
The subsidiaries are parties to joint ventures formed for the
purpose of developing lots for resale. The subsidiaries' interest in
the profits or losses of the joint ventures range from 20% to 50%. The
subsidiaries also owned 100% of a real estate project during 1996. The
project was completed and sold out during 1996. The subsidiaries'
equity in the joint ventures is $12,732, $12,732 and $51,466 at the
periods ended December 31, 1997 and September 30, 1997 and 1996,
respectively.
During the periods ended December 31, 1997 and September 30, 1997
and 1996, the Bank made acquisition, development and construction loans
to the joint ventures mentioned above. These loans are accounted for as
an investment in joint ventures. The loan balance to the joint venture
is as follows:
<TABLE>
<CAPTION>
December 31, September 30,
----------- ------------------------
1997 1997 1996
---- ---- ----
(Unaudited)
<S> <C> <C> <C>
Loans outstanding $ - $ - $349,000
Allowance for losses - - (34,900)
----- ------ --------
$ - $ - $314,100
===== ====== ========
</TABLE>
The following is a summary of the allowance for losses on loans
to the joint venture:
<TABLE>
<CAPTION>
December 31, September 30,
----------------------- ------------------------
1997 1996 1997 1996
---- ---- ---- ----
(Unaudited)
<S> <C> <C> <C> <C>
Balance - beginning of year $ - $(34,900) $(34,900) $(809,750)
Reduction of provision for
losses, net of recoveries - - 34,900 774,850
------- -------- -------- ---------
Balance - end of year $ - $(34,900) $ - $ (34,900)
======= ======== ======== =========
</TABLE>
F-18
<PAGE>
BALTIMORE COUNTY SAVINGS BANK, F.S.B.
- -------------------------------------
AND SUBSIDIARIES
----------------
Baltimore, Maryland
- -------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
Note 6 - Investment in Real Estate Development and Loans to Joint Ventures -
-----------------------------------------------------------------
Continued
Gain from real estate development and joint venture consists of
the following for the three month periods ended December 31, 1997 and
1996 and for the years ended September 30, 1997 and 1996.
<TABLE>
<CAPTION>
December 31, September 30,
--------------------- --------------------
1997 1996 1997 1996
---- ---- ---- ----
(Unaudited)
<S> <C> <C> <C> <C>
Reduction of provision for loss
on real estate development and
joint venture $ - $ - $ 34,900 $ 774,850
Loss from real estate
development and joint venture - 1,417 - (122,983)
---------- -------- --------- ---------
$ - $ 1,417 $ 34,900 $ 651,867
========== ======== ========= =========
</TABLE>
Note 7 - Premises and Equipment
----------------------
Premises and equipment at December 31, 1997 and September 30,
1997 and 1996 are summarized by major classification as follows:
<TABLE>
<CAPTION>
December 31, September 30,
------------ -------------------------
1997 1997 1996 Life
---- ---- ---- ----
<S> <C> <C> <C> <C>
(Unaudited)
Office building $2,440,860 $2,440,860 $2,286,489 50 Years
Leasehold improvements 88,703 88,703 89,703 7-31 Years
Furniture, fixtures and equipment 2,759,567 2,800,592 2,552,663 10 Years
---------- ---------- ----------
5,289,130 5,330,155 4,928,855
Accumulated depreciation 2,497,903 2,473,167 2,237,746
---------- ---------- ----------
$2,791,227 $2,856,988 $2,691,109
========== ========== ==========
</TABLE>
The Bank has entered into long-term leases for the land on which
the main office is located and the premises of its branch offices.
Rental expense under long-term leases for property for the three month
periods ended December 31, 1997 and 1996 and for the years ended
September 30, 1997 and 1996 was $48,280, $47,986, $191,945 and
$187,434, respectively. At December 31, 1997, minimum rental
commitments under noncancellable leases are as follows:
<TABLE>
<CAPTION>
Years Ended December 31, Amount
------------------------ --------
<S> <C>
1998 $164,195
1999 102,874
2000 103,817
2001 52,379
After 2001 30,574
--------
$453,839
========
</TABLE>
F-19
<PAGE>
BALTIMORE COUNTY SAVINGS BANK, F.S.B.
- -------------------------------------
AND SUBSIDIARIES
----------------
Baltimore, Maryland
- -------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
Note 8 - Deposits - Continued
--------
Deposits are summarized as follows at December 31, 1997 and
September 30, 1997 and 1996:
<TABLE>
<CAPTION>
December 31, September 30,
---------------------- --------------------------------------------
1997 1997 1996
---------------------- -------------------- ---------------------
Amount % Amount % Amount %
------------- ------- ------------ ------- ------------ -------
(Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Type of Account
- ---------------
Deposits
--------
NOW $ 21,634,698 9.74% $ 20,528,412 9.14% $ 20,415,577 8.75%
Non-interest
bearing NOW 3,762,440 1.69 3,674,511 1.63 3,580,090 1.53
Money market 9,508,881 4.28 10,054,713 4.48 10,571,478 4.54
Passbook
savings 58,874,363 26.49 60,657,069 27.00 64,497,932 27.64
Certificates 127,765,929 57.49 128,994,405 57.42 133,704,288 57.31
------------ ------ ------------ ------ ------------ ------
221,546,311 99.69 223,909,110 99.67 232,769,365 99.77
Accrued interest
payable 698,727 .31 746,971 .33 541,234 .23
------------ ------ ------------ ------ ------------ ------
$222,245,038 100.00% $224,656,081 100.00% $233,310,599 100.00%
============ ====== ============ ====== ============ ======
</TABLE>
The aggregate amount of jumbo certificates of deposit with a
minimum denomination of $100,000 was approximately $11,394,840,
$10,485,518 and $6,526,251 at December 31, 1997 and September 30, 1997
and 1996, respectively. Deposits in excess of $100,000 are not insured
by the Savings Association Insurance Fund.
At December 31, 1997, scheduled maturities of certificates of
deposit are as follows:
<TABLE>
<CAPTION>
<S> <C>
1997 $ 90,287,497
1998 19,501,603
1999 11,622,577
2000 and thereafter 6,354,252
------------
$127,765,929
============
</TABLE>
Interest expense on deposits for the three month periods ended
December 31, 1997 and 1996 and for the twelve month periods ending
September 30, 1997 and 1996 is as follows:
<TABLE>
<CAPTION>
December 31, September 30,
-------------------------- --------------------------
1997 1996 1997 1996
------------- ----------- ------------- -----------
(Unaudited)
<S> <C> <C> <C> <C>
NOW $ 99,799 $ 106,028 $ 476,519 $ 439,045
Money market 86,860 89,026 346,331 368,247
Passbooks savings 499,540 544,608 1,874,961 2,448,547
Certificates 1,762,924 1,943,791 7,614,653 7,364,732
---------- ---------- ----------- -----------
$2,449,123 $2,683,453 $10,312,464 $10,620,571
========== ========== =========== ===========
</TABLE>
F-20
<PAGE>
BALTIMORE COUNTY SAVINGS BANK, F.S.B.
- -------------------------------------
AND SUBSIDIARIES
----------------
Baltimore, Maryland
- -------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
Note 8 - Deposits - Continued
--------
Deposit Insurance Reform. Currently, there are two deposit
insurance funds maintained by the Federal Deposit Insurance Corporation
("FDIC"), the Bank Insurance Fund ("BIF") and the Savings Association
Insurance Fund ("SAIF"). The Bank's deposits are insured by SAIF.
Legislation has been passed concerning the Deposit Insurance Reform
that required the Bank to pay a one-time assessment of .657% of insured
deposits at March 31, 1995, which was approximately $1,305,000 and was
accrued at September 30, 1996. The Bank's SAIF deposit insurance
premiums were reduced to .064% of insured deposits beginning January 1,
1997 from the rate of .23% of insured deposits. BIF and SAIF may be
merged on January 1, 1999, if there are no savings institutions at that
time.
Note 9 - Borrowings
----------
At December 31, 1997 and September 30, 1997 and 1996 and for the
three month period ended December 31, 1997 and for the year ended
September 30, 1997, the Bank had no outstanding borrowings. For the
year ended September 30, 1996, the Bank borrowed at various times on
their line of credit from the Federal Home Loan Bank of Atlanta. The
line has no predetermined limit and is secured by a blanket lien on
mortgages. Each borrowing is evaluated on a case-by-case basis by the
lender.
Note 10- Pension Plan
------------
The Bank has a noncontributory, defined contribution, pension
plan covering substantially all employees. It is a money purchase plan
with contributions made each year for every participant in accordance
with actuarial recommended formula. There is no past service liability
or unfunded value of vested benefits as of December 31, 1996, the date
of latest available annual review and valuation of the plan.
The expense for the pension plan amounted to $70,846, $62,637,
$271,826 and $255,352 for the three month periods ended December 31,
1997 and 1996 and for the years ended September 30, 1997 and 1996,
respectively.
Note 11- Directors Retirement Plan
-------------------------
Effective July 1995, the Bank adopted a Deferred Compensation
Plan covering all directors. The Plan provides benefits based upon
certain vesting requirements. During 1997, the amount of the Plan's
benefit was increased from $40,000 to $80,000 per director.
Compensation expense recognized in connection with the Plan for the
three month periods ended December 31, 1997 and 1996 and for the years
ended September 30, 1997 and 1996 was $68,629, $11,210, $412,859 and
$39,866, respectively.
F-21
<PAGE>
BALTIMORE COUNTY SAVINGS BANK, F.S.B.
- -------------------------------------
AND SUBSIDIARIES
----------------
Baltimore, Maryland
- -------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
Note 12- Retained Earnings
-----------------
Under the regulatory capital requirements of the Office of Thrift
Supervision ("OTS"), savings banks are required to maintain minimal
capital requirements by satisfying three capital standards: a tangible
capital requirement, a leverage ratio requirement and a risk-based
capital requirement. Under the tangible capital requirement, the Bank's
tangible capital (the amount of retained earnings computed under
generally accepted accounting principles) must be equal to 1.5% of
adjusted total assets. Under the leverage ratio requirement, the Bank's
core capital must be equal to 3.0% of adjusted total assets. In
addition, under the risk-based capital requirement, the Bank must
maintain core and supplemental capital (core capital plus any general
loss reserves) equal to 8% of risk-weighted assets (total assets plus
off-balance-sheet items multiplied by the appropriate risk weights).
The Federal Deposit Insurance Corporation Improvement Act
(FDICIA) of 1991 was signed into law on December 31, 1991, and
regulations implementing the prompt corrective action provisions became
effective on December 12, 1992. The prompt corrective action
regulations define specific capital categories based on an
institution's capital ratios. The capital categories, in declining
order, are "well capitalized," "adequately capitalized,"
"undercapitalized," "significantly undercapitalized," and "critically
undercapitalized". Institutions categorized as "undercapitalized" or
lower are subject to certain restrictions, including the requirement to
file a capital plan with its primary federal regulator, prohibitions on
the payment of dividends and management fees, restrictions on executive
compensation, and increased supervisory monitoring, among other things.
To be considered "well capitalized," an institution must generally have
a leverage capital ratio of at least 5%, a Tier I risk-based capital
ratio of at least 6% and a total risk-based capital ratio of at least
10%. At September 30, 1997, the Bank met the criteria required to be
considered "well capitalized" under this regulation.
As of December 31, 1997, the most recent notification from the
Federal Deposit Insurance Corporation has categorized the Bank as well
capitalized under the regulatory framework for prompt corrective
action. To be categorized as well capitalized the Bank must maintain
minimum total risk-based, Tier I risk-based and Tier I leverage ratios
at least 100 to 200 basis points above those ratios set forth in the
table. There have been no conditions or events since that notification
that management believes have changed the Bank's category.
F-22
<PAGE>
BALTIMORE COUNTY SAVINGS BANK, F.S.B.
- -------------------------------------
AND SUBSIDIARIES
----------------
Baltimore, Maryland
- -------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
Note 12- Retained Earnings - Continued
-----------------
The following table presents the Bank's capital position based on
the December 31, 1997 and September 30, 1997 financial statements and
the current capital requirements.
<TABLE>
<CAPTION>
To Be Well Capitalized
For Capital Under Prompt Corrective
Actual Adequacy Purposes Action Provisions
------------------------- ------------------------- -------------------------
Actual % of Required % of Required % of
Amount Assets Amount Assets Amount Assets
------ ------ --------- ------ -------- ------
At December 31, 1997
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Tangible (1) $ 23,589,315 9.42% $ 3,757,864 1.50% $ N/A N/A %
Tier I capital (2) $ 23,589,315 17.53% $ N/A N/A % $ 8,072,628 6.00%
Core (1) $ 23,589,315 9.42% $ 7,515,728 3.00% $12,526,213 5.00%
Risk-weighted (2) $ 24,572,005 18.26% $10,763,504 8.00% $13,454,380 10.00%
At September 30, 1997
-------------------------------------------------------------------------------------
Tangible (1) $ 22,900,593 9.10% $ 3,775,114 1.50% $ N/A N/A%
Tier I capital (2) $ 22,900,593 16.72% $ N/A N/A % $ 8,218,975 6.00%
Core (1) $ 22,900,593 9.10% $ 7,550,228 3.00% $12,583,714 5.00%
Risk-weighted (2) $ 23,878,232 17.43% $10,958,634 8.00% $13,698,292 10.00%
</TABLE>
(1) To adjusted total assets.
(2) To risk-weighted assets.
<TABLE>
<CAPTION>
December 31, September 30,
1997 1997
-------------- -------------
(Unaudited)
<S> <C> <C>
Total Retained Earnings $ 24,515,761 $ 23,858,449
Less: Non-allowable items
Intangible assets acquired, net (44,531) (51,209)
Investment in and advances to
non-includable subsidiaries (881,915) (906,647)
------------ ------------
Tangible and core capital 23,589,315 22,900,593
General valuation allowance 982,690 977,639
------------ ------------
Risk-based capital $ 24,572,005 $ 23,878,232
============ ============
Total Assets $250,581,515 $251,738,224
Less: Non-allowable items
Intangible assets acquired, net (44,531) (51,209)
Assets of non-includable
subsidiaries not eliminated for
regulatory capital purposes (12,732) (12,727)
------------ ------------
Tangible and adjusted tangible
assets $250,524,252 $251,674,288
============ ============
Risk-weighted assets $134,543,799 $136,982,924
============ ============
</TABLE>
F-23
<PAGE>
BALTIMORE COUNTY SAVINGS BANK, F.S.B.
- -------------------------------------
AND SUBSIDIARIES
----------------
Baltimore, Maryland
- -------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
Note 12- Retained Earnings - Continued
-----------------
The OTS has adopted an interest rate risk component of regulatory
capital requirements effective January 1, 1994. The rule requires
additional capital to be maintained if the Bank's interest rate risk
exposure, measured by the decline in the market value of the Bank's
net portfolio value, exceeds 2% of assets as a result of a 200 basis
point shift in interest rates. As of December 31, 1997, the Bank is
not subject to the interest rate risk requirement.
Note 13- Income Taxes
------------
The current tax provision consists of the following for the three
month periods ended December 31, 1997 and 1996 and the year ended
September 30, 1997 and 1996:
<TABLE>
<CAPTION>
December 31, September 30,
------------------ ---------- -----------
1997 1996 1997 1996
-------- -------- ---------- -----------
(Unaudited)
<S> <C> <C> <C> <C>
Current expense $404,140 $201,249 $ 669,285 $ 806,370
Deferred expense (benefit) 22,235 213,491 631,628 (94,661)
-------- -------- ---------- --------
Total tax expense $426,375 $414,740 $1,300,913 $711,709
======== ======== ========== ========
</TABLE>
The tax effects to temporary differences that give rise to
significant portions of the deferred tax assets and deferred tax
liabilities at December 31, 1997 and September 30, 1997 and 1996 are
as follows:
<TABLE>
<CAPTION>
December 31, September 30,
------------- ---------------------------
1997 1997 1996
------------- ----------- ------------
<S> <C> <C> <C>
(Unaudited)
Deferred Tax Assets:
SAIF one-time assessment $ - $ - $ 504,339
Deferred loan origination fees 105,261 140,348 280,696
Allowance for loan losses 379,514 376,792 380,190
Allowance for uncollected interest 17,611 25,877 20,488
--------- --------- ----------
Total gross deferred tax assets 502,386 543,017 1,185,713
Deferred Tax Liabilities:
Federal Home Loan Bank of Atlanta
stock dividends (151,928) (151,928) (151,928)
Depreciation (94,464) (93,820) (107,142)
Bad debt deduction in excess of
base year reserves (361,767) (380,807) (378,553)
Net unrealized gains on investment
securities - - (19,841)
--------- --------- ----------
Total gross deferred tax
liabilities (608,159) (626,555) (657,464)
--------- --------- ----------
Net Deferred Tax Assets (Liabilities) $(105,773) $ (83,538) $ 528,249
========= ========= ==========
</TABLE>
F-24
<PAGE>
BALTIMORE COUNTY SAVINGS BANK, F.S.B.
- -------------------------------------
AND SUBSIDIARIES
----------------
Baltimore, Maryland
- -------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
Note 13- Income Taxes - Continued
------------
The amount computed by applying the statutory federal income tax
rate to income before taxes and extraordinary item is greater than the
taxes provided for the following reasons:
<TABLE>
<CAPTION>
For the Three Month Periods Ended December 31,
-------------------------------------------------
1997 1996
---------------------- ----------------------
Precent Percent
of Pretax of Pretax
Amount Income Amount Income
------------ ------------ ----------- ---------
(Unaudited)
<S> <C> <C> <C> <C>
Statutory federal income
tax rate $ 368,454 34.00% $347,356 34.00%
Increases (Decreases)
Resulting From
- --------------------
State income tax net
of federal income
tax benefit 50,932 4.70 49,603 4.86
Other 6,989 .64 17,781 1.74
---------- ----- -------- -------
$ 426,375 39.34% $414,740 40.60
========== ===== ======== =======
</TABLE>
<TABLE>
<CAPTION>
For the Years Ended September 30,
------------------------------------------------
1997 1996
-------------------- --------------------
Percent Percent
of Pretax of Pretax
Amount Income Amount Income
------ --------- ------ ---------
<S> <C> <C> <C> <C>
Statutory federal income
tax rate $1,114,488 34.00% $651,280 34.00%
Increases (Decreases)
Resulting From
- --------------------
State income tax net
of federal income
tax benefit 157,442 4.80 112,153 5.85
Other 28,983 .88 (51,724) (2.70)
---------- ----- -------- -------
$1,300,913 39.68% $711,709 37.15%
========== ===== ======== =======
</TABLE>
The Bank and its subsidiaries file a consolidated income tax return on a
fiscal year basis. The returns have been audited by the Internal Revenue
Service through the year ended September 30, 1994.
F-25
<PAGE>
BALTIMORE COUNTY SAVINGS BANK, F.S.B.
-------------------------------------
AND SUBSIDIARIES
----------------
Baltimore, Maryland
- -------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
Note 13- Income Taxes - Continued
------------
The Bank was allowed a special bad debt deduction limited
generally to 8% of otherwise taxable income for the year beginning
January 1, 1988 through December 31, 1995. Beginning January 1, 1996
the percentage of taxable income method of computing the Bank's tax bad
debt deduction is no longer allowed and the amount by which the tax
reserve for bad debts exceeds such amount at September 30, 1988 must be
recaptured over a six year period. A tax liability has been established
for the recapture. If the amounts which qualify as deductions for
federal income tax purposes are later used for purposes other than to
absorb loan losses, including distributions in liquidations, they will
be subject to federal income tax at the then current corporate rate.
The accumulated amount of the retained earnings for which income taxes
have not been accrued at December 31, 1997 and September 30, 1997 and
1996 was $4,227,000. The unrecorded deferred tax liability on the above
amount is approximately $1,633,000 at December 31, 1997 and September
30, 1997 and 1996.
Note 14- Disclosures About Fair Value of Financial Instruments
-----------------------------------------------------
The estimated fair values of the Bank's financial instruments are
summarized below. The fair values of a significant portion of these
financial instruments are estimates derived using present value
techniques prescribed by the FASB and may not be indicative of the net
realizable or liquidation values. Also, the calculation of estimated
fair values is based on market conditions at a specific point in time
and may not reflect current or future fair values.
The carrying amount is a reasonable estimate of fair value for
cash, federal funds and interest-bearing deposits in other banks. Fair
value is based upon market prices quoted by dealers for investment
securities and mortgage backed securities. The carrying amount of
Federal Home Loan Bank of Atlanta stock is a reasonable estimate of
fair value. Loans receivable were discounted using a single discount
rate, comparing the current rates at which similar loans would be made
to borrowers with similar credit ratings and for the same remaining
maturities. These rates were used for each aggregated category of loans
as reported on the Office of Thrift Supervision Quarterly Report. The
fair value of demand deposits, savings accounts and money market
deposits is the amount payable on demand at the reporting date. The
fair value of fixed-maturity certificates of deposit is estimated using
the rates currently offered on deposits of similar remaining
maturities.
F-26
<PAGE>
BALTIMORE COUNTY SAVINGS BANK, F.S.B.
- -------------------------------------
AND SUBSIDIARIES
----------------
Baltimore, Maryland
- -------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
Note 14- Disclosures About Fair Value of Financial Instruments - Continued
-----------------------------------------------------
The estimated fair values of the Bank's financial instruments are
as follows:
<TABLE>
<CAPTION>
December 31, 1997 September 30, 1997 September 30, 1996
---------------------- ---------------------- ----------------------
Carrying Estimated Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value Amount Fair Value
--------- ----------- --------- ---------- -------- ----------
(Unaudited) (Amounts in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Financial Assets
- ----------------
Cash $ 2,857 $ 2,857 $ 3,909 $ 3,909 $ 4,786 $ 4,786
Interest bearing
deposits in
other banks 20,159 20,159 8,206 8,206 9,065 9,065
Federal funds
sold 5,817 5,817 7,102 7,102 6,225 6,225
Investment securities -
available for sale - - - - 101 101
Investment securities -
held to maturity 20,093 20,190 30,323 30,382 36,298 36,245
Loans Receivable
- ----------------
Mortgage loans 127,376 131,628 125,034 127,858 117,001 117,890
Share loans 754 754 825 825 1,028 1,028
Consumer loans 31,402 31,854 32,818 33,280 36,531 36,851
Mortgage backed
securities 36,110 36,597 37,189 36,752 39,771 39,288
Federal Home Loan
Bank of Atlanta
stock 1,433 1,433 1,433 1,433 1,301 1,301
Financial Liabilities
- ---------------------
Deposits 222,245 222,422 224,656 224,765 $233,311 $233,863
Mortgage loan
commitments - 1,551 - 1,711 - 5,670
</TABLE>
F-27
<PAGE>
BALTIMORE COUNTY SAVINGS BANK, F.S.B.
- -------------------------------------
AND SUBSIDIARIES
----------------
Baltimore, Maryland
- -------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
Note 15- Plan of Reorganization
----------------------
On October 22, 1997, the Board of Directors of the Bank adopted
the Plan of Reorganization, which was subsequently amended, pursuant to
which the Bank will reorganize into the federal mutual holding company
form of organization as a wholly-owned subsidiary of BCSB Bankcorp,
Inc., which in turn will be a majority-owned subsidiary of Baltimore
County Savings Bank, M.H.C. Following receipt of all required
regulatory approvals, the approval of the members of the Bank entitled
to vote on the Plan of Reorganization, and the satisfaction of all
other conditions precedent to the Reorganization, the Bank will
consummate the Reorganization. Following completion of the
Reorganization, the Bank in its stock form will continue to conduct its
business and operations from the same offices with the same personnel
as the Bank conducted prior to the Reorganization. The Reorganization
will not affect the balances, interest rates, or other terms of the
Bank's loans or deposit accounts and the deposit accounts will continue
to be insured by the FDIC to the same extent prior to the
Reorganization.
Under the regulations of the Office of Thrift Supervision
("OTS"), the Bank will not be permitted to pay dividends on its stock
after the Reorganization if its regulatory capital would thereby be
reduced below the amount then required for the Bank's regulatory
capital requirements. Federal regulations also preclude any repurchase
of the stock for three years after the Reorganization except for an
offer made on a pro rata basis to all stockholders of the Bank and with
the prior approval of the OTS. The Bank may, however, make capital
distributions up to 100% of its net income plus the amount that would
reduce by one-half its surplus capital ratio at the beginning of the
calendar year, subject to the aforementioned restrictions, and the Bank
has not been notified that it is in need of more than normal
supervision. As of December 31, 1997, the Bank has not been notified
that it requires more than normal supervision.
The Board also approved establishment of the Baltimore County
Savings Bank Foundation. The Foundation will be dedicated to
charitable and educational purposes within the Baltimore Metropolitan
Area. The initial contribution funding the Foundation will be 75,000
shares of common stock in BCSB Bankcorp, Inc.
The costs associated with the Reorganization are expected to be
deferred and deducted from the proceeds from the sale of stock. If the
Reorganization does not occur, related expenses will be deducted from
current income. Deferred cost aggregated was $150,034 at December 31,
1997.
F-28
<PAGE>
BALTIMORE COUNTY SAVINGS BANK, F.S.B.
- -------------------------------------
AND SUBSIDIARIES
----------------
Baltimore, Maryland
- -------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
Note 16- Recent Accounting Pronouncements
--------------------------------
FASB Statement on Earnings per Share - In February 1997, FASB
issued Statement of Financial Accounting Standards ("SFAS") No. 128,
which is effective for financial statements issued for periods ending
after December 15, 1997. This Statement establishes standards for
computing and presenting earnings per share ("EPS"). It replaces the
presentation of primary EPS with a presentation of basic EPS.
Management believes the adoption of this Statement will not have a
significant effect on the Bank's EPS.
FASB Statement on Disclosure of Information About Capital
Structure - In February 1997, FASB issued SFAS No. 129 which
establishes standards for disclosing information about capital
structure. This Statement is effective for fiscal years ending after
December 15, 1997. Management believes the adoption of this Statement
will not have a material effect on the Bank's consolidated financial
statements.
FASB Statement on Reporting Comprehensive Income - In June 1997,
FASB issued SFAS No. 130, which establishes standards for reporting and
display of comprehensive income and its components. This Statement is
effective for fiscal years beginning after December 15, 1997.
Management believes the adoption of this Statement will not have a
material effect on the Bank's consolidated financial statements.
FASB Statement on Disclosures About Segments of an Enterprise and
Related Income - In June 1997, FASB issued SFAS No. 131, which
establishes standards for the way public companies report information
about operating segments in the annual and interim financial
statements. This Statement is effective for fiscal years beginning
after December 15, 1997. Management believes the adoption of this
Statement will not have a material effect on the consolidated financial
statements of the Bank.
FASB Statement on Employers Disclosures About Pensions and Other
Postretirement Benefits - In February 1998, FASB issued SFAS No. 132
which standardizes disclosure requirements for pensions and
postretirement benefits. This Statement is effective for fiscal years
beginning after December 15, 1997. Management believes the adoption of
this Statement will not have a material effect on the consolidated
financial statements of the Bank.
F-29
<PAGE>
No dealer, salesman or any other person has been authorized to give any
information or to make any representation other than as contained in this
Prospectus in connection with the offering made hereby, and, if given or made,
such information shall not be relied upon as having been authorized by the
Company, the Bank or Trident Securities, Inc. This Prospectus does not
constitute an offer to sell or a solicitation of an offer to buy any of the
securities offered hereby to any person 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.
Neither the delivery of this Prospectus nor any sale hereunder shall under any
circumstances create any implication that there has been no change in the
affairs of the Company or the Bank since any of the dates as of which
information is furnished herein or since the date hereof.
TABLE OF CONTENTS
Page
----
Prospectus Summary.......................................................
Selected Consolidated Financial Information and Other Data...............
Recent Developments......................................................
Risk Factors.............................................................
BCSB Bankcorp, Inc.......................................................
Baltimore County Savings Bank, F.S.B.....................................
Baltimore County Savings Bank, M.H.C.....................................
Use of Proceeds..........................................................
Dividend Policy..........................................................
Waiver of Dividends by the MHC...........................................
MHC Conversion to Stock Form.............................................
Market for the Common Stock..............................................
Capitalization...........................................................
Historical and Pro Forma Regulatory Capital Compliance...................
Pro Forma Data...........................................................
Comparison of Valuation and Pro Forma Information
with No Foundation......................................................
Proposed Management Purchases............................................
Management's Discussion and Analysis of Financial........................
Condition and Results of Operations......................................
Business of the Company..................................................
Business of the Bank.....................................................
Regulation...............................................................
Taxation.................................................................
Management of the Company................................................
Management of the Bank...................................................
The Reorganization and Stock Issuance....................................
Certain Restrictions on Acquisition of the Company
and the Bank............................................................
Description of Capital Stock.............................................
Registration Requirements................................................
Legal Opinions...........................................................
Tax Opinions.............................................................
Experts..................................................................
Additional Information...................................................
Index to Financial Statements............................................
Until __________ ___, 1998 (90 days after the date of this Prospectus), 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.
BCSB BANKCORP, INC.
(Holding Company for
BALTIMORE COUNTY
SAVINGS BANK, F.S.B.)
UP TO 1,988,350 SHARES
COMMON STOCK
--------------------------
PROSPECTUS
--------------------------
TRIDENT SECURITIES, INC.
_________________, 1998
<PAGE>
PART II: INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Federal Regulations define areas for indemnity coverage by Baltimore County
Savings Bank, F.S.B. (the "Bank") as follows:
(a) Any person against whom any action is brought or threatened because
that person is or was a director or officer of the Bank shall be indemnified by
the Bank, as the case may be, for:
(i) Any amount for which such person becomes liable under a judgment
in such action; and
(ii) Reasonable costs and expenses, including reasonable attorney's
fees, actually paid or incurred by such person in defending or settling
such action, or in enforcing his or her rights to indemnification if the
person attains a favorable judgment in such enforcement action.
(b) Indemnification provided for in subparagraph (a) shall be made to such
officer or director only if the requirements of this subparagraph are met:
(i) The Bank shall make the indemnification provided by subparagraph
(a) in connection with any such action which results in a final judgment on
the merits in favor of such officer or director.
(ii) The Bank shall make the indemnification provided by subparagraph
(a) in case of settlement of such action, final judgment against such
director or officer or final judgment in favor of such director or officer
other than on the merits, if a majority of the disinterested directors of
the Bank determines that such a director or officer was acting in good
faith within the scope of his or her employment or authority as he or she
could reasonably have perceived it under the circumstances and for a
purpose which he or she could reasonably have believed under the
circumstances was in the best interest of the Bank or its members.
(c) As used in this paragraph:
(i) "action" means any judicial or administrative proceeding, or
threatened proceeding, whether civil, criminal, or otherwise, including any
appeal or other proceeding for review;
(ii) "final judgment" means a judgment, decree, or order which is not
appealable and as to which the period for appeal has expired with no appeal
taken;
(iii) "settlement" includes the entry of a judgment by consent or by
confession or a plea of guilty or nolo contendere.
Office of Thrift Supervision regulations subject the small business issuer
to the same indemnification regulations applicable to the Bank and described
above.
The Bank has a directors and officers liability policy providing for
insurance against certain liabilities incurred by directors and officers of the
Bank while serving in their capacities as such.
II-1
<PAGE>
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
<TABLE>
<CAPTION>
<S> <C> <C>
* Legal Fees and Expenses...................... $ 90,000
* Printing, Postage and Mailing................ 110,000
* Accounting Fees and Expenses................. 100,000
* Appraisal and Business Plan Fees and Expenses 30,000
* Blue Sky Filing Fees and Expenses
(including counsel fees)................... 5,000
* Filing Fees (OTS, SEC and NASD).............. 37,500
* Conversion Agent Fees and Expenses........... 10,000
* Transfer Agent Fees and Stock Certificates.. 15,000
** Underwriter's Expenses....................... 36,500
* Other Expenses............................... 23,000
--------
Total...................................... $457,000
========
</TABLE>
- ----------------
* Estimated.
** Does not include $220,000 in estimated underwriting fees. Calculation of
the underwriting fees assumes that the midpoint of the Estimated Valuation
Range is sold in the Offering, 8% of the stock is sold to the ESOP, 124,992
shares will be sold to directors and officers of the Bank, and the
remaining shares will be sold in the Subscription and Community Offerings.
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
Not applicable.
ITEM 27. EXHIBITS:
The exhibits filed as a part of this registration statement are as follows:
* 1.1 Engagement Letter with Trident Securities, Inc.
* 1.2 Agency Agreement with Trident Securities, Inc.
* 2.1 Plan of Reorganization, as amended
* 2.2 Plan of Stock Issuance, as amended
* 3.1 Charter of BCSB Bankcorp, Inc.
* 3.2 Bylaws of BCSB Bankcorp, Inc.
* 4 Form of Common Stock Certificate of BCSB Bankcorp, Inc.
* 5 Opinion of Housley Kantarian & Bronstein, P.C. regarding legality
of securities being registered
* 8.1 Federal Tax Opinion
* 8.2 State Tax Opinion
* 8.3 Letter of RP Financial, LC. as to the value of subscription
rights for tax purposes
* 10.1 Proposed BCSB Bankcorp, Inc. 1998 Stock Option and Incentive
Plan
* 10.2 Proposed BCSB Bankcorp, Inc. Management Recognition Plan and
Trust Agreement
* 10.3 Amended and Restated Form of Change-in-Control Severance
Agreements between Baltimore County Savings Bank, F.S.B. and
Michael J. Dietz, Gary C. Loraditch and William M. Loughran
* 10.4 Baltimore County Savings Bank, F.S.B. Deferred Compensation
Plan
* 10.5 Baltimore County Savings Bank, F.S.B. Incentive Compensation
Plan
* 23.1 Consents of Housley Kantarian & Bronstein, P.C. (included in
opinions filed as Exhibits 5 and 8.1)
23.2 Consent of Anderson Associates, LLP
II-2
<PAGE>
23.3 Consent of RP Financial, LC.
24 Power of Attorney (reference is made to the signature page)
* 27 Financial Data Schedule
* 99.1 Stock Order Form and Form of Certification
* 99.2 Miscellaneous Solicitation and Marketing Materials
99.3 Updated Appraisal Report
* 99.4 Form of Baltimore County Savings Bank Foundation Gift
Instrument
_________
* Previously filed.
ITEM 28. UNDERTAKINGS
The undersigned small business issues hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement to:
(i) include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the information
in the registration statement. Notwithstanding the foregoing, any increase
or decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table in
the effective registration statement;
(iii) include any additional or changed material on the plan of
distribution.
(2) That, for determining liability under the Securities Act the small
business issuer will treat each post-effective amendment as a new registration
statement of the securities offered, and the offering of the securities at that
time shall be deemed to be the initial bona fide offering thereof.
(3) To file a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the offering.
The undersigned small business issuer hereby undertakes to provide to the
underwriter at the closing specified in the underwriting agreement certificates
in such denominations and registered in such names as required by the
underwriter to permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the small business issuer pursuant to the foregoing provisions, or
otherwise, the small business issuer has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is therefore, unenforceable.
II-3
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, in the County of
Baltimore, State of Maryland, on April 28, 1998.
BCSB BANKCORP, INC.
By: /s/ Michael J. Dietz
-----------------------------------
Michael J. Dietz, President
(Duly Authorized Representative)
In accordance with the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates stated.
<TABLE>
<CAPTION>
<S> <C> <C>
Signatures Title Date
---------- ----- ----
/s/ Michael J. Dietz President April 28, 1998
- ----------------------------------
Michael J. Dietz (Principal Executive Officer)
/s/ Gary C. Loraditch Vice President, Secretary and Treasurer April 28, 1998
- ----------------------------------
Gary C. Loraditch (Principal Financial and Accounting Officer)
* Chairman of the Board of Directors April 28, 1998
- ----------------------------------
Henry V. Kahl
* Vice Chairman of the Board of Directors April 28, 1998
- ----------------------------------
H. Adrian Cox
* Vice President and Director April 28, 1998
- ----------------------------------
William M. Loughran
* Director April 28, 1998
- ----------------------------------
Martin F. Meyers
</TABLE>
<PAGE>
* Director April 28, 1998
- ----------------------------------
John J. Panzer, Jr.
* Director April 28, 1998
- ----------------------------------
P. Louis Rohe, Jr.
* Director April 28, 1998
- ----------------------------------
Frank W. Dunton
*By: /s/ Gary C. Loraditch
--------------------------------
Gary C. Loraditch
Attorney-in-Fact
<PAGE>
Exhibit 23.2
[LETTERHEAD OF ANDERSON ASSOCIATES, LLP]
CONSENT
We consent to the use in Baltimore County Savings Bank, F.S.B.'s amended
Form MHC-1, Form MHC-2 and application H-(e)1 and the registration statement on
Form SB-2 of our report on the financial statements of Baltimore County Savings
Bank, F.S.B., included therein and to the reference to our firm under the
heading "Experts" in the Prospectus.
ANDERSON ASSOCIATES, LLP
/s/ Anderson Associates, LLP
April 28, 1998
Baltimore, Maryland
<PAGE>
[LETTERHEAD OF RP FINANCIAL, LC.]
EXHIBIT 23.3
April 28, 1998
Board of Directors
Baltimore County Savings Bank, F.S.B.
4111 E. Joppa Road
Suite 300
Baltimore, Maryland 21236
Gentlemen:
We hereby consent to the use of our firm's name in the Form MHC-1, Form
MHC-2 and Application on Form H-e(1) for Baltimore County Savings Bank, F.S.B,
Baltimore, Maryland, and any amendments thereto, and in the Form SB-2
Registration Statement and any amendments thereto for BCSB Bankcorp, Inc. We
also hereby consent to the inclusion of, summary of and references to our
Appraisal Report and our statement concerning subscription rights in such
filings including the Prospectus of BCSB Bankcorp, Inc.
Sincerely,
RP FINANCIAL, LC.
/s/ Gregory E. Dunn
Gregory E. Dunn
Senior Vice President
[FOOTER OF RP FINANCIAL APPEARS HERE]
<PAGE>
--------------------------------------------------
PRO FORMA VALUATION UPDATE REPORT
MUTUAL HOLDING COMPANY
STOCK OFFERING
BALTIMORE COUNTY SAVINGS BANK,
F.S.B.
Baltimore, Maryland
Dated As Of:
March 27, 1998
--------------------------------------------------
Prepared By:
RP Financial, LC.
1700 North Moore Street
Suite 2210
Arlington, Virginia 22209
<PAGE>
[LETTERHEAD OF RP FINANCIAL, LC. APPEARS HERE]
March 27, 1998
Board of Directors
Baltimore County Savings Bank, F.S.B.
4111 East Joppa Road
Suite 300
Baltimore, Maryland 21236
Gentlemen:
We have completed and hereby provide an updated 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 update is furnished pursuant to the conversion regulations
promulgated by the Office of Thrift Supervision ("OTS"). Our original appraisal
report, dated January 2, 1998 (the "original appraisal") is incorporated herein
by reference. As in the preparation of our original appraisal, we believe the
data and information used herein is reliable; however, we cannot guarantee the
accuracy and completeness of such information.
Description of Reorganization
- -----------------------------
We understand that the Board of Directors of Baltimore County Savings Bank,
F.S.B., Baltimore, Maryland ("BCSB" or the "Bank") has adopted a Plan of Stock
Issuance, which is an integral part of the Bank's Plan of Reorganization from
Mutual Savings Bank to Mutual Holding Company and Subsidiary Holding Company
Formation (the "Plan of Reorganization"). Pursuant to the Plan of
Reorganization, to become effective concurrent with the completion of the stock
sale, BCSB will become a wholly-owned subsidiary of BCSB Bankcorp, Inc. (the
"Holding Company"), a Federal corporation, and BCSB Bankcorp, Inc. will issue a
majority of its Common Stock to Baltimore County Savings Bank, 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 in a Subscription Offering to the Bank's
Eligible Account Holders, the ESOP, Supplemental Eligible Account Holders, and
Other Members. Any shares not sold in the Subscription Offering may be offered
by the Holding Company in a Community Offering. In addition, the Holding Company
intends to donate to a charitable foundation (the "Foundation"), immediately
following the Stock Issuance, authorized but unissued shares of the Holding
Company's Common Stock totaling 75,000 shares.
The aggregate amount of Common Stock sold by the Holding Company cannot
exceed the appraised value of the Bank. Immediately following the Stock
Issuance, the primary assets of the Holding Company will be the capital stock of
the Bank and the net offering 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 offering proceeds to purchase the Bank's Common Stock. The
remaining net offering proceeds, retained at the Holding Company, will be used
to fund a loan to the Employee Stock Ownership Plan ("ESOP"), with the balance
to be used as general working capital.
[FOOTER OF RP FINANCIAL APPEARS HERE]
<PAGE>
RP Financial, LC.
Board of Directors
March 27, 1998
Page 2
Appraisal Update
- ----------------
This updated appraisal reflects the following noteworthy items: (1) a
review of recent developments in the Bank's financial condition, including
updated financial data through December 31, 1997; (2) an updated comparison of
BCSB's financial condition and operating results versus the Peer Group companies
identified in the original appraisal; and (3) a review of stock market
conditions since the original appraisal date, along with updated stock prices as
of March 27, 1998.
Pro forma market value is defined as the price at which BCSB's 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.
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 offering 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 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.
Discussion of Relevant Considerations
- -------------------------------------
1. Financial Results
-----------------
Table 1 presents summary balance sheet and income statement details
for the twelve months ended September 30, 1997, as set forth in the original
appraisal, and updated unaudited financial information through December 31,
1997. The overall composition of BCSB's December 31, 1997 balance sheet was
comparable to the September 30, 1997 data, with the Bank posting a slight
decline in assets during the quarter. Updated reported earnings for the Bank
showed a slight increase, which was supported by a gain realized on the sale of
branch deposits during the quarter ended December 31, 1997. On a core earnings
basis, the Bank's updated earnings were down slightly from the original
appraisal.
BCSB's total assets decreased by $1.2 million, or 0.5 percent, from
September 30, 1997 to December 31, 1997, with the shrinkage occurring mostly in
investments and mortgage-backed securities. Funds realized from maturing
investments and mortgage-backed securities were primarily redeployed into cash
and cash equivalents and, to a lesser degree, utilized to fund loan growth and
deposit run-off. Overall, the concentration of loans comprising total assets
increased from 63.0 percent to 63.7 percent as of September 30, 1997 and
December 31, 1997, respectively, while the cash and investments ratio, which
includes FHLB stock, remained fairly stable equaling 20.2 percent and 20.1
percent of assets as of September 30, 1997 and December 31, 1997, respectively.
Mortgage-backed securities
<PAGE>
RP Financial, LC.
Board of Directors
March 27, 1998
Page 3
declined as a percent of assets from 14.8 percent at September 30, 1997 to 14.4
percent at December 31, 1997.
Table 1
Baltimore County Savings Bank, F.S.B.
Recent Financial Data
At Sept. 30, 1997 At Dec. 31, 1997
----------------- ----------------
(% of) (% of)
Amount Assets Amount Assets
------ ------ ------ ------
($000) (%) ($000) (%)
Balance Sheet Data
- ------------------
Total assets $251,738 100.0% $250,582 100.0%
Cash and cash equivalents 19,217 7.6 28,835 11.5
Investment securities 30,323 12.0 20,093 8.0
Mortgage-backed sec. 37,189 14.8 36,110 14.4
FHLB stock 1,433 0.6 1,433 0.6
Loans receivable, net 158,676 63.0 159,532 63.7
Deposits 224,656 89.2 222,245 88.7
Equity 23,858 9.5 24,516 9.8
12 Months Ended 12 Months Ended
Sept. 30, 1997 Dec. 31, 1997
--------------- -------------
(% of) (% of)
Avg. Avg.
Amount Assets Amount Assets
------ ------ ------ ------
($000) (%) ($000) (%)
Summary Income Statement
- ------------------------
Interest income $19,458 7.48% $19,167 7.47%
Interest expense (10,323) (3.97) (10,089) (3.93)
------- ----- ------- -----
Net interest income 9,135 3.51 9,078 3.54
Provision for losses (286) (0.11) (323) (0.13)
Other operating income 601 0.23 583 0.23
Gains (losses) on asset sales 51 0.02 339 0.13
Income (loss) on real estate
operations 34 0.01 9 0.00
Other operating expenses (6,257) (2.41) (6,346) (2.47)
------ ----- ------ -----
Income before taxes 3,278 1.26 3,340 1.30
Income taxes (1,301) (0.50) (1,313) (0.51)
------ ----- ------ -----
Net income $1,977 0.76% $2,027 0.79%
Sources: BCSB's prospectus and RP Financial calculations.
Updated credit quality measures for the Bank indicated an improving
trend, as BCSB's balance of non-performing assets declined during the first
quarter of fiscal 1998 as
<PAGE>
RP Financial, LC.
Board of Directors
March 27, 1998
Page 4
well as during fiscal 1997. BCSB's non-performing assets-to-assets ratio
declined from 0.76 percent to 0.66 percent as of September 30, 1997 and December
31, 1997, respectively, while loss reserves as a percent of non-performing loans
increased from 53.1 percent to 64.3 percent over the same time period. The
decline in the non-performing assets balance was largely attributable to a
reduction in non-accruing single-family loans.
Asset shrinkage and retained earnings funded deposit run-off, as the
Bank's deposits declined by $2.4 million, or 1.1 percent, during the quarter
ended December 31, 1997. The decline in deposits reflects the sale of $6.6
million of deposits held in the Severna Park branch office, which was partially
offset by deposit growth at the Bank's other branches. Deposits remained the
only interest-bearing source of funds utilized by BCSB. Growth in equity and
asset shrinkage provided for a slight increase in the Bank's equity-to-assets
ratio, which increased from 9.5 percent to 9.8 percent as of September 30, 1997
and December 31, 1997, respectively.
BCSB's operating results for the twelve months ended September 30,
1997 and December 31, 1997 are also set forth in Table 1. Updated reported
earnings for the Bank were slightly higher, based on comparative return on
average assets ratios of 0.76 percent and 0.79 percent for the twelve months
ended September 30, 1997 and December 31, 1997, respectively. The increase in
earnings was supported by a $339,000 gain realized from the sale of branch
deposits during the quarter ended December 31, 1997. On a core earnings basis,
BCSB's updated earnings were slightly lower due to normal increases in operating
expenses and slightly higher loss provisions. Net interest income and operating
expenses remained the two dominant components of the Bank's recurring earnings.
BCSB's updated net interest income to average assets ratio exhibited
little change, equaling 3.51 percent and 3.54 percent for the twelve months
ended September 30, 1997 and December 31, 1997, respectively. A lower interest
expense ratio accounted for the increase in the Bank's updated net interest
margin, which was attributable to a decline in BCSB's cost of funds during the
quarter ended December 31, 1997, versus the comparable year ago period. A
decline in the level of interest-bearing liabilities funding assets, due to
capital growth and a resulting higher equity-to-assets ratio, further
contributed to the reduction in the Bank's updated interest expense ratio. The
decline in the Bank's funding costs continued to be supported by the roll-off of
premium rate 24-month CDs, as the average cost of BCSB's CDs declined from 5.72
percent during the quarter ended December 31, 1996 to 5.49 percent during the
quarter ended December 31, 1997. Comparatively, the Bank's updated interest
income ratio declined slightly, reflecting a decline in yield earned on
interest-earning assets for the quarter ended December 31, 1997, versus the
comparable year ago period (7.71 percent versus 7.90 percent for the quarter
ended December 31, 1996).
Operating expenses as a percent of average assets were higher in the
Bank's updated earnings, equaling 2.41 percent and 2.47 percent for the twelve
months ended September 30, 1997 and December 31, 1997, respectively. The
increase in the operating expense ratio was largely the result of normal
increases in expenses associated with Bank's ongoing operations, such as
compensation, property and equipment, advertising and miscellaneous other
expenses. Further upward pressure was placed on the operating expense ratio as
the result of asset shrinkage recorded during the quarter ended December 31,
1997. Consistent with the original appraisal, the Bank continued to maintain a
relatively high number of employees for its asset size. As of December 31, 1997,
assets per full time equivalent employee equaled $3.3 million for the Bank,
versus a comparative average of $4.4 million for
<PAGE>
RP Financial, LC.
Board of Directors
March 27, 1998
Page 5
all publicly-traded SAIF-insured thrifts. Overall, BCSB's higher net interest
margin and higher operating expense ratio translated into a slightly less
favorable updated expense coverage ratio (net interest income divided by
operating expenses) of 1.43x for the twelve months ended December 31, 1997,
versus a comparative ratio of 1.46x recorded for the twelve months ended
September 30, 1997.
Sources of non-interest operating income remained stable in the Bank's
updated earnings, equaling 0.23 percent of average assets for both periods shown
in Table 1. Similarly, there was no material change reflected in the Bank's
updated earnings with respect to the amount of loan loss provisions established,
with such provisions amounting to 0.11 percent and 0.13 percent of average
assets for the twelve months ended September 30, 1997 and December 31, 1997,
respectively. Valuation allowances maintained as a percent of net loans
receivable and non-performing loans equaled 0.62 percent and 64.3 percent,
respectively, at December 31, 1997, versus comparative ratios of 0.62 percent
and 53.1 percent at September 30, 1997.
The most notable difference in Bank's updated earnings was the
$339,000 gain realized from the sale of branch deposits during the quarter ended
December 31, 1997, which increased BCSB's pre-tax earnings by 0.13 percent of
average assets. In October 1997, the Bank sold all deposits held in the Severna
Park branch office, with such deposits totaling $6.6 million. Comparatively,
gains had a nominal impact on the Bank's earnings for the twelve months ended
September 30, 1997, consisting of gains realized from the sale of investment
securities. Partially offsetting the increase in gains recorded in the Bank's
updated earnings was a slight decline in income from real estate operations,
although such income had a fairly nominal impact on BCSB's earnings for both
periods shown in Table 1. The reduction in real estate operations income stemmed
from loss provisions established for foreclosed real estate and losses on the
sale of foreclosed real estate during the quarter ended December 31, 1997, which
substantially negated gains realized from real estate development and joint
venture activities for the twelve months ended December 31, 1997.
2. Peer Group Financial Comparisons
--------------------------------
Tables 2 and 3 present the financial characteristics and operating
results for BCSB, the Peer Group and all publicly-traded SAIF-insured thrifts.
BCSB's and the Peer Group's ratios are based on financial results through
December 31, 1997. It should be noted that the number of companies comprising
the Peer Group has been reduced from 17 companies in the original appraisal to
16 companies in this update, as Pulaski SB of Missouri was eliminated from the
Peer Group on the basis of announcing plans to pursue a second-step conversion
subsequent to the original appraisal date. Brookline Bancorp MHC of
Massachusetts, which began trading on March 25, 1998, has not been added to the
Peer Group, due to the lack of a seasoned trading history and its pricing data
is based on pro forma assumptions as opposed to reported financials.
In general, the comparative balance sheet ratios for the Bank and the
Peer Group did not vary significantly from the ratios exhibited in the original
appraisal. Relative to the Peer Group, the Bank's updated interest-earning asset
composition reflected slightly high concentrations of loans and mortgage-backed
securities and a slightly lower concentration of cash and investments. Overall,
consistent with the original appraisal, BCSB maintained a slightly higher
concentration of interest-earning assets than the Peer Group, with the Bank and
<PAGE>
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 2
Balance Sheet Composition and Growth Rates
Comparable Institution Analysis
As of December 31, 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>
Baltimore County Savings Bank
- -----------------------------
December 31, 1997 20.1 63.7 14.4 88.7 0.0 0.0 9.8 0.0 9.8 0.0
SAIF-Insured Thrifts 17.7 68.0 10.8 69.9 15.3 0.2 13.1 0.2 12.8 0.0
State of MD 17.3 64.1 15.4 79.8 6.7 0.0 12.5 0.0 12.5 0.0
Comparable Group Average 22.7 61.4 12.2 75.7 11.2 0.1 11.8 0.2 11.5 0.0
Florida Companies 18.5 68.1 9.6 76.1 12.1 0.0 9.7 0.0 9.7 0.0
Mid-Atlantic Companies 26.1 54.4 15.9 74.4 12.6 0.0 12.0 0.4 11.6 0.0
Mid-West Companies 16.1 72.5 8.2 79.6 6.0 0.0 13.1 0.0 13.0 0.0
Other Comparative Companies 27.7 65.9 0.0 71.1 17.2 1.8 8.7 0.0 8.6 0.0
Comparable Group
- ----------------
Florida Companies
- -----------------
CMSV Commty. Svgs, MHC of FL (48.5) 31.5 62.7 1.8 76.5 10.4 0.0 11.3 0.0 11.3 0.0
FFFL Fidelity Bcsh MHC of FL (47.7)(1) 5.6 73.6 17.3 75.7 13.7 0.0 8.2 0.1 8.2 0.0
Mid-Atlantic Companies
- ----------------------
SKBO First Carnegie MHC of PA(45.0) 13.1 43.2 40.3 53.8 27.6 0.0 17.2 0.0 17.2 0.0
GDVS Greater DV SB,MHC of PA (19.9) 37.1 58.5 1.3 80.2 8.2 0.0 11.2 0.0 11.2 0.0
HARS Harris Fin. MHC of PA (24.3) 55.3 41.1 0.3 52.1 38.8 0.0 8.1 0.9 7.2 0.0
LFED Leeds FSB, MHC of MD (36.3) 28.7 62.7 6.1 81.4 0.2 0.0 16.6 0.0 16.6 0.0
NWSB Northwest SB, MHC of PA (30.7) 21.4 72.7 2.9 84.7 5.1 0.0 9.2 1.0 8.2 0.0
PBHC Pathfinder BC MHC of NY (46.1) 19.3 61.8 11.8 77.5 9.5 0.0 12.0 1.8 10.2 0.0
PHSB Ppls Home SB, MHC of PA (45.0)(3) 18.8 45.8 32.3 80.0 6.1 0.0 13.1 0.0 13.1 0.0
PLSK Pulaski SB, MHC of NJ (46.0) 12.9 56.2 28.0 84.3 3.1 0.0 11.9 0.0 11.9 0.0
SBFL SB Fngr Lakes MHC of NY (33.1) 28.2 47.8 20.5 75.3 14.9 0.0 8.8 0.0 8.8 0.0
Mid-West Companies
- ------------------
FFSX First FSB MHC Sxld of IA(46.1) 13.0 74.5 8.7 71.6 18.3 0.0 8.9 0.1 8.8 0.0
JXSB Jcksnville SB,MHC of IL (45.6) 10.3 77.4 8.3 87.6 0.1 0.0 10.4 0.0 10.4 0.0
WAYN Wayne Svgs Bks MHC of OH (47.8) 15.4 80.9 0.1 84.1 5.5 0.0 9.5 0.0 9.5 0.0
WCFB Wbstr Cty FSB MHC of IA (45.2) 25.6 57.1 15.7 75.2 0.2 0.0 23.5 0.0 23.5 0.0
New England Companies
- ---------------------
PBCT Peoples Bank, MHC of CT (40.1) 27.7 65.9 0.0 71.1 17.2 1.8 8.7 0.0 8.6 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>
Baltimore County Savings Bank
- -----------------------------
December 31, 1997 -2.57 -12.57 0.54 -3.82 0.00 9.33 9.48 9.42 9.42 18.26
SAIF-Insured Thrifts 12.42 6.06 13.38 8.51 14.12 3.90 2.92 11.25 11.37 22.88
State of MD 6.65 11.14 5.49 6.19 -1.44 4.74 4.74 10.92 10.92 23.80
Comparable Group Average 10.51 11.50 8.56 6.88 14.11 8.12 6.65 11.47 11.24 24.57
Florida Companies 15.94 9.56 18.73 13.27 54.77 6.77 7.00 7.90 7.90 15.80
Mid-Atlantic Companies 11.95 11.45 10.30 5.50 23.45 9.22 5.92 11.54 11.12 26.40
Mid-West Companies 5.42 13.08 0.73 5.55 -16.99 5.44 5.62 12.92 12.92 26.00
Other Comparative Companies 7.05 10.97 3.86 11.88 -8.21 14.87 14.42 8.80 8.80 13.00
Comparable Group
- ----------------
Florida Companies
- -----------------
CMSV Commty. Svgs, MHC of FL (48.5) 9.91 -0.64 14.69 7.20 39.31 6.75 6.75 NM NM NM
FFFL Fidelity Bcsh MHC of FL (47.7)(1) 21.97 19.75 22.78 19.33 70.23 6.80 7.25 7.90 7.90 15.80
Mid-Atlantic Companies
- ----------------------
SKBO First Carnegie MHC of PA(45.0) 2.25 -16.46 7.72 -4.82 -7.46 NM NM 17.19 17.19 57.80
GDVS Greater DV SB,MHC of PA (19.9) 10.25 10.67 11.17 10.53 15.49 4.92 4.92 NM 11.36 26.47
HARS Harris Fin. MHC of PA (24.3) 24.50 65.84 -3.84 -2.32 99.14 17.06 21.64 6.81 6.81 13.65
LFED Leeds FSB, MHC of MD (36.3) 4.71 -3.86 7.24 3.85 -13.79 7.74 7.74 16.19 16.19 32.64
NWSB Northwest SB, MHC of PA (30.7) 17.62 29.14 14.25 23.41 -25.94 8.83 1.30 NM 8.32 16.77
PBHC Pathfinder BC MHC of NY (46.1) 3.60 -15.60 10.01 -4.15 NM 10.25 -6.60 8.57 8.57 14.47
PHSB Ppls Home SB, MHC of PA (45.0)(3) 8.02 -4.20 13.33 -2.31 41.36 NM NM NM NM NM
PLSK Pulaski SB, MHC of NJ (46.0) 13.07 NM 10.49 4.09 NM NM NM 11.93 11.93 28.28
SBFL SB Fngr Lakes MHC of NY (33.1) 23.59 26.11 22.31 21.26 55.35 6.53 6.53 8.57 8.57 21.12
Mid-West Companies
- ------------------
FFSX First FSB MHC Sxld of IA(46.1) 0.36 -3.23 0.42 -0.50 -0.59 8.67 8.83 8.73 8.73 17.24
JXSB Jcksnville SB,MHC of IL (45.6) 17.91 NM 9.42 19.31 -30.42 4.39 4.94 10.36 10.36 15.24
WAYN Wayne Svgs Bks MHC of OH (47.8) 2.03 19.36 -1.50 2.58 -12.82 6.05 6.05 9.10 9.10 17.49
WCFB Wbstr Cty FSB MHC of IA (45.2) 1.40 23.11 -5.43 0.81 -24.12 2.67 2.67 23.50 23.50 54.01
New England Companies
- ---------------------
PBCT Peoples Bank, MHC of CT (40.1) 7.05 10.97 3.86 11.88 -8.21 14.87 14.42 8.80 8.80 13.00
</TABLE>
(1) Financial information is for the quarter ending September 30, 1997.
(3) Growth rates have been annualized from available financial information.
Source: Audited and unaudited financial statements, corporate reports and
offering circulars, and RP Financial, LC. calculations. The information
provided in this table has been obtained from sources we believe are
reliable, but we cannot guarantee the accuracy or completeness of such
information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 3
Income as a Percent of Average Assets and Yields, Costs, Spreads
Comparable Institution Analysis
For the Twelve Months Ended December 31, 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
------ ------ ------- ------ ------- ------- ---- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Baltimore County Savings Bank
- -----------------------------
December 31, 1997 0.79 7.47 3.93 3.54 0.13 3.41 0.07 0.00 0.16 0.23
SAIF-Insured Thrifts 0.93 7.42 4.14 3.28 0.12 3.16 0.10 0.01 0.30 0.41
State of MD 0.87 7.39 4.53 2.86 0.04 2.82 0.06 0.04 0.16 0.26
Comparable Group Average 0.84 7.24 4.05 3.19 0.11 3.08 0.15 -0.01 0.29 0.43
Florida Companies 0.72 7.25 4.02 3.24 0.03 3.21 0.04 0.01 0.42 0.48
Mid-Atlantic Companies 0.80 7.18 4.06 3.13 0.09 3.03 0.04 -0.01 0.21 0.24
Mid-West Companies 0.88 7.48 4.20 3.28 0.07 3.22 0.06 0.00 0.30 0.36
Other Comparable Companies 1.19 6.73 3.49 3.25 0.51 2.73 1.67 -0.04 0.77 0.00
Comparable Group
- ----------------
Florida Companies
- -----------------
CMSV Commty. Svgs, MHC of FL (48.5) 0.77 7.26 3.95 3.31 0.04 3.27 0.04 0.01 0.49 0.53
FFFL Fidelity Bcsh MHC of FL (47.7)(1) 0.67 7.25 4.08 3.17 0.02 3.15 0.05 0.01 0.36 0.42
Mid-Atlantic Companies
- ----------------------
SKBO First Carnegie MHC of PA(45.0) 0.63 6.87 4.20 2.67 0.05 2.62 0.01 0.00 -0.02 0.00
GDVS Greater DV SB,MHC of PA (19.9) 0.83 7.16 3.74 3.42 0.05 3.37 0.00 0.00 0.24 0.24
HARS Harris Fin. MHC of PA (24.3) 0.88 7.01 4.62 2.38 0.03 2.35 0.13 0.04 0.20 0.37
LFED Leeds FSB, MHC of MD (36.3) 1.20 7.04 4.15 2.89 0.02 2.87 0.00 0.00 0.10 0.10
NWSB Northwest SB, MHC of PA (30.7) 0.94 7.82 4.20 3.62 0.15 3.47 0.10 -0.01 0.21 0.29
PBHC Pathfinder BC MHC of NY (46.1) 0.96 7.37 3.59 3.79 0.14 3.65 0.03 0.00 0.48 0.51
PHSB Ppls Home SB, MHC of PA (45.0) 0.78 7.08 3.72 3.36 0.26 3.10 0.00 0.00 0.38 0.37
PLSK Pulaski SB, MHC of NJ (46.0) 0.63 7.13 4.12 3.00 0.09 2.91 0.06 -0.01 0.04 0.09
SBFL SB Fngr Lakes MHC of NY (33.1) 0.38 7.16 4.16 3.00 0.05 2.94 0.02 -0.09 0.22 0.15
Mid-West Companies
- ------------------
FFSX First FSB MHC Sxld of IA(46.1) 0.73 7.39 4.46 2.93 0.07 2.87 0.03 0.00 0.51 0.54
JXSB Jcksnville SB,MHC of IL (45.6) 0.61 7.82 4.41 3.41 0.14 3.27 0.20 0.00 0.24 0.44
WAYN Wayne Svgs Bks MHC of OH (47.8 0.75 7.55 4.34 3.21 0.02 3.19 0.00 0.00 0.23 0.23
WCFB Wbstr Cty FSB MHC of IA (45.2) 1.45 7.15 3.57 3.58 0.04 3.54 0.00 0.00 0.22 0.21
New England Companies
- ---------------------
PBCT Peoples Bank, MHC of CT (40.1) 1.19 6.73 3.49 3.25 0.51 2.73 1.67 -0.04 0.77 2.40
<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
------- ------- ------- ------- --------- -------- ------ ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Baltimore County Savings Bank
- -----------------------------
December 31, 1997 2.46 0.01 0.13 0.00 7.77 4.37 3.40 3,297 39.31
SAIF-Insured Thrifts 2.19 0.02 0.08 0.00 7.68 4.85 2.83 4,384 36.89
State of MD 1.79 0.00 0.12 0.00 7.64 5.23 2.40 5,382 38.42
Comparable Group Average 2.33 0.02 0.10 0.00 7.51 4.66 2.85 3,937 35.90
Florida Companies 2.61 0.02 0.12 0.00 7.53 4.58 2.95 3,123 38.79
Mid-Atlantic Companies 2.12 0.03 0.04 0.00 7.45 4.67 2.79 4,683 35.07
Mid-West Companies 2.26 0.00 0.08 0.00 7.72 4.88 2.84 2,968 36.34
Other Comparable Companies 4.02 0.03 0.77 0.00 7.18 3.88 3.30 2,734 35.88
Comparable Group
- ----------------
Florida Companies
- -----------------
CMSV Commty. Svgs, MHC of FL (48.5) 2.69 0.00 0.09 0.00 7.54 4.57 2.97 2,590 35.36
FFFL Fidelity Bcsh MHC of FL (47.7)(1) 2.53 0.04 0.16 0.00 7.52 4.59 2.93 3,656 42.22
Mid-Atlantic Companies
- ----------------------
SKBO First Carnegie MHC of PA(45.0) 1.64 0.00 -0.12 0.00 7.11 5.07 2.03 7,561 53.40
GDVS Greater DV SB,MHC of PA (19.9) 2.37 0.00 0.00 0.00 7.42 4.25 3.18 3,568 33.24
HARS Harris Fin. MHC of PA (24.3) 1.70 0.12 0.18 0.00 7.28 5.09 2.19 4,558 38.06
LFED Leeds FSB, MHC of MD (36.3) 1.05 0.00 0.00 0.00 7.17 5.07 2.10 10,407 37.36
NWSB Northwest SB, MHC of PA (30.7) 2.17 0.06 -0.02 0.00 8.05 4.71 3.33 2,706 37.78
PBHC Pathfinder BC MHC of NY (46.1) 2.89 0.08 0.14 0.00 7.93 4.10 3.83 2,624 29.97
PHSB Ppls Home SB, MHC of PA (45.0) 2.69 0.00 0.07 0.00 7.32 4.28 3.05 2,903 8.45
PLSK Pulaski SB, MHC of NJ (46.0) 2.00 0.00 0.00 0.00 7.40 4.79 2.60 4,226 37.53
SBFL SB Fngr Lakes MHC of NY (33.1) 2.53 0.00 0.07 0.00 7.42 4.65 2.77 3,590 39.84
Mid-West Companies
- ------------------
FFSX First FSB MHC Sxld of IA(46.1) 2.29 0.01 0.04 0.00 7.66 4.94 2.72 2,716 35.87
JXSB Jcksnville SB,MHC of IL (45.6) 2.90 0.00 0.19 0.00 8.17 5.03 3.14 2,025 38.62
WAYN Wayne Svgs Bks MHC of OH (47.8 2.37 0.00 0.08 0.00 7.80 4.83 2.97 2,603 34.02
WCFB Wbstr Cty FSB MHC of IA (45.2) 1.46 0.00 0.00 0.00 7.25 4.73 2.53 4,530 36.85
New England Companies
- ---------------------
PBCT Peoples Bank, MHC of CT (40.1) 4.02 0.03 0.77 0.00 7.18 3.88 3.30 2,734 35.88
</TABLE>
(1) Financial information is for the quarter ending September 30, 1997.
Source: Audited and unaudited financial statements, corporate reports and
offering circulars, and RP Financial, LC. calculations. The information
provided in this table has been obtained from sources we believe are
reliable, but we cannot guarantee the accuracy or completeness of such
information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP Financial, LC.
Board of Directors
March 27, 1998
Page 8
the Peer Group posting updated interest-earning assets-to-assets ratios of 98.2
percent and 96.3 percent, respectively.
The mix of deposits and borrowings maintained by BCSB and the Peer
Group also did not reflect any significant changes from the original appraisal.
BCSB's funding composition continued to reflect a higher concentration of
deposits as compared to the Peer Group, based on updated deposits-to-assets
ratios of 88.7 percent and 75.7 percent for the Bank and the Peer Group,
respectively. Borrowings continued to be utilized to a greater degree by the
Peer Group, as the Bank continued to maintain a zero balance of borrowings.
Updated interest-bearing liabilities-to-assets ratios equaled 88.7 percent and
86.9 percent for the Bank and the Peer Group, respectively, with the Peer
Group's lower ratio being supported by the maintenance of a higher capital
position. BCSB posted an updated equity-to-assets ratio of 9.8 percent, versus a
comparative ratio of 11.8 percent for the Peer Group. Intangibles remained a
slightly larger factor on the Peer Group's balance sheet, as the Bank and the
Peer Group posted updated tangible equity-to-assets ratios of 9.8 percent and
11.5 percent, respectively. Overall, BCSB's updated interest-earnings
assets/interest-bearing liabilities ("IEA/IBL") ratio equaled 110.7 percent,
which approximated the comparative Peer Group average of 110.8 percent. As noted
in the original appraisal, the additional capital realized from the stock
offering should serve to provide BCSB with a higher IEA/IBL ratio than currently
maintained by the Peer Group, as the interest free capital realized in BCSB's
stock offering is expected to be primarily redeployed into interest-earning
assets.
Credit quality measures continued to indicate fairly limited credit
risk exposure for both BCSB and the Peer Group. Consistent with the original
appraisal, the Bank's updated non-performing assets to assets ratio of 0.66
percent was slightly higher than the comparative Peer Group ratio of 0.59
percent. Likewise, loss reserve coverage ratios remained somewhat higher for the
Peer Group, as a percent of non-performing assets (145.5 percent versus 59.1
percent for BCSB) and as a percent of loans (0.78 percent versus 0.62 percent
for BCSB).
Updated growth rates for BCSB reflect annualized growth for the 15
months ended December 31, 1997, while the Peer Group's growth rates reflect
growth for the twelve months ended December 30, 1997. The Peer Group continued
to post stronger asset growth than the Bank, based on updated asset growth rates
of positive 10.5 percent and negative 2.6 percent for the Peer Group and BCSB,
respectively. BCSB's negative asset growth continued to result from declines in
cash and investments and mortgage-backed securities, which was partially offset
by positive loan growth. The Peer Group's asset growth continued to be sustained
primarily by growth in loans and mortgage-backed securities, although a higher
growth rate was posted in the Peer Group's lower balance of cash and
investments. Consistent with the original appraisal, the Peer Group's asset
growth measures would tend to support greater earnings growth relative to the
Bank's measures.
Asset shrinkage and retained earnings funded a reduction in the Bank's
deposits, as BCSB recorded a 3.8 percent decline in deposits. Deposits,
borrowings and retained earnings continued to fund the Peer Group's asset
growth, with the Peer Group's updated deposit growth rate equaling positive 6.9
percent. As noted in the original appraisal, the Peer Group's borrowings growth
rate is somewhat understated, as the "NM" borrowings growth rates indicated for
two of the Peer Group companies included one company with a borrowings growth
rate in excess of 100 percent. Consistent with the original appraisal, the Bank
posted a slightly stronger capital growth rate than the Peer Group (positive 9.3
percent versus positive 8.1 percent for the Peer Group). The Peer Group's lower
return on equity continued to be
<PAGE>
RP Financial, LC.
Board of Directors
March 27, 1998
Page 9
largely attributable to maintenance of a higher capital position and dividend
payments, as the Peer Group's return on average assets ratio remained higher
than the Bank's ratio. Accordingly, following the increase in capital to be
realized from the Bank's stock offering, the Bank's return on equity can also be
expected to be depressed by maintenance of a higher capital position and
dividend payments.
Table 3 displays comparative operating results for BCSB and the Peer
Group, based on their respective earnings for the twelve months ended December
31, 1997. The Bank's and the Peer Group's updated earnings continued to be
largely representative of their core earnings. BCSB's and the Peer Group's
updated return on average assets ratios equaled 0.79 percent and 0.84 percent,
respectively. On a recurring earnings basis, the Bank's updated earnings
continued to reflect a higher net interest margin and a higher level of
operating expenses than the comparative Peer Group ratios. Non-interest
operating income continued to be an earnings advantage for the Peer Group, while
loss provisions remained a comparable factor in the Bank's and the Peer Group's
updated earnings. In contrast to the original appraisal, non-recurring gains
were a slightly larger factor in the Bank's updated earnings.
In terms of core earnings strength, updated expense coverage ratios
posted by BCSB and the Peer Group equaled 1.43x and 1.36x, respectively. The
Bank's higher expense coverage ratio continued to be supported by the
maintenance of a stronger net interest margin (3.54 percent versus 3.19 percent
for the Peer Group), which was partially offset by the Peer Group's lower level
of operating expenses as a percent of average assets (2.35 percent versus 2.47
percent for the Bank). The Bank's higher net interest margin continued to be
realized through maintaining a higher interest income ratio and a lower interest
expense ratio, reflecting BCSB's higher yield earned on interest-earning assets
and lower cost of funds.
Non-interest operating income remained a larger contributor to the
Peer Group's earnings, with such income amounting to 0.23 percent and 0.43
percent of the Bank's and the Peer Group's average assets, respectively. As
noted in the original appraisal, the Bank's lower level of non-interest
operating income is reflective of a traditional thrift operating strategy and
resulting limited diversification into areas that generate non-interest
operating income. Taking non-interest operating income into account in comparing
the Bank's and the Peer Group's updated earnings, BCSB's efficiency ratio
(operating expenses, net of amortization of intangibles, as a percent of the sum
of non-interest operating income and net interest income) of 65.3 percent
remained slightly less favorable than the Peer Group's efficiency ratio of 64.4
percent.
Loss provisions continued to have a comparable impact on the Bank's
and the Peer Group's earnings, amounting to 0.13 percent and 0.11 percent of
BCSB's and the Peer Group's average assets, respectively. In contrast to the
original appraisal, gains were a more significant factor in the Bank's updated
earnings, with such gains amounting to 0.13 percent and 0.10 percent of average
assets for BCSB and the Peer Group, respectively. The higher gains posted by the
Bank reflects the gain realized from the sale of branch deposits during the
quarter ended December 31, 1997. As discussed in the original appraisal, gains
and losses realized from the sale of loans, investments and other assets and
liabilities are typically viewed as being non-recurring sources of income and,
thus, the gains indicated for the Bank's and the Peer Group's earnings will be
discounted in evaluating the relative strengths and weaknesses of their
respective earnings. The Bank's and the Peer Group's pre-tax earnings continued
to be
<PAGE>
RP Financial, LC.
Board of Directors
March 27, 1998
Page 10
similarly impacted by taxes, as BCSB and the Peer Group posted updated effective
tax rates of 39.3 percent and 35.9 percent, respectively.
3. Stock Market Conditions
-----------------------
Since the date of the original appraisal, the performance of the
overall stock market has generally been favorable. In general, a rebound in the
Asian markets and favorable fourth quarter earnings served to the push the stock
market higher during the second half of January 1998 and into early-February. In
contrast, bond prices edged lower over the same time period, reflecting the
impact of a tight labor market as indicated by a sharp increase in labor costs
during the fourth quarter of 1997 and a larger than expected increase in the
number of jobs added during December 1997. Strength primarily in technology
stocks pushed the DJIA to a new record for the first time in six months on
February 10, 1998. The rally was sustained through mid-February, as the DJIA
established six consecutive new highs through February 18, 1998. Strong earnings
and expectations that profitability was not as badly hurt by the Asian crisis as
feared served as the basis for the rally in technology stocks. Stable interest
rates and few signs of inflation preserved the positive stock market environment
through the end of February, with blue-chip stocks leading the advance.
At the beginning of March 1998, signs of a strengthening economy
pushed the 30-year bellwether bond above 6.0 percent for the first time in three
months. Earnings concerns, particularly in the technology sector, provided for
an uneven stock market in early-March. Despite a decline in the February
unemployment rate to 4.6 percent, bond prices advanced on news of a loss of jobs
in the manufacturing sector and stocks moved higher as technology issues
rallied. Both bond and stock prices benefitted from plunging oil prices in mid-
March, as further new highs were established in the DJIA and the yield on 30-
year bond moved back below 6.0 percent. Positive fundamentals in the banking
sector and a recovery in oil stocks further sustained the stock market rally
through the week ended March 20, 1998. Inflation worries, reflecting a record
increase in February home resales and an increase in oil prices following OPEC's
decision to cut oil output, caused stock and bond prices to retreat slightly in
late-March. On March 27, 1998, the DJIA closed at 8796.08, an increase of 10.4
percent since the date of the original appraisal.
Since the original appraisal date, the market for thrift issues has
also generally been positive. However, at the beginning of 1998, thrift prices
moved sharply lower. From January 2, 1998 to January 9, 1998, the SNL index for
all publicly-traded thrifts declined from 810.5 to 720.2, or 11.1 percent. The
sell-off in thrift stocks was prompted by concerns that the flattening yield
curve would put pressure on earnings, particularly among institutions which
maintained high concentrations of mortgage loans. Thrift prices recovered
somewhat during the second half of January, with the upward trend becoming more
pronounced in early-February. Fourth quarter earnings, which generally met
expectations, and acquisition news led the recovery in thrift prices. The
ongoing trend of consolidation was highlighted by the proposed merger between
First Nationwide Holdings, San Francisco, California ($30.9 billion in assets)
and Golden State Bancorp, Glendale, California ($16.0 billion in assets), which
was announced in early-February. Stable interest rates and acquisitions provided
for a mildly positive increase in thrift stocks during the balance of February.
Thrift issues continued to advance during the first half of March, reflecting
increasing expectations of favorable first quarter earnings. The announcement of
Washington Mutual's acquisition of H.F. Ahmanson for 390 percent of book value
on March 17, 1998 provided a more notable boost to thrift
<PAGE>
RP Financial, LC.
Board of Directors
March 27, 1998
Page 11
prices, particularly in the stocks of the California-based institutions. As
interest rates edged higher in late-March, thrift issued traded in a narrow
range. On March 27, 1998, the SNL Index for all publicly-traded thrifts closed
at 878.9, an increase of 8.4 percent since the original appraisal date.
Similarly, the SNL Index for publicly-traded MHCs was up 8.0 percent since the
original appraisal date.
Consistent with the SNL index, the pricing measures for the all
publicly-traded SAIF-insured thrifts and the Peer Group moved higher since the
date of the original appraisal. The comparative pricing ratios for the Peer
Group are on a fully-converted basis. Overall, since the date of the original
appraisal, the price performance of Peer Group was generally more favorable
compared to the all publicly-traded SAIF-insured thrifts. The more notable
increase exhibited in the SNL index, as compared to the pricing ratios for the
SAIF-insured thrifts, can in part be attributed to the impact of the recently
announced acquisitions involving large institutions on the SNL index, which is a
weighted index. Comparatively, the pricing measures shown below for the SAIF-
insured thrifts excludes companies that are the subject of a pending
acquisition. Likewise, the slight decline indicated for the average market
capitalization of the SAIF-insured thrifts can be attributed to the elimination
of certain larger market cap companies from the average, as the result of
becoming the subject of an announced acquisition since the first update. Most
notably, H.F. Ahmanson, which had a market capitalization of $6.1 billion as of
the date of the original appraisal, was not included in the updated averages for
the SAIF-insured thrifts. As in the original appraisal, the Peer Group
maintained a lower price/book ratio and higher price/earnings multiples relative
to the comparative averages for the all publicly-traded SAIF-insured thrifts.
Since the date of the original appraisal, 14 out of the 16 Peer Group companies
were trading at higher prices as of March 27, 1998. Pulaski SB of Missouri was
excluded from the Peer Group's pricing ratios for both periods shown in
comparative table below, as the result of announcing a second-step conversion
subsequent to the original appraisal date.
Average Pricing Characteristics
At Jan. 2, At March 27, %
1998 1998 Change
---------- ------------ ------
Peer Group
- ----------
Price/Earnings (x) 21.82x 23.49x 7.7%
Price/Core Earnings (x) 23.38 24.33 4.1
Price/Book (%) 107.98% 108.17% 0.2
Price/Assets (%) 24.84 26.04 4.8
Avg. Mkt. Capitalization ($Mil) $295.62 $323.18 9.3
SAIF-Insured Thrifts
- --------------------
Price/Earnings (x) 20.01x 20.36x 1.7
Price/Core Earnings (x) 20.97 21.42 2.1
Price/Book (%) 165.51 167.77% 1.4
Price/Assets (%) 20.36 21.34 4.8
Avg. Mkt. Capitalization ($Mil) $183.75 $178.98 (2.6)
Recent Conversions(1)
- ---------------------
Price/Core Earnings (x) 27.24x 24.75x (9.1)%
Price/Book (%) 125.74% 141.74% 12.7
(1) Ratios based on conversions completed for prior three months.
<PAGE>
RP Financial, LC.
Board of Directors
March 27, 1998
Page 12
The "new issue" market is separate and distinct from the market for
seasoned issues like the Peer Group companies. Accordingly, as discussed in the
original appraisal, RP Financial has considered the pro forma pricing and
trading level of recently converted companies in this updated appraisal. Market
interest for converting thrifts has remained strong for the conversions that
have been completed since the original appraisal date. One MHC offering has been
completed since the original appraisal date. Brookline Bancorp MHC of
Massachusetts, which is a $1.7 billion institution, began trading on March 25,
1998. On March 27, 1998, Brookline Bancorp's stock closed at $16.38 per share,
an increase of 63.8 percent from its initial public offering price of $10.00 per
share. Based on Brookline Bancorp's current trading price, its implied pro forma
full conversion price-to-book ratio and core price-to-earnings multiple equaled
102.2 percent and 26.42 times, respectively.
Overall, in recent conversion activity, offerings have experienced
oversubscriptions and have posted price increases in initial trading activity.
As shown in Table 4, the average one week change in price for standard
conversion offerings completed during the latest three months equaled positive
57.0 percent. The average pro forma price/tangible book and price/earnings
ratios of the recent conversions, excluding second step conversions, was 77.9
percent and 19.7 times. All of the recent standard conversion were closed at the
top of the super range.
Shown in Table 5 is a summary of recently completed conversions which
closed in the last three months. Relative to the original appraisal date, which
reflected pricing ratios as of January 2, 1998, the newly converted companies
increased in value by 12.7 percent on a price-to-book basis, from an average
125.74 percent pro forma P/B ratio at January 2, 1998 to an average 141.74
percent pro forma P/B ratio at March 27, 1998. Comparatively, a 9.1 percent
decline was recorded in the pro forma core P/E multiple for the recent
conversions, although companies with core P/E multiples of greater than 30 times
have been excluded from the averages. Only five out of the twelve recently
converted companies were trading at core P/E multiples of less than 30 times at
March 27, 1998. Comparatively, as of the original appraisal date, seven out of
the nine recent conversions maintained core P/E multiples of less than 30 times
and, thus, the core P/E multiples indicated for the recent conversions were not
viewed as being highly meaningful in our comparative analysis. In comparison to
the average P/B ratio of all publicly-traded thrifts, which equaled 167.77
percent at March 27, 1998, the average P/B ratio of the recent conversions was
discounted by 15.5 percent, and the average core P/E ratio for the recent
conversions reflected a 15.5 percent premium to the all publicly-traded average
core P/E ratio of 21.42 times. As noted in the original appraisal, the pricing
ratios of the better capitalized but lower earning recently converted thrifts
suggest that the investment community has determined to discount their stock
price on a book basis, until the earnings improve through redeployment and
leveraging of the proceeds over the longer term.
Summary of Adjustments
- ----------------------
In the original appraisal, we made the following adjustments to BCSB's pro
forma value based upon our comparative analysis to the Peer Group:
<PAGE>
RP Financial, LC.
Pricing Characteristics and After-Market Trends
Recent Conversions Completed (Last Three Months)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Institutional Information Pre-Conversion Data Offering Information
------------------------------ Contribution to
Financial Info. Asset Quality Charitable Found.
- ------------------------------------------------------------------------------------------------------------------------------------
Conversion Equity/ NPAs/ Res. Gross % of Exp./ % of
Institution State Date Ticker Assets Assets Assets Cov. Proc. Mid. Proc. Form Offering
- ----------- ----- ---- ------ ------ ------ ------ ---- ----- ---- ----- ---- --------
($Mil) (%) (%)(2) (%) ($Mil.) (%) (%) (%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Standard Conversions
- --------------------
Independence Community NY* 03/17/98 ICBC $3,794 8.56% 0.69% 117% $704.1 132% 2.3% Stock 8.00%
Cavalry Bancorp, Inc. TN 03/17/98 CAVB 276 10.69% 0.02% 43% 75.4 132% 1.8% N.A. N.A.
SFSB Holding Company PA 03/02/98 SFSH 38 9.20% 0.59% 47% 7.3 132% 4.4% N.A. N.A.
Richmond County Fin. Corp. NY 02/19/98 RCBK 1,006 10.22% 0.64% 102% 244.7 132% 2.7% Stock 8.00%
Hopfed Bancorp KY 02/09/98 HFBC 202 9.27% 0.12% 94% 40.3 132% 1.9% N.A. N.A.
Timberland Bancorp WA* 01/13/98 TSBK 212 11.65% 3.83% 21% 66.1 132% 1.5% N.A. N.A.
Mystic Financial, Inc. MA* 01/09/98 MYST 158 7.78% 0.22% 302% 27.1 132% 3.4% N.A. N.A.
Wyman Park Bancorp MD 01/07/98 P. Sheet 63 7.50% 0.24% 183% 10.1 132% 4.6% N.A. N.A.
Delaware First Fin. Corp. DE 01/05/98 P. Sheet 107 5.63% 0.81% 53% 11.6 132% 4.8% N.A. N.A.
United Tennessee Bancshares TN* 01/05/98 UTBI 65 10.41% 0.09% 903% 14.5 132% 4.9% N.A. N.A.
Great Pee Dee Bancorp SC 12/31/97 PEDE 60 18.79% 0.18% 312% 21.8 132% 3.5% Stock 0.91%
Coddle Creek Financial NC 12/31/97 P. Sheet 114 12.90% 0.88% 63% 33.7 132% 3.2% N.A. N.A.
Union Community Bancorp IN* 12/29/97 UCBC 86 17.23% 0.16% 165% 30.4 132% 2.6% N.A. N.A.
Averages - Standard Conversions: $ 475 10.76% 0.65% 185% $ 99.0 132% 3.2% N.A. N.A.
Medians - Standard Conversions: $ 114 10.22% 0.24% 102% $ 30.4 132% 3.2% N.A. N.A.
Second-Step Conversions
- -----------------------
Harbor Florida Bancshares FL* 03/19/98 HARB $1,129 8.95% 0.43% 240% $166.6 132% 1.1% N.A. N.A.
Heritage Financial Corp. WA* 01/09/98 HFWA 249 11.39% 0.20% 537% 66.1 132% 2.1% N.A. N.A.
Guaranty Fed. Bancshares MO* 12/31/97 GFED 212 13.82% 0.64% 244% 43.6 132% 2.1% N.A. N.A.
Averages - 2nd Step Conversions: $ 530 11.39% 0.42% 340% $ 92.1 132% 1.8% N.A. N.A.
Medians - 2nd Step Conversions: $ 249 11.39% 0.43% 244% $ 66.1 132% 2.1% N.A. N.A.
Averages - All Conversions: $ 486 10.87% 0.61% 214% $ 97.7 132% 2.9% N.A. N.A.
Medians - All Conversions: $ 180 10.32% 0.34% 141% $ 37.0 132% 2.7% N.A. N.A.
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Institutional Information Insider Purchases Pro Forma Data
--------------------- ----------------------------------------
Pricing Ratios(4) Financial Charac.
------------------ -----------------
Benefit Plans Initial
Conversion Recog. Mgmt.& Dividend Core
Institution State Date Ticker ESOP Plans Dirs. Yield 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> <C>
Standard Conversions
- --------------------
Independence Community NY* 03/17/98 ICBC 8.0% 4.0% 0.1% 0.00% 85.1% 20.2x 17.3% 0.6% 20.3% 3.2%
Cavalry Bancorp, Inc. TN 03/17/98 CAVB 8.0% 4.0% 20.3% 0.00% 79.8% 16.5 21.7% 1.3% 27.2% 4.8%
SFSB Holding Company PA 03/02/98 SFSH 8.0% 4.0% 7.9% 0.00% 76.1% N.M. 16.6% -0.2% 21.8% -0.9%
Richmond County Fin. Corp. NY 02/19/98 RCBK 8.0% 4.0% 1.2% 0.00% 84.8% 17.8 21.8% 1.2% 25.6% 4.8%
Hopfed Bancorp KY 02/09/98 HFBC 8.0% 4.0% 16.7% 0.00% 75.4% 17.4 17.0% 1.0% 22.6% 4.4%
Timberland Bancorp WA* 01/13/98 TSBK 8.0% 4.0% 3.8% 0.00% 80.8% 13.3 24.6% 2.0% 30.5% 6.4%
Mystic Financial, Inc. MA* 01/09/98 MYST 8.0% 4.0% 4.6% 0.00% 77.0% 19.2 15.0% 0.8% 19.5% 4.0%
Wyman Park Bancorp MD 01/07/98 P.Sheet 8.0% 4.0% 5.9% 0.00% 76.7% 22.1 14.1% 0.6% 18.4% 3.5%
Delaware First Fin. Corp. DE 01/05/98 P.Sheet 8.0% 4.0% 2.5% 0.00% 73.9% 26.1 9.9% 0.4% 13.4% 2.8%
United Tennessee Bancshares TN* 01/05/98 UTBI 8.0% 4.0% 9.6% 3.00% 77.2% 15.1 18.9% 1.2% 24.5% 4.8%
Great Pee Dee Bancorp SC 12/31/97 PEDE 8.0% 4.0% 8.5% 3.00% 74.0% 18.0 28.0% 1.6% 37.8% 4.1%
Coddle Creek Financial NC 12/31/97 P.Sheet 8.0% 4.0% 8.9% 2.00% 77.8% 28.2 23.6% 0.8% 30.3% 2.8%
Union Community Bancorp IN* 12/29/97 UCBC 8.0% 4.0% 5.8% 3.00% 74.6% 17.2 27.2% 1.6% 36.5% 4.3%
Averages - Standard Conversions: 8.0% 4.0% 7.4% 0.85% 77.9% 19.3x 19.7% 1.0% 25.3% 3.8%
Medians - Standard Conversions: 8.0% 4.0% 5.9% 0.00% 77.0% 17.9x 18.9% 1.0% 24.5% 4.1%
Second-Step Conversions
- -----------------------
Harbor Florida Bancshares FL* 03/19/98 HARB 8.0% 4.0% 20.3% 3.50% 126.5% 17.8x 24.1% 1.4% 19.1% 7.3%
Heritage Financial Corp. WA* 01/09/98 HFWA 2.0% 1.0% 1.3% 0.00% 107.1% 20.3 31.3% 1.5% 29.2% 5.3%
Guaranty Fed. Bancshares MO* 12/31/97 GFED 8.0% 4.0% 5.1% 3.00% 93.5% 20.2 25.0% 1.2% 26.7% 4.6%
Averages - 2nd Step Conversions: 6.0% 3.0% 8.9% 2.17% 109.0% 19.4x 26.8% 1.4% 25.0% 5.7%
Medians - 2nd Step Conversions: 8.0% 4.0% 5.1% 3.00% 107.1% 20.2x 25.0% 1.4% 26.7% 5.3%
Averages - All Conversions: 7.6% 3.8% 7.7% 1.09% 83.8% 19.3x 21.0% 1.1% 25.2% 4.1%
Medians - All Conversions: 8.0% 4.0% 5.9% 0.00% 77.5% 18.0x 21.7% 1.2% 25.1% 4.3%
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Institutional Information Post-IPO Pricing Trends
------------------------------------------------------------
Closing Price:
------------------------------------------------------------
First After After
Conversion IPO Trading % First % First %
Institution State Date Ticker Price Day Change Week(6) Change Month(7) Change
- ----------- ----- ---- ------ ----- --- ------ ------- ------ -------- ------
($) ($) (%) ($) (%) ($) (%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Standard Conversions
- --------------------
Independence Community NY* 03/17/98 ICBC $ 10.00 $17.25 72.5% $17.56 75.6% $ 18.13 81.3%
Cavalry Bancorp, Inc. TN 03/17/98 CAVB 10.00 20.56 105.6% 24.38 143.8% 25.00 150.0%
SFSB Holding Company PA 03/02/98 SFSH 10.00 12.81 28.1% 13.13 31.3% 14.38 43.8%
Richmond County Fin. Corp. NY 02/19/98 RCBK 10.00 16.31 63.1% 16.56 65.6% 18.00 80.0%
Hopfed Bancorp KY 02/09/98 HFBC 10.00 16.81 68.1% 16.00 60.0% 16.75 67.5%
Timberland Bancorp WA* 01/13/98 TSBK 10.00 14.50 45.0% 16.00 60.0% 16.00 60.0%
Mystic Financial, Inc. MA* 01/09/98 MYST 10.00 14.44 44.4% 15.63 56.3% 15.00 50.0%
Wyman Park Bancorp MD 01/07/98 P. Sheet 10.00 13.75 37.5% 13.75 37.5% 14.38 43.8%
Delaware First Fin. Corp. DE 01/05/98 P. Sheet 10.00 12.88 28.8% 12.13 21.3% 12.75 27.5%
United Tennessee Bancshares TN* 01/05/98 UTBI 10.00 14.75 47.5% 13.75 37.5% 14.25 42.5%
Great Pee Dee Bancorp SC 12/31/97 PEDE 10.00 16.13 61.3% 15.50 55.0% 15.00 50.0%
Coddle Creek Financial NC 12/31/97 P. Sheet 50.00 77.00 54.0% 77.63 55.3% 79.25 58.5%
Union Community Bancorp IN* 12/29/97 UCBC 10.00 14.69 46.9% 14.25 42.5% 14.25 42.5%
Averages - Standard Conversions: $ 13.08 $20.14 54.1% $20.48 57.0% $ 21.01 61.3%
Medians - Standard Conversions: $ 10.00 $14.75 47.5% $15.63 55.3% $ 15.00 50.0%
Second-Step Conversions
- -----------------------
Harbor Florida Bancshares FL* 03/19/98 HARB $ 10.00 $12.25 22.5% $11.69 16.9% $ 11.75 17.5%
Heritage Financial Corp. WA* 01/09/98 HFWA 10.00 13.25 32.5% 13.25 32.5% 14.25 42.5%
Guaranty Fed. Bancshares MO* 12/31/97 GFED 10.00 12.88 28.8% 12.50 25.0% 12.38 23.8%
Averages - 2nd Step Conversions: $ 10.00 $12.79 27.9% $12.48 24.8% $ 12.79 27.9%
Medians - 2nd Step Conversions: $ 10.00 $12.88 28.8% $12.50 25.0% $ 12.38 23.8%
Averages - All Conversions: $ 12.50 $18.77 49.2% $18.98 51.0% $ 19.47 55.1%
Medians - All Conversions: $ 10.00 $14.60 46.0% $14.88 48.8% $ 14.69 23.8%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Note: * - Appraisal performed by RP Financial; "NT" - Not Traded; "NA" - Not
Applicable, Not Available.
(1) Non-OTS regulated thrift.
(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) Simultaneously converted to commercial bank charter.
March 27, 1998
<PAGE>
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Table 5
Market Pricing Comparatives
Prices As of March 27, 1998
Market Per Share Data
Capitalization --------------- Pricing Ratios(3)
--------------- Core Book ---------------------------------------
Price/ Market 12-Mth Value/
Financial Institution Share(1) Value EPS(2) Share P/E P/B P/A P/TB P/CORE
- --------------------- -------- ------- ------- ------- ------- ------- ------- ------- --------
($) ($Mil) ($) ($) (X) (%) (%) (%) (x)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts 23.97 178.98 1.03 14.38 20.36 167.77 21.34 171.67 21.42
Converted Last 3 Mths (no MHC) 16.88 238.70 0.56 11.99 24.61 141.74 37.94 142.71 24.75
Comparable Group
- ----------------
Converted Last 3 Mths (no MHC)
- ------------------------------
CAVB Cavalry Bancorp of TN 25.00 183.95 0.61 12.53 NM 199.52 54.32 199.52 NM
PEDE Great Pee Dee Bancorp of SC 15.75 34.68 0.56 13.51 28.13 116.58 44.14 116.58 28.13
GFED Guaranty Fed Bancshares of MO 12.38 77.03 0.32 11.18 NM 110.73 33.41 110.73 NM
HARBD Harbor Florida Bancshrs of FL 11.75 360.71 0.56 8.01 20.26 146.69 28.31 148.55 20.98
HFWA Heritage Financial Corp of WA 15.44 150.52 0.49 9.34 NM 165.31 48.33 165.31 NM
HFBC HopFed Bancorp of KY 17.63 71.12 0.58 13.26 NM 132.96 30.03 132.96 NM
ICBC Independence Comm Bnk Cp of NY 18.13 1276.55 0.49 12.55 NM 144.46 31.35 154.30 NM
MYST Mystic Financial of MA 18.00 48.80 0.52 13.00 NM 138.46 26.96 138.46 NM
RCBK Richmond County Fin Corp of NY 19.28 471.70 0.56 11.79 NM 163.53 41.94 163.53 NM
TSBK Timberland Bancorp of WA 17.94 118.64 0.75 12.38 23.92 144.91 44.13 144.91 23.92
UCBC Union Community Bancorp of IN 15.81 48.09 0.58 13.40 27.26 117.99 43.04 117.99 27.26
UTBI United Tenn. Bancshares of TN 15.50 22.55 0.66 12.95 23.48 119.69 29.31 119.69 23.48
<CAPTION>
Dividends(4) Financial Characteristics(6)
----------------------- -------------------------------------------------------
Reported Core
Amount/ Payout Total Equity/ NPAs/ ---------------- -------------
Financial Institution Share Yield Ratio(5) Assets Assets Assets ROA ROE ROA ROE
- --------------------- ------- ------ ------- ------- ------- ------- ------- --------------- -------
($) (%) (%) ($Mil) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts 0.36 1.56 30.63 1,033 13.70 0.74 0.94 8.07 0.89 7.55
Converted Last 3 Mths (no MHC) 0.18 1.43 8.03 692 27.05 0.67 1.26 4.90 1.27 4.95
Comparable Group
- ----------------
Converted Last 3 Mths (no MHC)
- ------------------------------
CAVB Cavalry Bancorp of TN 0.00 0.00 0.00 339 27.23 0.02 1.33 4.87 1.33 4.87
PEDE Great Pee Dee Bancorp of SC 0.00 0.00 0.00 79 37.86 0.45 1.57 4.15 1.57 4.15
GFED Guaranty Fed Bancshares of MO 0.30 2.42 NM 231 30.17 0.61 1.00 5.76 0.97 5.58
HARBD Harbor Florida Bancshrs of FL 1.40 11.91 NM 1,274 19.30 0.51 1.40 7.24 1.35 6.99
HFWA Heritage Financial Corp of WA 0.14 0.91 28.57 311 29.23 0.10 1.53 5.25 1.53 5.25
HFBC HopFed Bancorp of KY 0.00 0.00 0.00 237 22.59 0.12 0.99 4.37 0.99 4.37
ICBC Independence Comm Bnk Cp of NY 0.00 0.00 0.00 4,072 21.70 0.70 0.64 2.95 0.85 3.90
MYST Mystic Financial of MA 0.00 0.00 0.00 181 19.47 0.18 0.78 4.00 0.78 4.00
RCBK Richmond County Fin Corp of NY 0.00 0.00 0.00 1,125 25.65 NA 1.22 4.75 1.22 4.75
TSBK Timberland Bancorp of WA 0.00 0.00 0.00 269 30.46 3.07 1.85 6.06 1.85 6.06
UCBC Union Community Bancorp of IN 0.30 1.90 51.72 112 36.48 NA 1.58 4.33 1.58 4.33
UTBI United Tenn. Bancshares of TN 0.00 0.00 0.00 77 24.48 0.93 1.25 5.10 1.25 5.10
</TABLE>
(1) Average of High/Low or Bid/Ask price per share.
(2) EPS (estimate core basis) is based on actual trailing twelve month data,
adjusted to omit non-operating items (including the SAIF assessment) on a
tax effected basis.
(3) P/E = Price to earnings; P/B = Price to book; P/A = Price to assets; P/TB =
Price to tangible book value; and P/CORE = Price to estimated core earnings.
(4) Indicated twelve month dividend, based on last quarterly dividend declared.
(5) Indicated dividend as a percent of trailing twelve month estimated core
earnings.
(6) ROA (return on assets) and ROE (return on equity) are indicated ratios based
on trailing twelve month earnings and average equity and assets balances.
(7) Excludes from averages those companies the subject of actual or rumored
acquisition activities or unusual operating characteristics.
Source: Corporate reports, offering circulars, and RP Financial, LC.
calculations. The information provided in this report has been obtained
from sources we believe are reliable, but we cannot guarantee the
accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP Financial, LC.
Board of Directors
March 27, 1998
Page 15
Previous Valuation
Key Valuation Parameters: Adjustment
------------------------ ----------
Financial Condition No Adjustment
Profitability, Growth and Viability of Earnings Slight Downward
Asset Growth Slight Downward
Primary Market Area No Adjustment
Dividends Slight Downward
Liquidity of the Shares No Adjustment
Marketing of the Issue No Adjustment
Management No Adjustment
Effect of Government Regulations and Regulatory Reform No Adjustment
The factors concerning the valuation parameters of primary market area,
dividends, liquidity of the shares, management and effect of government
regulation and regulatory reform did not change since the original appraisal
date. Accordingly, those parameters were not discussed further in this update.
There were no material changes in the updated financial conditions of the
Bank and the Peer Group, with both BCSB's and the Peer Group's balance sheets
remaining fairly indicative of traditional thrift operating strategies. In terms
of overall asset/liability composition, credit quality, balance sheet liquidity,
funding composition and capital, the comparative differences between the Bank's
and the Peer Group's financial characteristics remained limited and required no
adjustment for valuation purposes. A slight downward valuation adjustment
remained appropriate for BCSB's asset growth, as the Bank continued to exhibit
less favorable asset growth measures than the Peer Group. BCSB's smaller asset
size and more limited resources also continued to be factors in the downward
adjustment applied for the Bank's assets growth. The Bank's updated core
earnings remained fairly comparable to the Peer Group's, with BCSB's stronger
net interest margin continuing to substantially negated by the Peer Group's
higher level of non-interest operating income and lower level of operating
expenses. Consistent with the original appraisal, the credit risk and the
earnings growth potential associated with the Bank's earnings warranted downward
adjustments compared to the Peer Group's earnings. Greater lending
diversification into higher risk types of lending and less favorable credit
quality measures remained factors warranting the downward adjustment for the
credit risk exposure associated with the Bank's earnings. The Peer Group's more
favorable earnings growth potential continued to be warranted by its stronger
asset growth historically and more diversified operations. Accordingly, we
continue to believe a slight downward adjustment remains appropriate for the
quality, predictability and growth of the Bank's earnings relative to the Peer
Group's.
The general market for thrift stocks has remained favorable, with thrift
issues continuing to trade at historically high levels. The SNL Index for all
publicly-traded thrifts posted a healthy increase since the original appraisal
date, with a comparable increase being exhibited in the SNL Index for all
publicly-traded MHCs. Since the date of the original appraisal, the substantial
majority of the Peer Group companies were trading at higher prices as of March
27, 1998. The new issue market for thrift stocks remains strong, as recent
converting and MHC issues have been oversubscribed and have traded higher in
initial trading activity.
<PAGE>
RP Financial, LC.
Board of Directors
March 27, 1998
Page 16
Overall, taking into account the foregoing factors, we believe that an
increase in BCSB's value is appropriate.
Basis of Valuation. Fully-Converted Pricing Ratios
- --------------------------------------------------
Consistent with the original appraisal, 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 March 27, 1998 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.
Since 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 BCSB. Table 6 on the following page shows the
calculation of per share financial data (fully-converted basis) for each of the
16 public MHC institutions that form the Peer Group.
Valuation Approaches
- --------------------
In applying the accepted valuation methodology promulgated by the OTS,
i.e., the pro forma market value approach, we considered the three key pricing
ratios in valuing BCSB's Savings' to-be-issued stock -- price/earnings ("P/E"),
price/book ("P/B"), and price/assets ("P/A") approaches -- all performed on a
pro forma basis including the effects of the conversion proceeds. In computing
the pro forma impact of the conversion and the related pricing ratios, the
valuation assumptions for effective tax rate, stock benefit plan assumptions,
and offering expenses utilized in the original appraisal did not change in this
update. The reinvestment rate was revised from 5.44 percent to 5.48 percent,
equaling the one year U.S. Treasury rate prevailing as of December 31, 1997. The
pro assumptions are summarized in Exhibits 3 and 4.
Consistent with the original appraisal, this updated appraisal continues to
be based primarily on fundamental analysis techniques applied to the Peer Group,
including the P/E approach, the P/B approach and the P/A approach. Also
consistent with the original appraisal, this updated appraisal also incorporates
a technical analysis of the most recently completed MHC offerings.
Based on the foregoing, we have concluded that the pro forma market value
of BCSB's stock is subject to an increase. Therefore, as of March 27, 1998, the
pro forma market value of a 100 percent in BCSB's stock has been increased from
$43,250,000 to $46,250,000 at the midpoint of the valuation range. The increase
takes into account the Bank's capital growth since the original appraisal, the
higher trading prices of the Peer Group companies on average, the favorable
market environment for thrift stocks in general, and a continuation of the
strong market environment for converting and MHC thrift issues.
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Table 6
Calculation of Implied Per Share Data -- Incorporating MHC Second Step Conversion
Comparable Institutional Analysis
For the Twelve Months Ended December 31, 1997
Current Ownership Current Per Share Data (MHC Ratios)
------------------------------ ----------------------------------------------------
Total Public MHC Core Book Tangible
Shares Shares Shares EPS EPS Value Book Assets
-------- -------- -------- -------- -------- -------- -------- --------
(000) (000) (000) ($) ($) ($) ($) ($)
<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 1.05 0.97 15.95 15.95 141.34
FFFL Fidelity Bcsh MHC of FL (47.7) 6,783 3,224 3,559 0.93 0.79 12.65 12.57 154.16
FFSX First FSB MHC Sxld of IA(46.1) 2,834 1,303 1,531 1.19 1.15 14.34 14.23 161.94
GDVS Greater DV SB, MHC of PA(19.9) 3,273 650 2,623 0.62 0.62 8.91 8.91 79.58
HARS Harris Fin. MHC of PA (24.3) 33,790 8,169 25,621 0.53 0.45 5.29 4.72 65.15
JXSB Jcksnville SB,MHC of IL (45.6) 1,908 580 1,328 0.51 0.41 9.17 9.17 88.07
LFED Leeds FSB, MHC of MD (36.3) 5,182 1,883 3,299 0.66 0.66 9.35 9.35 56.23
NWSB Northwest SB, MHC of PA (30.7) 46,798 14,352 32,446 0.41 0.42 4.44 3.94 48.05
PBCT Peoples Bank, MHC of CT (40.1) 61,162 24,453 36,709 1.51 0.87 11.61 11.55 133.81
PBHC Pathfinder BC MHC of NY (46.1) 2,875 882 1,993 0.64 0.58 8.20 6.95 68.44
PHSB Ppls Home SB, MHC of PA (45.0) 2,760 1,242 1,518 0.59 0.56 10.37 10.37 78.89
PLSK Pulaski SB, MHC of NJ (46.0) 2,108 952 1,156 0.53 0.53 10.29 10.29 86.21
SBFL SB Fngr Lakes MHC of NY (33.1) 3,570 590 2,980 0.24 0.21 6.07 6.07 69.39
SKBO First Carnegie MHC of PA(45.0) 2,300 1,035 1,265 0.41 0.46 10.74 10.74 62.46
WAYN Wayne Svgs Bks MHC of OH (47.8) 2,257 1,075 1,182 0.84 0.78 10.72 10.72 113.04
WCFB Wbstr Cty FSB MHC of IA (45.2) 2,109 950 1,159 0.65 0.65 10.60 10.60 45.10
<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) 38.38 100,748 86,643 2,653 1.57 1.49 32.96 32.96 158.35
FFFL Fidelity Bcsh MHC of FL (47.7) 29.75 105,880 91,057 2,788 1.34 1.20 26.07 25.99 167.58
FFSX First FSB MHC Sxld of IA(46.1) 33.50 51,289 44,108 1,351 1.67 1.63 29.90 29.79 177.50
GDVS Greater DV SB, MHC of PA(19.9) 32.75 85,903 73,877 2,262 1.31 1.31 31.48 31.48 102.15
HARS Harris Fin. MHC of PA (24.3) 26.50 678,957 583,903 17,880 1.06 0.98 22.57 22.00 82.43
JXSB Jcksnville SB,MHC of IL (45.6) 24.50 32,536 27,981 857 0.96 0.86 23.84 23.84 102.74
LFED Leeds FSB, MHC of MD (36.3) 23.00 75,877 65,254 1,998 1.05 1.05 21.94 21.94 68.82
NWSB Northwest SB, MHC of PA (30.7) 17.19 557,747 479,662 14,688 0.72 0.73 14.69 14.19 58.30
PBCT Peoples Bank, MHC of CT (40.1) 38.00 1,394,942 1,199,650 36,734 2.11 1.47 31.22 31.16 153.42
PBHC Pathfinder BC MHC of NY (46.1) 21.50 42,850 36,851 1,128 1.03 0.97 21.02 19.77 81.26
PHSB Ppls Home SB, MHC of PA (45.0) 19.75 29,981 25,783 790 0.88 0.85 19.71 19.71 88.23
PLSK Pulaski SB, MHC of NJ (46.0) 19.00 21,964 18,889 578 0.80 0.80 19.25 19.25 95.17
SBFL SB Fngr Lakes MHC of NY (33.1) 19.50 58,110 49,975 1,530 0.67 0.64 20.07 20.07 83.39
SKBO First Carnegie MHC of PA(45.0) 20.00 25,300 21,758 666 0.70 0.75 20.20 20.20 71.92
WAYN Wayne Svgs Bks MHC of OH (47.8) 30.00 35,460 30,496 934 1.25 1.19 24.23 24.23 126.55
WCFB Wbstr Cty FSB MHC of IA (45.2) 19.75 22,890 19,686 603 0.94 0.94 19.93 19.93 54.43
</TABLE>
(1) Gross proceeds calculated as stock price mulitplied 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.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP Financial, LC.
Board of Directors
March 27, 1998
Page 18
The Bank has adopted Statement of Position ("SOP" 93-6) which will cause
earnings per share computations to be based on shares issued and outstanding
excluding shares owned by an ESOP where there is not a commitment to release
such shares. For the purpose of preparing the pro forma pricing tables and
exhibits, we have reflected all shares issued in the offering including shares
purchased by the ESOP as outstanding to capture the full dilutive impact of such
stock to the Bank's shareholders. However, we have considered the impact of the
Bank's adoption of SOP 93-6 in the determination of BCSB's pro forma value.
1. P/E Approach. In applying the P/E approach, RP Financial's
------------
valuation conclusions were based on the Bank's and the Peer Group's reported and
recurring or "core" earnings estimates. BCSB's reported earnings for the twelve
months ended December 31, 1997 equaled $2.027 million. Two adjustments were made
in deriving the Bank's core earnings, which were comparable to the adjustments
made in the original appraisal. The first adjustment was to eliminate gains from
real estate development, which approximated $36,000 for the twelve months ended
December 31, 1997. The second adjustment eliminated the $339,000 gain recorded
on the sale of branch deposits. On a tax effected basis, assuming an effective
marginal tax rate of 39.0 percent, the elimination of the gains resulted in a
$229,000 reduction in the Bank's reported earnings. Accordingly, as shown below,
BCSB's core earnings were estimated to equal $1.798 million for the twelve
months ended December 31, 1997. (Note: see Exhibit 2 for the adjustments applied
to the Peer Group's earnings in the calculation of core earnings).
Amount
------
($000)
Net income $2,027
Gain on sale of branch(1) (207)
Gains on real estate development(1) (22)
--
Core earnings estimate $1,798
(1) Tax effected at 39.0 percent.
Based on BCSB's reported and estimated core earnings, and
incorporating the impact of the pro forma assumptions discussed previously, the
Bank's pro forma reported and core P/E multiples (fully-converted basis) at the
$46.250 million fully-converted midpoint value equaled 16.23 times and 17.65
times, respectively (versus 15.82x and 16.13x at the midpoint valuation in the
original appraisal). Comparatively, the Peer Group posted average reported and
core P/E multiples of 23.49 times and 24.33 times, which indicated discounts of
30.9 percent and 27.5 percent in the Bank's reported and core P/E multiples
(versus discounts of 27.0 percent and 30.6 percent as indicated in the original
appraisal). The implied conversion pricing ratios relative to the Peer Group's
pricing ratios are indicated in Table 7, and the updated pro forma calculations
are detailed in Exhibits 3 and 4.
2. P/B Approach. P/B ratios have generally served as a useful
------------
benchmark in the valuation of thrift stocks, with the greater determinant of
long term value being earnings. Based on the $46.250 million fully-converted
midpoint value, BCSB's pro forma P/B and P/TB ratios (fully-converted basis)
were 72.34 percent and 72.39 percent, respectively (versus 71.25 percent and
71.31 percent in the original appraisal). Relative to the average P/B and P/TB
ratios indicated for the Peer Group of 108.17 percent and 109.08
<PAGE>
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Table 7
MHC INSTITUTIONS -- IMPLIED PRICING RATIOS FULL CONVERSION BASIS
Baltimore County Savings Bank and the Comparables
As of March 27, 1998
Fully Converted
Implied Value Per Share (8)
---------------- --------------- Pricing Ratios(3)
Implied Core Book ---------------------------------------
Price/ Market 12-Mth Value/
Share(1) Value(8) EPS(2) Share P/E P/B P/A P/TB P/CORE
-------- -------- ------- ------- ------- ------- ------- ------- --------
($) ($Mil) ($) ($) (X) (%) (%) (%) (x)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Baltimore County Savings Bank
- -----------------------------
Superrange 10.00 61.17 0.47 12.53 19.56 79.80 20.21 79.84 21.10
Range Maximum 10.00 53.19 0.52 13.13 17.86 76.14 17.97 76.19 19.34
Range Midpoint 10.00 46.25 0.57 13.82 16.23 72.34 15.95 72.39 17.65
Range Mimimum 10.00 39.31 0.63 14.76 14.46 67.75 13.84 67.80 15.78
SAIF-Insured Thrifts(7)
- ----------------------
Averages 23.97 178.98 1.03 14.38 20.36 167.77 21.34 171.67 21.42
Medians --- --- --- --- 19.62 159.79 19.48 162.33 21.28
All Non-MHC State of MD(7)
- -------------------------
Averages 20.07 34.39 0.91 12.62 18.85 160.53 16.71 160.53 22.83
Medians --- --- --- --- 15.92 148.89 15.44 148.89 26.09
Publicly-Traded MHC Institutions, Full Conversion Basis
- -------------------------------------------------------
Averages 25.82 323.18 1.05 23.69 23.49 108.17 26.04 109.08 24.33
Medians --- --- --- --- 23.81 104.43 24.50 106.79 24.79
Publicly-Traded MHC Institutions, Full Conversion Basis
- -------------------------------------------------------
CMSV Commty. Svgs, MHC of FL (48.5) 38.38 195.55 1.49 32.96 24.45 116.44 24.24 116.44 25.76
FFFL Fidelity Bcsh MHC of FL (47.7) 29.75 201.79 1.20 26.07 22.20 114.12 17.75 114.47 24.79
SKBO First Carnegie MHC of PA (45.0) 20.00 46.00 0.75 20.20 28.57 99.01 27.81 99.01 26.67
FFSX First FSB MHC Sxld of IA (46.1) 33.50 94.94 1.63 29.90 20.06 112.04 18.87 112.45 20.55
GDVS Greater DV SB, MHC of PA (19.9) 32.75 107.19 1.31 31.48 25.00 104.03 32.06 104.03 25.00
HARS Harris Fin. MHC of PA (24.3) 26.50 895.43 0.98 22.57 25.00 117.41 32.15 120.45 27.04
JXSB Jcksnville SB,MHC of IL (45.6) 24.50 46.75 0.86 23.84 25.52 102.77 23.85 102.77 28.49
LFED Leeds FSB, MHC of MD (36.3) 23.00 119.19 1.05 21.94 21.90 104.83 33.42 104.83 21.90
NWSB Northwest SB, MHC of PA (30.7) 17.19 804.46 0.73 14.69 23.88 117.02 29.49 121.14 23.55
PBHC Pathfinder BC MHC of NY (46.1) 21.50 61.81 0.97 21.02 20.87 102.28 26.46 108.75 22.16
PBCT Peoples Bank, MHC of CT (40.1) 38.00 2324.16 1.47 31.22 18.01 121.72 24.77 121.95 25.85
PHSB Ppls Home SB, MHC of PA (45.0) 19.75 54.51 0.85 19.71 22.44 100.20 22.38 100.20 23.24
PLSK Pulaski SB, MHC of NJ (46.0) 19.00 40.05 0.80 19.25 23.75 98.70 19.96 98.70 23.75
SBFL SB Fngr Lakes MHC of NY (33.1) 19.50 69.61 0.64 20.07 29.10 97.16 23.38 97.16 NH
WAYN Wayne Svgs Bks MHC of OH (47.8) 30.00 67.71 1.19 24.23 24.00 123.81 23.71 123.81 25.21
WCFB Wbstr Cty FSB MHC of IA (45.2) 19.75 41.65 0.94 19.93 21.01 99.10 36.29 99.10 21.01
<CAPTION>
Dividends(4) Financial Characteristics(6)
----------------------- -------------------------------------------------------
Reported Core
Amount/ Payout Total Equity/ NPAs/ ---------------- -------------
Baltimore County Savings Bank Share Yield Ratio(5) Assets Assets Assets ROA ROE ROA ROE
- ----------------------------- ------- ------ ------- ------- ------- ------- ------- --------- ------ -------
($) (%) (%) ($Mil) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Superrange 0.00 0.00 0.00 303 25.32 0.72 1.03 4.08 0.96 3.78
Range Maximum 0.00 0.00 0.00 296 23.61 0.74 1.01 4.26 0.93 3.94
Range Midpoint 0.00 0.00 0.00 290 22.05 0.76 0.98 4.46 0.90 4.10
Range Mimimum 0.00 0.00 0.00 284 20.42 0.77 0.96 4.69 0.88 4.29
SAIF-Insured Thrifts(7)
- ----------------------
Averages 0.36 1.56 30.63 1,033 13.70 0.74 0.94 8.07 0.89 7.55
Medians --- --- --- --- --- --- --- --- --- ---
All Non-MHC State of MD(7)
- ----------------------------------
Averages 0.23 1.25 35.65 230 11.46 0.67 0.78 8.67 0.69 7.51
Medians --- --- --- --- --- --- --- --- --- ---
Publicly-Traded MHC Institutions, Full Conversion Basis
- -------------------------------------------------------
Averages 0.46 1.73 36.52 1,236 24.27 0.59 1.16 4.83 1.10 4.56
Medians --- --- --- --- --- --- --- --- --- ---
Publicly-Traded MHC Institutions, Full Conversion Basis
- --------------------------------------------------------
CMSV Commty. Svgs, MHC of FL (48.5) 0.90 2.34 60.40 807 20.81 0.42 1.03 4.84 0.97 4.59
FFFL Fidelity Bcsh MHC of FL (47.7) 0.90 3.03 NM 1,137 15.56 0.40 0.88 5.23 0.79 4.69
SKBO First Carnegie MHC of PA (45.0) 0.30 1.50 40.00 165 28.09 0.78 0.95 3.80 1.02 4.07
FFSX First FSB MHC Sxld of IA (46.1) 0.48 1.43 29.45 503 16.85 0.19 0.94 5.70 0.91 5.57
GDVS Greater DV of SB, MHC of PA (19.9) 0.36 1.10 27.48 334 30.82 1.52 1.34 4.20 1.34 4.20
HARS Harris Fin. MHC of PA (24.3) 0.22 0.83 22.45 2,785 27.38 0.62 1.38 4.79 1.27 4.42
JXSB Jcksnville SB,MHC of IL (45.6) 0.30 1.22 34.88 196 23.20 0.94 0.97 4.06 0.87 3.64
LFED Leeds FSB, MIC of MD (36.3) 0.56 2.43 53.33 357 31.88 0.04 1.55 4.86 1.55 4.86
NWSB Northwest SB, MHC of PA (30.7) 0.16 0.93 21.92 2,728 25.20 0.72 1.32 4.97 1.34 5.03
PBHC Pathfinder BC MHC of NY (46.1) 0.20 0.93 20.62 234 25.87 1.17 1.29 5.00 1.22 4.71
PBCT Peoples Bank, MHC of CT (40.1) 0.76 2.00 51.70 9,383 20.35 0.68 1.43 6.92 1.00 4.82
PHSB Ppls Home SB, MHC of PA (45.0) 0.24 1.22 28.24 244 22.34 0.44 1.03 5.02 0.99 4.85
PLSK Pulaski SB, MHC of NJ (46.0) 0.30 1.58 37.50 201 20.23 0.53 0.86 4.59 0.86 4.59
SBFL SB FNgr Lakes MHC of NY (33.1) 0.20 1.03 32.25 298 24.07 0.50 0.88 3.38 0.84 3.23
WAYN Wayne Svgs Bks MHC of OH (47.8) 0.62 2.07 52.10 286 19.15 0,45 1.00 5.23 0.95 4.97
WCFB Wbstr Cty FSB MHC of IA (45.2) 0.80 4.05 NM 115 36.62 0.06 1.74 4.75 1.74 4.75
</TABLE>
(1) Current stock price of minority stock. Average of High/Low or Bid/Ask
price per share.
(2) EPS (estimate core earnings) is based on reported trailing twelve month
data, adjusted to omit non-operating gains and losses (including the SAIF
assessment) on a tax effected basis. Public MHC data reflects additional
earnings from reinvestment of proceeds of second step conversion.
(3) P/E = Price to Earnings; P/B = Price to Book; P/A = Price to Assets; P/TB =
Price to Tangible Book; and P/CORE = Price to Core Earnings. Ratios are pro
forma assuming a second step conversion to full stock form.
(4) Indicated twelve month dividend, based on last quarterly dividend declared.
(5) Indicated twelve month dividend as a percent of trailing twelve month
estimated core earnings (earnings adjusted to reflect second step
conversion).
(6) ROA (return on assets) and ROE (return on equity) are indicated ratios based
on trailing twelve month earnings and average equity and assets balances.
(7) Excludes from averages and medians those companies the subject of actual or
rumored acquisition activities or unusual operating characteristics.
(8) Figures estimated by RP Financial to reflect 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.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP Financial, LC.
Board of Directors
March 27, 1998
Page 20
percent, respectively, BCSB's updated valuation reflected a 33.1 percent
discount on a P/B basis (versus 33.9 percent in the original appraisal) and a
33.6 percent discount on a P/TB basis (versus 34.4 percent discount in the
original appraisal).
Since the date of the original appraisal, there has been one publicly-
traded MHC offering that has been completed and began trading: Brookline Bancorp
MHC of Massachusetts. Based on Brookline Bancorp's current trading price of
$16.38 per share, its pro forma fully-converted P/B ratio equaled 102.2 percent.
At the fully-converted midpoint value of $46.250 million, BCSB's P/B ratio of
72.3 percent indicated a discount of 29.2 percent from Brookline Bancorp's
current P/B ratio.
3. P/A Approach. While generally less emphasized than the other
------------
pricing ratios, the P/A ratio is an indicator of franchise value and, in the
case of highly capitalized institutions, high P/A ratios may limit the
investment community's willingness to pay market multiples for earnings or book
value when ROE is expected to be low. At the $46.250 million fully-converted
midpoint value, BCSB's P/A ratio equaled 15.95 percent. In comparison to the
Peer Group's average P/A ratio of 26.04 percent, BCSB's P/A ratio indicated a
discount of 38.7 percent (versus a discount of 40.4 percent at the midpoint
valuation in the original appraisal).
Summary
- -------
We have concluded that BCSB's estimated pro forma market value should be
increased since the date of the original appraisal, based on the Bank's capital
growth since the original appraisal, the higher trading prices of the Peer Group
companies on average, the increase in the market for thrift stocks in general,
and a continuation of the strong market environment for converting and MHC
thrift issues. Based on the foregoing, it is our opinion that, as of March 27,
1998, 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 $46,250,000 at the midpoint, equal to 4,625,000 shares offered at a
per share value of $10.00. Pursuant to conversion guidelines, the 15 percent
offering range indicates a minimum value of $39,312,500, and a maximum value of
$53,187,500. Based on the $10.00 per share offering price determined by the
Board, this valuation range equates to total shares outstanding of 3,931,250 at
the minimum and 5,318,750 at the maximum. In the event that the appraised value
is subject to an increase, the full conversion value may be increased up to
$61,165,620, equal to 6,116,562 shares at $10.00 per share, without a
resolicitation. The Board of Directors has established a public offering range
such that the public ownership of the Holding Company will constitute a 38
percent ownership interest prior to the issuance of shares to the Foundation.
Accordingly, the offering to the public of the minority stock will equal
$14,696,500 at the minimum, $17,290,000 at the midpoint, $19,883,500 at the
maximum and $22,866,020 at the top of the super range. Based on the public
offering range, and inclusive of the 75,000 shares issued to the Foundation, the
public ownership of the shares will represent 39.3 percent of the shares issued
at the minimum of the valuation range, 39.0 percent of the shares issued at the
midpoint of the valuation range, 38.8 percent of the shares issued at the
maximum of the valuation range and 38.6 of the shares issued at the top of the
super range, with the MHC owning the remaining majority of the shares. The pro
forma valuation calculations relative to the Peer Group (fully-converted basis)
are shown in Table 7 and are detailed in Exhibit 3 and Exhibit 4; the pro forma
valuation calculations relative to the
<PAGE>
RP Financial, LC.
Board of Directors
March 27, 1998
Page 21
Peer Group based on reported financials are shown in Table 8 and are detailed in
Exhibits 5 and 6.
Respectfully submitted,
RP FINANCIAL, LC.
/s/ Gregory E. Dunn
Gregory E. Dunn
Senior Vice President
<PAGE>
RP FINANCIAL, L.C.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 8
Public Market Pricing
Baltimore County Savings Bank and the Comparables
As of March 27, 1998
<TABLE>
<CAPTION>
Market Per Share Data
Capitalization -------------- Pricing Ratios (3)
----------------- Core Book ----------------------------------------
Price/ Market 12-Mth Value/
Shares(1) Value EPS(2) Shares P/E P/B P/A P/TB P/CORE
--------- ------ ------ ------ --- --- --- ---- ------
($) ($Mil) ($) ($) (X) (%) (%) (%) (X)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Baltimore County Savings Bank
- -----------------------------
Superrange 10.00 23.62 0.36 7.12 25.19 140.41 22.69 140.55 27.82
Range Maximum 10.00 20.63 0.40 7.77 22.70 128.76 19.89 128.91 25.16
Range Midpoint 10.00 18.04 0.45 8.45 20.16 118.30 17.44 118.43 22.39
Range Minimum 10.00 15.45 0.51 9.36 17.51 106.81 14.95 106.94 19.50
SAIF-Insured Thrifts(7)
- -----------------------
Averages 23.97 178.98 1.03 14.38 20.36 167.77 21.34 171.67 21.42
Medians --- --- --- --- 19.62 159.79 19.48 162.33 21.28
All Non-MHC State of MD(7)
- --------------------------
Averages 20.07 34.49 0.91 12.62 18.85 160.53 16.71 160.53 22.83
Medians --- --- --- --- 15.92 148.89 15.44 148.89 26.09
Comparable Group Averages
- -------------------------
Averages 25.82 115.65 0.63 9.92 26.66 243.14 30.68 247.15 29.13
Medians --- --- --- --- 26.66 254.09 28.25 256.58 29.13
State of MD
- -----------
EQSB Equitable FSB of Wheaton MD 30.25 36.75 1.87 13.77 15.92 219.68 11.43 219.68 16.18
HRBF Harbor Federal Bancorp of MD 24.00 40.63 0.92 17.23 25.00 139.29 17.40 139.29 26.09
MFSL Maryland Fed. Bancorp of MD(7) 38.00 246.09 1.61 15.39 NM 246.91 20.94 249.67 23.60
WHGB WHG Bancshares of MD 17.88 28.84 0.55 14.34 NM 124.69 24.51 124.69 NM
WSB Washington SB, FSB of MD 8.13 35.73 0.31 5.13 15.63 158.48 13.49 158.48 26.23
Comparable Group
- ----------------
CNSR Commty. Svgs, MHC of Fl (48.5) 38.38 94.80 0.97 15.95 NM 240.63 27.15 240.63 NM
FFFL Fidelity Bcsh MHC of Fl (47.7) 29.75 95.91 0.79 12.65 NM 235.18 19.30 236.67 NM
SKBO First Carnegie MHC of PA(45.0) 20.00 20.70 0.46 10.74 NM 186.22 32.02 186.22 NM
FFSX First FSB MHC Sxld of IA(46.1) 33.50 43.65 1.15 14.34 28.15 233.61 20.69 235.42 29.13
GDVS Greater DV SB, MHC of PA(19.9) 32.75 21.29 0.62 8.91 NM NM 41.15 NM NM
HARS Harris Fin. MHC of PA (24.3) 26.50 216.48 0.45 5.29 NM NM 40.68 NM NM
JXSB Jcksnville SB, MHC of IL (45.6) 24.50 14.21 0.41 9.17 NM 267.18 27.82 267.18 NM
LFED Leeds FSB, MHC of MD (36.3) 23.00 43.31 0.66 9.35 NM 245.99 40.90 245.99 NM
NWSB Northwest SB, MHC of PA (30.7) 17.19 246.71 0.42 4.44 NM NM 35.78 NM NM
PBHC Pathfinder BC MHC of NY (46.1) 21.50 18.96 0.58 8.20 NM 262.20 31.41 309.35 NM
PBCT Peoples Bank, MHC of CT (40.1) 38.00 929.21 0.87 11.61 25.17 327.30 28.40 329.00 NM
PHSB Ppls Home SB, MHC of PA (45.0) 19.75 24.53 0.56 10.37 NM 190.45 25.03 190.45 NM
PLSK Pulaski SB, MHC of NJ (46.0) 19.00 18.09 0.53 10.29 NM 184.65 22.04 184.65 NM
SBFL SB Fngr Lakes MHC of NY (33.1) 19.50 11.51 0.21 6.07 NM 321.25 28.10 321.25 NM
WAYN Wayne Svgs Bks MHC of OH (47.8) 30.00 32.25 0.78 10.72 NM 279.85 26.54 279.85 NM
<CAPTION>
Dividends(4) Financial Characteristics(6)
--------------------------- ---------------------------------------------------------
Reported Core
Amount/ Payout Total Equity/ NPAs/ ------------- -------------
Share Yield Ratio(5) Assets Assets Assets ROA ROE ROA ROE
------- ----- -------- ------ ------- ------ ----- ----- ----- -----
($) (%) (%) ($Mil) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Baltimore County Savings Bank
- -----------------------------
Superrange 0.50 5.00 48.63 270 16.16 0.81 0.90 5.57 0.82 5.05
Range Maximum 0.50 5.00 44.03 267 15.45 0.82 0.88 5.67 0.79 5.12
Range Midpoint 0.50 5.00 39.31 265 14.74 0.83 0.87 5.87 0.78 5.28
Range Minimum 0.50 5.00 34.41 263 14.00 0.83 0.85 6.10 0.77 5.48
SAIF-Insured Thrifts(7)
- -----------------------
Averages 0.36 1.56 30.63 1,033 13.70 0.74 0.94 8.07 0.89 7.55
Medians --- --- --- --- --- --- --- --- --- ---
All Non-MHC State of MD(7)
- --------------------------
Averages 0.23 1.25 35.65 230 11.46 0.67 0.78 8.67 0.69 7.51
Medians --- --- --- --- --- --- --- --- --- ---
Comparable Group Averages
- -------------------------
Averages 0.46 1.73 17.92 1,057 11.79 0.59 0.84 7.65 0.77 6.90
Medians --- --- --- --- --- --- --- --- --- ---
State of MD
- -----------
EQSB Equitable FSB of Wheaton MD 0.00 0.00 0.00 322 5.20 0.54 0.76 14.86 0.74 14.62
HRBF Harbor Federal Bancorp of MD 0.48 2.00 52.17 234 12.49 0.53 0.74 5.73 0.70 5.49
MFSL Maryland Fed. Bancorp of MD(7) 0.00 0.00 0.00 1,175 8.48 0.60 0.65 7.77 0.91 10.97
WHGB WHG Bancshares of MD 0.32 1.79 58.18 101 19.66 0.95 0.76 3.59 0.77 3.65
WSB Washington SB, FSB of MD 0.10 1.23 32.26 265 8.51 NA 0.88 10.51 0.52 6.26
Comparable Group
- ----------------
CHSV County. Svgs, MHC of Fl (48.5) 0.90 2.34 NM 720 11.28 0.42 0.77 6.80 0.71 6.29
FFFL Fidelity Bcsh MHC of Fl (47.7) 0.90 3.03 NM 1,046 8.21 0.40 0.67 7.64 0.57 6.49
SKBO First Carnegie MHC of PA(45.0) 0.30 1.50 29.35 144 17.20 0.78 0.64 4.58 0.71 5.13
FFSX First FSB MHC Sxld of IA(46.1) 0.48 1.43 19.19 459 8.86 0.19 0.73 8.67 0.71 8.38
GDVS Greater DV 5B, MHC of PA(19.9) 0.36 1.10 11.53 260 11.20 1.52 0.83 7.17 0.83 7.17
HARS Harris Fin. MHC of PA (24.3) 0.22 0.83 11.82 2,201 8.12 0.62 0.89 10.88 0.76 9.24
JXSB Jcksnville SB, MHC of IL (45.6) 0.30 1.22 22.24 168 10.41 0.94 0.61 5.69 0.49 4.57
LFED Leeds FSB, MHC of MD (36.3) 0.56 2.43 NM 291 16.63 0.04 1.20 7.33 1.20 7.33
NWSB Northwest SB, MHC of PA (30.7) 0.16 0.93 11.68 2,249 9.24 0.72 0.93 9.65 0.95 9.88
PBHC Pathfinder BC MHC of NY (46.1) 0.20 0.93 10.58 197 11.98 1.17 0.96 8.24 0.87 7.46
PBCT Peoples Bank, MHC of CT (40.1) 0.76 2.00 NM 8,184 8.68 0.68 1.18 13.88 0.68 8.00
PHSB Ppls Home SB, MHC of PA (45.0) 0.24 1.22 19.29 218 13.14 0.44 0.77 7.20 0.73 6.83
PLSK Pulaski SB, MHC of NJ (46.0) 0.30 1.58 25.56 182 11.94 0.53 0.63 6.25 0.63 6.25
SBFL SB Fngr Lakes MHC of NY (33.1) 0.20 1.03 NM 248 8.75 0.50 0.39 4.11 0.34 3.60
WAYN Wayne Svgs Bks MHC of OH (47.8) 0.62 2.07 NM 255 9.48 0.45 0.75 8.07 0.70 7.49
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 8
Public Market Pricing
Baltimore County Savings Bank and the Comparables
As of March 27, 1998
<TABLE>
<CAPTION>
Market Per Share Data
Capitalization ----------------
----------------- Core Book Pricing Ratios(3)
Price/ Market 12-Mth Value/ -------------------------------------------
Share(1) Value EPS(2) Share P/E P/B P/A P/TB P/CORE
-------- ------- ------- -------- -------- ------- ------- -------- ---------
($) ($Mil) ($) ($) (X) (%) (%) (%) (X)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
WCFB Wbstr Cty FSB MHC of IA (45.2) 19.75 18.76 0.65 10.60 NM 186.32 43.79 186.32 NM
<CAPTION>
Dividends(4) Financial Characteristics(6)
--------------------------------- ---------------------------------------------------------
Reported Core
Amount/ Payout Total Equity/ NPAs/ ------------- -------------
Share Yield Ratio(5) Assets Assets Assets ROA ROE ROA ROE
-------- -------- ---------- -------- --------- --------- ------ ------ ------ ------
($) (%) (%) ($Mil) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
WCFB Wbstr Cty FSB MHC of IA (45.2) 0.80 4.05 NM 95 23.50 0.06 1.45 6.21 1.45 6.21
</TABLE>
(1) Average of high/low or bid/ask price per share.
(2) EPS (core basis) is based on actual trailing twelve months data, adjusted
to omit the impact of non-operating items (including the SAIF assessment)
on a tax effected basis, and is shown on a pro forma basis where
appropriate.
(3) P/E - Price to Earnings; P/B - Price to Book; P/A - Price to Assets; P/TB -
Price to Tangible Book; and P/CORE - Price to Core Earnings.
(4) Indicated twelve month dividend, based on last quarterly dividend declared.
(5) Indicated twelve month dividend as a percent of trailing twelve month
estimated core earnings.
(6) ROA (return on assets) and ROE (return on equity) are indicated ratios
based on trailing twelve month common earnings and average common equity
and total assets balances.
(7) Excludes from averages and medians those companies the subject of actual or
rumored acquisition activities or unusual operating characteristics.
Source: Corporate reports, offering circulars, and RP Financial, Inc.
calculations. The information provided in this report has been obtained
from sources we believe are reliable, but we cannot quarantee the
accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP Financial, LC.
LIST OF EXHIBITS
Exhibit
Number Description
------ -----------
1 Stock Prices: As of March 27, 1998
2 Peer Group Core Earnings Analysis
3 Pro Forma Analysis Sheet: Fully Converted Basis
4 Pro Forma Effect of Conversion Proceeds: Fully Converted Basis
5 Pro Forma Analysis Sheet: Minority Stock Offering
6 Pro Forma Effects: Minority Stock Offering
7 Firm Qualifications Statement
<PAGE>
EXHIBIT 1
Stock Prices
As of March 27, 1998
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit I
Weekly Thrift Market Line - Part One
Prices As Of March 27, 1998
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
----------------------- -----------------------------------------------
52 Week (1) % Change From
Shares Market --------------- -----------------------
Price/ Outst- Capital- Last Last 52 Wks Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week Ago(2) 1997(2)
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
Market Averages. SAIF-Insured Thrifts(no MHC)
- ---------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts(298) 23.90 6,169 185.0 25.43 15.59 23.60 0.56 49.57 5.28
NYSE Traded Companies(9) 42.50 35,643 1,705.1 44.02 24.69 42.09 1.64 58.66 8.34
AMEX Traded Companies(20) 19.88 2,932 57.0 21.76 13.83 19.74 0.51 37.28 1.10
NASDAQ Listed OTC Companies(269) 23.75 5,692 157.3 25.25 15.50 23.45 0.54 50.31 5.53
California Companies(20) 29.09 13,171 599.7 30.66 17.84 28.81 1.40 48.33 6.84
Florida Companies(6) 21.36 23,339 491.5 24.00 13.50 21.15 -0.23 47.91 -3.48
Mid-Atlantic Companies(58) 25.11 8,781 232.8 26.22 15.69 24.65 0.36 55.84 6.79
Mid-West Companies(138) 22.51 4,047 121.9 24.16 14.92 22.50 0.09 46.02 3.62
New England Companies(9) 31.93 4,842 203.6 32.78 17.38 31.21 1.65 73.04 6.32
North-West Companies(11) 22.96 10,610 274.1 23.86 16.48 22.80 0.42 49.41 18.27
South-East Companies(44) 24.86 4,076 119.6 26.83 16.83 23.78 2.08 49.98 6.39
South-West Companies(6) 20.70 2,202 54.9 21.82 13.91 20.16 3.19 51.79 -1.30
Western Companies (Excl CA)(6) 21.30 4,509 118.9 21.96 14.89 21.72 -2.28 43.72 5.48
Thrift Strategy(249) 22.51 4,454 112.4 24.11 15.13 22.20 0.53 47.20 4.92
Mortgage Banker Strategy(30) 31.91 15,187 574.3 33.21 18.63 32.01 -0.33 61.92 4.55
Real Estate Strategy(8) 27.01 6,484 161.1 27.39 15.16 26.52 1.32 64.50 15.17
Diversified Strategy(7) 39.69 33,283 1,352.2 41.32 22.58 38.85 1.77 58.32 8.14
Retail Banking Strategy(4) 21.13 4,568 110.8 22.15 11.98 20.17 5.49 65.95 6.03
Companies Issuing Dividends(250) 24.56 5,834 188.0 26.14 15.97 24.42 0.55 47.38 3.48
Companies Without Dividends(48) 20.44 7,915 169.5 21.72 13.58 19.34 0.61 60.92 14.65
Equity/Assets less than 6%(24) 25.66 14,863 382.9 27.03 14.64 25.40 0.46 67.20 4.30
Equity/Assets 6-12% (134) 27.47 6,296 246.1 28.92 16.53 27.24 1.10 56.47 4.84
Equity/Assets greater than 12%(140) 20.53 4,676 100.7 22.15 14.92 20.17 0.11 40.93 5.81
Converted Last 3 Mths (no MHC)(11) 16.78 15,114 256.0 17.21 13.78 12.67 0.83 80.33 54.33
Actively Traded Companies(36) 34.51 18,029 736.7 35.74 20.14 34.47 -0.18 64.38 6.18
Market Value Below $20 Million(41) 17.48 921 15.3 18.98 12.47 17.49 -0.19 38.83 1.13
Holding Company Structure(270) 24.04 6,114 187.8 25.61 15.77 23.72 0.57 47.99 5.39
Assets Over $1 Billion(60) 33.64 20,910 731.0 34.87 20.26 32.98 0.72 55.98 8.93
Assets $500 Million-$1 Billion(44) 26.05 5,487 125.2 27.74 15.86 25.85 1.05 54.96 4.35
Assets $250-$500 Million(67) 24.50 3,121 71.9 25.98 15.93 23.96 0.50 58.80 8.42
Assets less than $250 Million(127) 18.73 1,658 30.0 20.35 13.34 18.67 0.35 40.49 2.50
Goodwill Companies(123) 27.94 10,799 325.7 29.29 17.18 27.50 1.03 55.76 6.56
Non-Goodwill Companies(174) 21.21 3,094 91.7 22.87 14.50 21.17 0.26 44.87 3.52
Acquirors of FSLIC Cases(9) 38.88 28,871 1,516.9 39.89 23.77 38.71 1.91 58.96 5.34
<CAPTION>
Current Per Share Financials
----------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- -------- ------- ------- ------- -------
($) ($) ($) ($) ($)
Market Averages. SAIF-Insured Thrifts(no MHC)
- ---------------------------------------------
<S> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts(298) 1.11 1.05 14.61 14.19 134.88
NYSE Traded Companies(9) 2.48 2.00 19.78 19.44 286.31
AMEX Traded Companies(20) 0.87 0.82 14.17 13.97 113.97
NASDAQ Listed OTC Companies(269) 1.09 1.05 14.52 14.07 132.77
California Companies(20) 1.54 1.43 17.17 16.70 238.54
Florida Companies(6) 1.03 0.69 11.14 10.65 147.15
Mid-Atlantic Companies(58) 1.22 1.17 14.74 13.95 151.66
Mid-West Companies(138) 1.03 0.98 14.36 14.07 117.50
New England Companies(9) 1.40 1.55 17.51 16.68 244.32
North-West Companies(11) 1.06 0.98 13.20 12.77 111.53
South-East Companies(44) 1.01 0.96 14.55 14.30 112.89
South-West Companies(6) 1.30 1.27 14.81 14.18 197.12
Western Companies (Excl CA)(6) 0.95 0.94 15.40 14.75 94.84
Thrift Strategy(249) 1.04 1.00 14.58 14.20 121.92
Mortgage Banker Strategy(30) 1.58 1.46 15.32 14.48 211.83
Real Estate Strategy(8) 1.60 1.46 13.91 13.52 197.41
Diversified Strategy(7) 1.80 1.46 14.61 14.27 191.20
Retail Banking Strategy(4) -0.37 -0.44 12.95 12.39 186.34
Companies Issuing Dividends(250) 1.17 1.11 14.83 14.37 135.11
Companies Without Dividends(48) 0.75 0.76 13.46 13.23 133.69
Equity/Assets less than 6%(24) 1.19 1.24 11.79 10.99 238.31
Equity/Assets 6-12%(134) 1.37 1.27 14.91 14.23 173.40
Equity/Assets greater than 12%(140) 0.86 0.83 14.80 14.65 85.15
Converted Last 3 Mths (no MHC)(11) 0.55 0.56 11.90 11.82 44.09
Actively Traded Companies(36) 1.70 1.80 16.17 15.61 204.69
Market Value Below $20 Million(41) 0.83 0.77 13.57 13.52 101.89
Holding Company Structure(270) 1.10 1.05 14.82 14.38 134.58
Assets Over $1 Billion(60) 1.61 1.53 16.16 14.86 218.09
Assets $500 Million-$1 Billion(44) 1.23 1.17 14.04 13.62 158.24
Assets $250-$500 Million(67) 1.15 1.09 15.20 14.81 135.56
Assets less than $250 Million(127) 0.82 0.79 13.87 13.79 91.17
Goodwill Companies(123) 1.35 1.26 15.12 14.04 172.60
Non-Goodwill Companies(174) 0.95 0.92 14.29 14.29 110.44
Acquirors of FSLIC Cases(9) 2.38 2.21 19.91 19.21 259.82
</TABLE>
(1) Average of high/low or bid/ask price per share.
(2) Or since offering price if converted or first listed in 1996 or 1997.
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 March 27, 1998
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
----------------------- -----------------------------------------------
52 Week (1) % Change From
Shares Market --------------- -----------------------
Price/ Outst- Capital- Last Last 52 Wks Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week Ago(2) 1997(2)
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- -------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Market Averages. BIF-Insured Thrifts(no MHC)
- --------------------------------------------
BIF-Insured Thrifts(58) 27.49 15,103 662.6 28.60 16.56 27.04 1.27 61.34 5.20
NYSE Traded Companies(4) 35.30 64,012 1,990.2 36.25 24.86 35.57 -0.81 55.42 1.57
AMEX Traded Companies(7) 28.50 1,777 54.1 29.10 15.89 27.33 2.72 73.69 10.66
NASDAQ Listed OTC Companies(47) 26.67 12,171 611.1 27.85 15.88 26.23 1.30 60.48 4.90
California Companies(1) 20.75 7,871 163.3 21.25 14.00 21.25 -2.35 40.68 7.79
Mid-Atlantic Companies(20) 26.39 21,547 636.4 27.32 17.26 26.25 0.44 56.77 2.01
New England Companies(31) 28.47 4,565 141.9 29.53 15.84 27.72 2.09 72.00 8.91
North-West Companies(3) 37.18 89,713 6,470.1 38.12 22.65 37.02 0.05 47.30 7.01
South-East Companies(3) 17.52 2,593 39.6 20.58 13.84 17.31 1.16 10.23 -13.04
Thrift Strategy(43) 26.30 7,559 218.5 27.40 16.01 25.75 1.61 61.24 6.18
Mortgage Banker Strategy(7) 25.36 29,028 813.6 27.04 14.48 25.19 0.65 69.62 -2.74
Real Estate Strategy(3) 22.50 5,839 127.8 23.07 14.50 22.63 -0.66 46.12 6.61
Diversified Strategy(5) 41.59 62,448 4,248.8 42.29 24.28 41.34 0.09 58.31 6.28
Companies Issuing Dividends(47) 29.49 16,557 774.0 30.67 17.41 28.89 1.79 60.07 3.47
Companies Without Dividends(11) 18.88 8,851 183.9 19.73 12.88 19.06 -0.94 66.81 12.61
Equity/Assets less than 6%(4) 34.26 68,924 4,896.4 34.83 18.63 33.96 2.10 86.64 7.67
Equity/Assets 6-12%(40) 28.76 10,659 341.5 29.86 16.26 28.13 1.63 66.85 5.12
Equity/Assets greater than 12%(14) 22.38 10,835 255.8 23.67 16.71 22.32 0.15 40.35 4.69
Converted Last 3 Mths (no MHC)(1) 18.00 2,711 48.8 18.56 14.44 17.88 0.67 80.00 80.00
Actively Traded Companies(17) 37.10 30,644 1,733.4 37.92 21.50 36.53 1.30 65.05 9.11
Market Value Below $20 Million(2) 13.07 1,046 13.9 14.57 7.72 13.00 0.47 51.72 7.89
Holding Company Structure(46) 26.98 13,580 675.5 28.15 16.55 26.60 1.04 59.85 5.72
Assets Over $1 Billion(17) 36.55 42,153 2,024.7 37.29 22.65 36.37 0.27 55.98 4.41
Assets $500 Million-$1 Billion(15) 30.42 5,404 129.9 30.92 16.71 29.05 3.19 70.45 8.64
Assets $250-$500 Million(11) 20.71 3,657 72.2 22.29 12.51 20.54 0.61 62.98 0.65
Assets less than $250 Million(15) 20.66 1,755 33.5 22.26 12.92 20.37 1.43 59.18 6.83
Goodwill Companies(31) 30.73 24,516 1,161.1 31.65 17.82 30.04 1.87 66.80 6.23
Non-Goodwill Companies(27) 24.13 5,328 145.0 25.44 15.25 23.91 0.65 55.68 4.12
<CAPTION>
Current Per Share Financials
----------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- -------- ------- ------- ------- -------
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
Market Averages. BIF-Insured Thrifts(no MHC)
- --------------------------------------------
BIF-Insured Thrifts(58) 1.42 1.38 14.14 13.59 145.75
NYSE Traded Companies(4) 1.52 1.52 19.33 17.02 138.86
AMEX Traded Companies(7) 1.50 1.31 15.91 15.38 148.32
NASDAQ Listed OTC Companies(47) 1.40 1.38 13.46 13.07 146.09
California Companies(1) 1.52 1.52 12.28 12.23 114.54
Mid-Atlantic Companies(20) 1.13 1.12 14.75 14.04 132.23
New England Companies(31) 1.68 1.59 14.05 13.54 158.55
North-West Companies(3) 1.14 1.50 12.99 12.53 185.79
South-East Companies(3) 0.89 0.88 13.03 12.83 77.85
Thrift Strategy(43) 1.40 1.33 14.48 14.02 136.47
Mortgage Banker Strategy(7) 1.31 1.30 12.12 11.55 150.44
Real Estate Strategy(3) 1.72 1.61 11.40 11.38 106.01
Diversified Strategy(5) 1.58 1.86 14.88 13.45 230.31
Companies Issuing Dividends(47) 1.51 1.47 14.67 14.01 158.39
Companies Without Dividends(11) 1.02 1.02 11.85 11.79 91.43
Equity/Assets less than 6%(4) 1.24 1.30 10.25 9.81 202.89
Equity/Assets 6-12%(40) 1.64 1.58 13.95 13.28 164.36
Equity/Assets greater than 12%(14) 0.91 0.91 15.71 15.45 82.90
Converted Last 3 Mths (no MHC)(1) 0.52 0.52 13.00 13.00 66.76
Actively Traded Companies(17) 2.02 1.96 17.20 16.31 193.16
Market Value Below $20 Million(2) 0.63 0.52 9.15 9.10 97.77
Holding Company Structure(46) 1.39 1.36 14.24 13.82 138.63
Assets Over $1 Billion(17) 1.59 1.66 16.66 15.38 179.97
Assets $500 Million-$1 Billion(15) 1.92 1.80 15.31 14.98 170.65
Assets $250-$500 Million(11) 1.19 1.14 11.40 11.10 113.11
Assets less than $250 Million(15) 1.02 0.96 12.58 12.47 114.94
Goodwill Companies(31) 1.56 1.54 14.91 13.83 172.46
Non-Goodwill Companies(27) 1.26 1.22 13.34 13.34 118.02
</TABLE>
(1) Average of high/low or bid/ask price per share.
(2) Or since offering price if converted or first listed in 1996 or 1997.
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 1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of March 27, 1998
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
----------------------- -----------------------------------------------
52 Week (1) % Change From
Shares Market --------------- -----------------------
Price/ Outst- Capital- Last Last 52 Wks Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week Ago(2) 1997(2)
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Market Averages. MHC Institutions
- ---------------------------------
SAIF-Insured Thrifts(19) 25.26 8,626 64.4 27.20 13.00 25.67 -1.49 108.72 9.17
BIF-Insured Thrifts(3) 29.75 32,019 474.1 31.69 13.09 30.50 -2.65 106.89 3.75
NASDAQ Listed OTC Companies(22) 25.82 11,550 115.6 27.76 13.01 26.27 -1.64 108.49 8.50
Florida Companies(2) 34.07 5,939 95.4 38.07 19.19 34.75 -2.23 72.81 0.01
Mid-Atlantic Companies(11) 22.13 11,406 69.1 23.76 9.84 22.47 -1.50 138.35 11.74
Mid-West Companies(5) 26.94 2,277 27.2 28.88 15.54 27.47 -1.58 69.82 7.55
New England Companies(2) 38.00 61,162 929.2 38.75 19.00 38.75 -1.94 65.79 0.00
Thrift Strategy(20) 24.90 6,418 50.3 27.07 13.08 25.49 -2.24 98.31 7.33
Mortgage Banker Strategy(1) 26.50 33,790 216.5 26.50 6.04 24.75 7.07 293.76 33.30
Diversified Strategy(1) 38.00 61,162 929.2 38.75 19.00 38.75 -1.94 65.79 0.00
Companies Issuing Dividends(21) 25.82 11,550 115.6 27.76 13.01 26.27 -1.64 108.49 8.50
Equity/Assets 6-12%(15) 27.55 14,371 145.3 29.89 13.11 28.15 -2.13 117.88 10.01
Equity/Assets greater than 12%(7) 20.63 3,088 26.8 21.38 12.71 20.66 -0.16 80.32 3.94
Holding Company Structure(3) 25.75 2,566 25.6 28.82 12.09 26.13 -1.69 110.55 5.47
Assets Over $1 Billion(6) 27.86 37,133 372.1 29.46 12.73 27.94 0.36 133.91 11.62
Assets $500 Million-$1 Billion(2) 38.38 5,095 94.8 40.75 19.63 38.25 0.34 93.06 8.48
Assets $250-$500 Million(6) 29.81 3,387 35.1 31.25 15.46 30.00 -0.23 92.22 5.09
Assets less than $250 Million(8) 20.57 2,519 18.1 22.95 10.82 21.48 -3.86 105.46 8.66
Goodwill Companies(8) 27.74 25,707 258.5 29.70 13.14 28.29 -1.37 124.51 9.92
Non-Goodwill Companies(14) 24.66 3,056 29.9 26.60 12.93 25.06 -1.80 98.88 7.64
MHC Institutions(22) 25.82 11,550 115.6 27.76 13.01 26.27 -1.64 108.49 8.50
<CAPTION>
Current Per Share Financials
----------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- -------- ------- ------- ------- -------
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
Market Averages. MHC Institutions
- ---------------------------------
SAIF-Insured Thrifts(19) 0.65 0.62 9.92 9.83 89.26
BIF-Insured Thrifts(3) 1.08 0.73 9.90 9.25 101.13
NASDAQ Listed OTC Companies(22) 0.71 0.63 9.92 9.76 90.74
Florida Companies(2) 0.99 0.88 14.30 14.26 147.75
Mid-Atlantic Companies(11) 0.51 0.50 8.18 7.93 68.27
Mid-West Companies(5) 0.80 0.75 11.21 11.18 102.04
New England Companies(2) 1.51 0.87 11.61 11.55 133.81
Thrift Strategy(20) 0.66 0.63 10.13 9.99 89.49
Mortgage Banker Strategy(1) 0.53 0.45 5.29 4.72 65.15
Diversified Strategy(1) 1.51 0.87 11.61 11.55 133.81
Companies Issuing Dividends(21) 0.71 0.63 9.92 9.76 90.74
Equity/Assets 6-12%(15) 0.75 0.65 9.80 9.59 100.77
Equity/Assets greater than 12%(7) 0.58 0.58 10.27 10.27 60.67
Holding Company Structure(3) 0.74 0.68 9.46 8.84 90.74
Assets Over $1 Billion(6) 0.85 0.63 8.50 8.20 100.29
Assets $500 Million-$1 Billion(2) 1.05 0.97 15.95 15.95 141.34
Assets $250-$500 Million(6) 0.83 0.80 10.83 10.80 102.70
Assets less than $250 Million(8) 0.51 0.49 9.35 9.17 71.22
Goodwill Companies(8) 0.87 0.71 9.42 8.99 105.26
Non-Goodwill Companies(14) 0.61 0.59 10.22 10.22 82.03
MHC Institutions(22) 0.71 0.63 9.92 9.76 90.74
</TABLE>
(1) Average of high/low or bid/ask price per share.
(2) Or since offering price if converted or first listed in 1996 or 1997.
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 1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of March 27, 1998
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
----------------------- -----------------------------------------------
52 Week (1) % Change From
Shares Market --------------- -----------------------
Price/ Outst- Capital- Last Last 52 Wks Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week Ago(2) 1997(2)
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NYSE Traded Companies
- ---------------------
AHM Ahmanson and Co. H.F. of CA(8) 80.06 93,156 7,458.1 81.06 35.25 78.75 1.66 114.18 19.60
CFB Commercial Federal Corp. of NE 36.06 32,599 1,175.5 36.50 21.42 35.25 2.30 50.25 1.41
DME Dime Bancorp, Inc. of NY* 29.94 116,358 3,483.8 31.06 14.88 29.88 0.20 81.45 -1.02
DSL Downey Financial Corp. of CA 32.13 26,756 859.7 32.50 18.10 32.06 0.22 62.60 12.97
FED FirstFed Fin. Corp. of CA 42.38 10,588 448.7 42.69 22.50 39.88 6.27 74.76 9.37
GSB Golden State Bancorp of CA(8) 38.75 51,023 1,977.1 38.81 22.50 37.81 2.49 58.16 3.50
GDW Golden West Fin. Corp. of CA 96.31 57,069 5,496.3 98.56 59.88 97.81 -1.53 49.32 -1.53
GPT GreenPoint Fin. Corp. of NY* 35.25 84,640 2,983.6 37.31 25.75 37.06 -4.88 30.27 -2.84
JSB JSB Financial, Inc. of NY* 55.00 9,920 545.6 55.50 40.00 54.38 1.14 34.97 9.87
NYB New York Bancorp, Inc. of NY(8) 46.00 21,359 982.5 47.00 20.81 44.63 3.07 105.27 15.81
OCN Ocwen Financial Corp. of FL 28.75 60,566 1,741.3 30.38 13.00 28.38 1.30 84.77 13.01
SIB Staten Island Bancorp of NY* 21.00 45,130 947.7 21.13 18.81 20.94 0.29 75.00 0.29
WES Westcorp Inc. of Orange CA 19.38 26,279 509.3 23.50 13.25 19.13 1.31 30.24 14.81
AMEX Traded Companies
- ---------------------
ANA Acadiana Bancshares, Inc of LA 22.00 2,697 59.3 24.75 17.50 22.13 -0.59 14.29 -5.90
ANE Alliance Bancorp of NE, of CT* 21.00 1,636 34.4 21.13 10.41 20.88 0.57 96.45 27.27
BKC American Bank of Waterbury CT* 58.00 2,321 134.6 58.00 31.00 52.63 10.20 86.32 18.97
BFD BostonFed Bancorp of MA 22.00 5,520 121.4 22.44 14.38 22.19 -0.86 40.75 0.55
CFX CFX Corp of Keene NH(8)* 31.50 24,071 758.2 31.75 15.50 30.94 1.81 85.29 2.84
CNY Carver Bancorp, Inc. of NY 15.00 2,314 34.7 17.13 9.13 15.13 -0.86 51.82 -7.69
CBK Citizens First Fin.Corp. of IL 21.38 2,397 51.2 22.38 14.63 22.38 -4.47 39.01 5.58
EBI Equality Bancorp, Inc. of MO 15.44 2,486 38.4 16.00 12.50 15.50 -0.39 54.40 6.48
ESX Essex Bancorp of Norfolk VA(8) 5.00 1,058 5.3 7.94 1.00 4.94 1.21 195.86 26.90
FCB Falmouth Bancorp, Inc. of MA* 23.13 1,455 33.7 23.88 13.25 23.63 -2.12 56.81 12.83
FAB FirstFed America Bancorp of MA 20.88 8,707 181.8 22.13 13.63 20.25 3.11 50.43 -4.57
GAF GA Financial Corp. of PA 20.75 7,718 160.1 20.75 14.88 19.00 9.21 39.45 9.90
HBS Haywood Bancshares, Inc. of NC* 22.38 1,250 28.0 23.00 15.63 22.25 0.58 32.58 -0.53
KNK Kankakee Bancorp, Inc. of IL 37.00 1,372 50.8 37.75 26.63 36.13 2.41 35.78 -1.99
KYF Kentucky First Bancorp of KY 14.13 1,298 18.3 15.00 10.56 14.00 0.93 22.87 -5.42
MBB MSB Bancorp of Middletown NY(8)* 36.88 2,844 104.9 37.63 16.38 36.38 1.37 113.80 -1.99
NBN Northeast Bancorp of ME* 18.00 2,223 40.0 19.50 9.17 17.25 4.35 96.29 -5.26
PDB Piedmont Bancorp, Inc. of NC 10.63 2,751 29.2 11.63 10.00 10.63 0.00 -3.36 -2.30
SSB Scotland Bancorp, Inc. of NC 10.00 1,914 19.1 19.25 9.88 10.19 -1.86 -35.48 0.60
SZB SouthFirst Bancshares of AL 22.00 976 21.5 22.75 13.88 22.00 0.00 54.39 -3.30
SRN Southern Banc Company of AL 16.75 1,230 20.6 19.13 14.25 16.63 0.72 16.48 -5.63
SSM Stone Street Bancorp of NC 20.75 1,898 39.4 27.25 19.25 20.25 2.47 -18.24 -6.49
TSH Teche Holding Company of LA 22.25 3,438 76.5 23.50 15.50 21.75 2.30 35.84 -2.20
FTF Texarkana Fst. Fin. Corp of AR 28.00 1,760 49.3 29.50 15.63 28.00 0.00 69.70 12.00
THR Three Rivers Fin. Corp. of MI 21.44 825 17.7 23.50 13.75 22.00 -2.55 49.10 -1.43
WSB Washington SB, FSB of MD 8.13 4,395 35.7 9.50 4.88 8.31 -2.17 58.48 -10.26
WFI Winton Financial Corp. of OH 29.13 2,006 58.4 29.13 12.00 28.50 2.21 132.67 42.93
NASDAQ Listed OTC Companies
- ---------------------------
FBCV 1st Bancorp of Vincennes IN 26.00 1,090 28.3 29.29 18.41 27.25 -4.59 32.11 -11.23
FBER 1st Bergen Bancorp of NJ 19.75 2,865 56.6 20.75 12.88 20.75 -4.82 41.07 3.24
AFED AFSALA Bancorp, Inc. of NY 20.25 1,383 28.0 20.25 12.56 20.00 1.25 47.27 5.19
ALBK ALBANK Fin. Corp. of Albany NY 50.88 12,907 656.7 51.44 34.00 49.25 3.31 37.51 -1.09
AMFC AMB Financial Corp. of IN 17.25 964 16.6 17.88 13.13 17.63 -2.16 24.91 8.63
ASBP ASB Financial Corp. of OH 14.25 1,653 23.6 14.63 11.50 14.25 0.00 23.91 7.55
ABBK Abington Bancorp of MA* 21.00 3,637 76.4 22.00 10.25 20.88 0.57 93.01 0.00
<CAPTION>
Current Per Share Financials
----------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- -------- ------- ------- ------- -------
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
NYSE Traded Companies
- ---------------------
AHM Ahmanson and Co. H.F. of CA(8) 4.08 3.58 20.57 17.56 501.08
CFB Commercial Federal Corp. of NE 2.09 2.05 14.06 12.68 220.54
DME Dime Bancorp, Inc. of NY* 1.05 1.05 11.30 9.27 187.77
DSL Downey Financial Corp. of CA 1.69 1.62 16.08 15.89 218.11
FED FirstFed Fin. Corp. of CA 2.18 2.14 21.04 20.87 392.91
GSB Golden State Bancorp of CA(8) 1.85 2.22 18.96 17.11 314.15
GDW Golden West Fin. Corp. of CA 6.21 6.11 47.28 47.28 693.73
GPT GreenPoint Fin. Corp. of NY* 1.74 1.69 15.00 8.18 154.58
JSB JSB Financial, Inc. of NY* 2.96 2.63 35.83 35.83 154.34
NYB New York Bancorp, Inc. of NY(8) 2.48 2.53 8.34 8.34 152.85
OCN Ocwen Financial Corp. of FL 1.30 0.37 6.93 6.67 50.67
SIB Staten Island Bancorp of NY* 0.32 0.70 15.20 14.79 58.75
WES Westcorp Inc. of Orange CA 1.40 -0.28 13.27 13.24 141.90
AMEX Traded Companies
- ---------------------
ANA Acadiana Bancshares, Inc of LA 0.97 0.94 17.22 17.22 101.60
ANE Alliance Bancorp of NE, of CT* 1.23 0.86 11.49 11.17 151.06
BKC American Bank of Waterbury CT* 3.42 2.96 24.82 24.01 275.32
BFD BostonFed Bancorp of MA 1.28 1.14 14.78 14.24 176.57
CFX CFX Corp of Keene NH(8)* 0.55 0.89 10.21 9.85 119.39
CNY Carver Bancorp, Inc. of NY -0.20 0.03 15.24 14.66 179.67
CBK Citizens First Fin.Corp. of IL 0.79 0.53 15.84 15.84 114.14
EBI Equality Bancorp, Inc. of MO 0.46 0.10 10.31 10.31 92.23
ESX Essex Bancorp of Norfolk VA(8) 0.20 0.18 0.03 -0.14 181.37
FCB Falmouth Bancorp, Inc. of MA* 0.63 0.53 16.05 16.05 67.05
FAB FirstFed America Bancorp of MA 0.20 0.63 14.87 14.87 133.17
GAF GA Financial Corp. of PA 1.08 1.02 15.05 14.90 101.57
HBS Haywood Bancshares, Inc. of NC* 1.50 1.50 17.74 17.16 122.78
KNK Kankakee Bancorp, Inc. of IL 2.20 2.15 27.57 25.99 250.30
KYF Kentucky First Bancorp of KY 0.77 0.76 11.32 11.32 66.49
MBB MSB Bancorp of Middletown NY(8)* 1.52 1.14 22.40 11.94 272.15
NBN Northeast Bancorp of ME* 0.70 0.68 9.46 8.53 125.39
PDB Piedmont Bancorp, Inc. of NC 0.54 0.54 7.66 7.66 47.32
SSB Scotland Bancorp, Inc. of NC 0.58 0.58 7.73 7.73 32.12
SZB SouthFirst Bancshares of AL 0.63 0.64 16.39 15.98 169.45
SRN Southern Banc Company of AL 0.41 0.41 14.74 14.61 86.31
SSM Stone Street Bancorp of NC 0.81 0.81 16.37 16.37 56.95
TSH Teche Holding Company of LA 1.13 1.08 16.09 16.09 118.85
FTF Texarkana Fst. Fin. Corp of AR 1.72 1.68 15.52 15.52 102.42
THR Three Rivers Fin. Corp. of MI 1.00 0.94 15.72 15.67 114.20
WSB Washington SB, FSB of MD 0.52 0.31 5.13 5.13 60.27
WFI Winton Financial Corp. of OH 1.61 1.32 11.60 11.37 161.76
NASDAQ Listed OTC Companies
- ---------------------------
FBCV 1st Bancorp of Vincennes IN 1.81 1.18 21.08 20.71 234.80
FBER 1st Bergen Bancorp of NJ 0.74 0.74 13.71 13.71 101.37
AFED AFSALA Bancorp, Inc. of NY 0.89 0.89 14.52 14.52 115.99
ALBK ALBANK Fin. Corp. of Albany NY 3.36 3.34 27.86 21.64 316.35
AMFC AMB Financial Corp. of IN 1.06 0.67 15.32 15.32 103.74
ASBP ASB Financial Corp. of OH 0.62 0.62 10.59 10.59 68.47
ABBK Abington Bancorp of MA* 1.20 1.06 9.99 9.09 146.27
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit 1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of March 27, 1998
<TABLE>
<CAPTION>
Price Change Data
Market Capitalization -----------------------------------------------
----------------------- 52 Week (1) % Change From
Shares Market --------------- -----------------------
Price/ Outst- Capital- Last Last 52 Wks Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week Ago(2) 1997(2)
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
AABC Access Anytime Bancorp of NM 12.00 1,217 14.6 12.00 5.15 10.81 11.01 133.01 9.09
AFBC Advance Fin. Bancorp of WV 19.50 1,084 21.1 20.88 13.50 19.88 -1.91 39.29 12.20
AADV Advantage Bancorp, Inc. of WI(8) 69.25 3,236 224.1 70.88 36.50 68.75 0.73 70.99 -2.30
AFCB Affiliated Comm BC, Inc of MA(8) 38.13 6,504 248.0 38.13 19.00 37.31 2.20 91.61 1.01
ALBC Albion Banc Corp. of Albion NY 10.25 750 7.7 14.17 6.04 10.77 -4.83 66.13 -23.11
ABCL Alliance Bancorp, Inc. of IL 28.50 8,022 228.6 28.75 18.50 28.75 -0.87 46.15 7.55
AHCI Ambanc Holding Co., Inc. of NY* 19.00 4,306 81.8 19.50 12.69 19.13 -0.68 38.18 1.33
ASBI Ameriana Bancorp of IN 21.00 3,233 67.9 22.00 15.25 20.50 2.44 33.33 5.63
ABCW Anchor Bancorp Wisconsin of WI 44.75 9,052 405.1 45.50 21.00 44.50 0.56 94.57 23.01
ANDB Andover Bancorp, Inc. of MA* 40.63 5,168 210.0 42.00 26.25 40.06 1.42 46.41 0.94
ASFC Astoria Financial Corp. of NY 62.50 26,198 1,637.4 62.50 34.75 61.88 1.00 64.99 12.11
AVND Avondale Fin. Corp. of IL 15.88 3,324 52.8 18.88 12.75 15.13 4.96 -7.30 -2.28
BKCT Bancorp Connecticut of CT* 20.00 5,092 101.8 25.00 11.00 20.00 0.00 71.09 -4.76
BPLS Bank Plus Corp. of CA 15.13 19,367 293.0 15.63 9.63 15.25 -0.79 31.57 19.79
BNKU Bank United Corp. of TX 49.00 31,596 1,548.2 49.88 28.25 48.38 1.28 66.78 0.12
BWFC Bank West Fin. Corp. of MI 14.13 2,623 37.1 17.50 7.50 14.38 -1.74 79.31 -12.40
BANC BankAtlantic Bancorp of FL 14.50 25,760 373.5 17.00 12.13 14.88 -2.55 13.73 -13.43
BKUNA BankUnited Fin. Corp. of FL 14.13 14,209 200.8 15.63 8.50 13.88 1.80 29.87 -8.31
BVCC Bay View Capital Corp. of CA 34.50 12,070 416.4 37.25 22.63 35.75 -3.50 34.82 -4.83
FSNJ Bayonne Banchsares of NJ 14.63 9,050 132.4 14.81 7.93 14.81 -1.22 75.21 9.34
BFSB Bedford Bancshares, Inc. of VA 28.00 1,142 32.0 34.75 19.00 29.13 -3.88 43.59 -17.65
BFFC Big Foot Fin. Corp. of IL 21.00 2,513 52.8 23.94 13.88 23.25 -9.68 43.54 0.00
BYFC Broadway Fin. Corp. of CA 12.50 831 10.4 13.75 10.50 12.50 0.00 16.28 -5.66
BRKL Brookline Bncp MHC (47.0)of MA(8) 16.38 29,095 224.0 16.56 16.25 0.00 -1.00 63.80 63.80
CBES CBES Bancorp, Inc. of MO 24.00 1,022 24.5 26.00 15.88 25.25 -4.95 43.28 7.87
CCFH CCF Holding Company of GA 21.50 900 19.4 22.00 14.32 21.50 0.00 45.57 6.81
CENF CENFED Financial Corp. of CA(8) 46.13 6,006 277.1 46.25 26.38 45.25 1.94 53.77 2.51
CFSB CFSB Bancorp of Lansing MI 29.25 7,607 222.5 31.13 12.88 29.13 0.41 127.10 11.43
CKFB CKF Bancorp of Danville KY 20.00 867 17.3 21.25 17.75 20.50 -2.44 5.93 8.11
CNSB CNS Bancorp, Inc. of MO 18.25 1,653 30.2 21.50 15.00 18.25 0.00 11.42 -10.98
CSBF CSB Financial Group Inc of IL 13.75 840 11.6 13.75 11.00 13.75 0.00 20.83 1.85
CBCI Calumet Bancorp of Chicago IL 36.00 3,141 113.1 39.00 22.83 36.75 -2.04 51.58 8.27
CAFI Camco Fin. Corp. of OH 27.13 3,217 87.3 27.13 16.67 26.38 2.84 51.90 6.39
CMRN Cameron Fin. Corp. of MO 20.50 2,564 52.6 21.00 15.88 20.25 1.23 28.13 0.00
CAPS Capital Savings Bancorp of MO(8) 23.00 1,891 43.5 25.25 12.75 23.13 -0.56 67.27 -8.91
CFNC Carolina Fincorp of NC* 17.81 1,852 33.0 18.75 14.13 17.31 2.89 20.75 -3.73
CASB Cascade Financial Corp. of WA 15.00 3,395 50.9 16.80 11.60 14.75 1.69 20.97 13.21
CATB Catskill Fin. Corp. of NY* 17.94 4,630 83.1 19.13 13.94 17.88 0.34 11.22 -4.98
CAVB Cavalry Bancorp of TN 25.00 7,358 184.0 25.25 20.56 0.00 -1.00 150.00 150.00
CNIT Cenit Bancorp of Norfolk VA 77.13 1,654 127.6 84.25 40.00 79.00 -2.37 74.78 -2.98
CEBK Central Co-Op. Bank of MA* 32.50 1,965 63.9 33.50 15.88 32.25 0.78 84.34 14.04
CENB Century Bancorp, Inc. of NC(8) 116.00 407 47.2 117.00 68.00 86.12 34.70 70.59 36.87
CBSB Charter Financial Inc. of IL(8) 34.25 4,174 143.0 34.38 16.75 33.38 2.61 104.48 36.29
COFI Charter One Financial of OH 66.88 63,849 4,270.2 67.13 40.24 65.63 1.90 52.66 5.94
CVAL Chester Valley Bancorp of PA 36.00 2,169 78.1 37.00 15.71 35.25 2.13 119.11 23.08
CTZN CitFed Bancorp of Dayton OH(8) 55.38 13,003 720.1 56.63 22.00 55.13 0.45 132.40 42.00
CLAS Classic Bancshares, Inc. of KY 21.50 1,300 28.0 21.50 12.25 20.25 6.17 60.69 28.36
CBSA Coastal Bancorp of Houston TX 33.75 5,009 169.1 35.50 22.75 32.88 2.65 29.81 -3.24
CFCP Coastal Fin. Corp. of SC 23.00 4,674 107.5 27.75 16.13 22.00 4.55 29.80 -6.12
CMSB Commonwealth Bancorp Inc of PA 21.88 16,247 355.5 22.13 13.50 21.00 4.19 40.62 10.06
CMSV Commty. Svgs, MHC of FL (48.5) 38.38 5,095 94.8 40.75 19.63 38.25 0.34 93.06 8.48
CFTP Community Fed. Bancorp of MS 18.50 4,629 85.6 21.00 16.38 18.63 -0.70 0.65 -8.64
CFFC Community Fin. Corp. of VA 15.75 2,554 40.2 15.75 10.75 15.12 4.17 36.60 14.05
CFBC Community First Bnkg Co. of GA 47.00 2,414 113.5 47.00 31.88 45.00 4.44 135.00 6.82
CIBI Community Inv. Bancorp of OH 17.75 902 16.0 18.75 11.50 18.00 -1.39 45.85 9.84
<CAPTION>
Current Per Share Financials
----------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- -------- ------- ------- ------- -------
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
AABC Access Anytime Bancorp of NM 1.26 1.17 7.51 7.51 86.80
AFBC Advance Fin. Bancorp of WV 0.84 0.81 15.17 15.17 99.66
AADV Advantage Bancorp, Inc. of WI(8) 3.57 3.13 31.79 30.06 317.22
AFCB Affiliated Comm BC, Inc of MA(8) 1.82 1.76 17.38 17.29 177.59
ALBC Albion Banc Corp. of Albion NY 0.44 0.43 8.09 8.09 94.41
ABCL Alliance Bancorp, Inc. of IL 1.28 1.42 16.32 16.13 170.01
AHCI Ambanc Holding Co., Inc. of NY* 0.64 0.52 14.21 14.21 118.54
ASBI Ameriana Bancorp of IN 1.12 0.98 13.74 13.74 120.90
ABCW Anchor Bancorp Wisconsin of WI 2.20 2.03 14.25 14.02 214.45
ANDB Andover Bancorp, Inc. of MA* 2.56 2.50 20.72 20.72 255.95
ASFC Astoria Financial Corp. of NY 2.56 2.38 32.42 22.56 401.88
AVND Avondale Fin. Corp. of IL -3.76 -3.19 13.83 13.83 163.12
BKCT Bancorp Connecticut of CT* 1.16 1.03 9.22 9.22 87.00
BPLS Bank Plus Corp. of CA 0.65 0.73 9.36 8.53 215.20
BNKU Bank United Corp. of TX 2.52 2.21 19.39 18.89 396.36
BWFC Bank West Fin. Corp. of MI 0.43 0.32 8.83 8.83 64.65
BANC BankAtlantic Bancorp of FL 1.06 0.56 6.08 5.04 110.44
BKUNA BankUnited Fin. Corp. of FL 0.38 0.29 9.13 8.10 213.16
BVCC Bay View Capital Corp. of CA 1.16 1.58 14.39 11.94 268.97
FSNJ Bayonne Banchsares of NJ 0.30 0.43 10.63 10.63 67.47
BFSB Bedford Bancshares, Inc. of VA 1.42 1.41 17.41 17.41 119.88
BFFC Big Foot Fin. Corp. of IL 0.51 0.45 15.09 15.09 86.06
BYFC Broadway Fin. Corp. of CA 0.42 0.48 14.77 14.77 150.11
BRKL Brookline Bncp MHC (47.0)of MA(8) 0.39 0.39 8.56 8.56 49.88
CBES CBES Bancorp, Inc. of MO 1.09 0.95 17.16 17.16 108.73
CCFH CCF Holding Company of GA 0.15 -0.25 13.05 13.05 138.92
CENF CENFED Financial Corp. of CA(8) 2.30 2.07 22.58 22.54 367.81
CFSB CFSB Bancorp of Lansing MI 1.40 1.31 8.88 8.88 112.12
CKFB CKF Bancorp of Danville KY 1.29 0.97 15.87 15.87 72.51
CNSB CNS Bancorp, Inc. of MO 0.52 0.52 14.47 14.47 59.22
CSBF CSB Financial Group Inc of IL 0.29 0.25 13.87 13.09 57.78
CBCI Calumet Bancorp of Chicago IL 2.54 2.56 25.98 25.98 154.93
CAFI Camco Fin. Corp. of OH 1.75 1.42 15.22 14.12 161.82
CMRN Cameron Fin. Corp. of MO 0.94 0.93 17.66 17.66 82.39
CAPS Capital Savings Bancorp of MO(8) 1.25 1.20 12.08 12.08 128.08
CFNC Carolina Fincorp of NC* 0.73 0.70 14.06 14.06 61.91
CASB Cascade Financial Corp. of WA 0.74 0.72 8.63 8.63 124.46
CATB Catskill Fin. Corp. of NY* 0.82 0.82 15.48 15.48 63.64
CAVB Cavalry Bancorp of TN 0.61 0.61 12.53 12.53 46.02
CNIT Cenit Bancorp of Norfolk VA 3.39 3.15 29.47 26.99 424.25
CEBK Central Co-Op. Bank of MA* 1.49 1.41 18.05 16.26 182.40
CENB Century Bancorp, Inc. of NC(8) 4.00 4.01 75.76 75.76 251.30
CBSB Charter Financial Inc. of IL(8) 1.26 1.39 14.24 12.75 91.61
COFI Charter One Financial of OH 1.97 2.88 21.56 20.15 309.48
CVAL Chester Valley Bancorp of PA 1.45 1.38 13.23 13.23 150.14
CTZN CitFed Bancorp of Dayton OH(8) 2.10 2.10 16.14 14.74 266.12
CLAS Classic Bancshares, Inc. of KY 0.82 0.96 15.13 12.85 101.68
CBSA Coastal Bancorp of Houston TX 2.31 2.29 20.93 17.79 581.24
CFCP Coastal Fin. Corp. of SC 1.31 1.10 7.21 7.21 120.64
CMSB Commonwealth Bancorp Inc of PA 1.01 0.77 13.22 10.44 139.63
CMSV Commty. Svgs, MHC of FL (48.5) 1.05 0.97 15.95 15.95 141.34
CFTP Community Fed. Bancorp of MS 0.61 0.61 13.07 13.07 49.40
CFFC Community Fin. Corp. of VA 0.73 0.74 9.76 9.72 71.60
CFBC Community First Bnkg Co. of GA 0.96 0.96 29.10 28.71 163.45
CIBI Community Inv. Bancorp of OH 1.02 1.02 12.31 12.31 106.29
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit 1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of March 27, 1998
<TABLE>
<CAPTION>
Price Change Data
Market Capitalization -----------------------------------------------
----------------------- 52 Week (1) % Change From
Shares Market --------------- -----------------------
Price/ Outst- Capital- Last Last 52 Wks Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week Ago(2) 1997(2)
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
COOP Cooperative Bancshares of NC 20.00 2,984 59.7 25.00 10.25 19.75 1.27 90.48 -18.37
CRZY Crazy Woman Creek Bncorp of WY 17.00 955 16.2 17.25 13.00 17.25 -1.45 19.30 13.33
DNFC D&N Financial Corp. of MI 28.00 9,099 254.8 28.06 15.68 27.75 0.90 68.78 5.66
DCBI Delphos Citizens Bancorp of OH 20.50 1,946 39.9 24.25 12.44 21.25 -3.53 49.09 -1.20
DIME Dime Community Bancorp of NY* 24.50 12,438 304.7 25.50 16.63 24.13 1.53 30.67 3.16
DIBK Dime Financial Corp. of CT* 37.00 5,164 191.1 37.00 18.00 30.25 22.31 90.92 21.31
EGLB Eagle BancGroup of IL 21.13 1,178 24.9 21.13 14.75 20.75 1.83 32.06 11.92
EBSI Eagle Bancshares of Tucker GA 25.50 5,719 145.8 25.50 15.25 21.38 19.27 54.55 15.91
EGFC Eagle Financial Corp. of CT(8) 59.75 6,514 389.2 59.75 26.75 55.56 7.54 109.65 8.64
ETFS East Texas Fin. Serv. of TX 14.63 1,540 22.5 15.83 11.25 15.00 -2.47 21.92 -7.58
ESBK Elmira Svgs Bank (The) of NY* 29.25 741 21.7 30.38 18.33 28.66 2.06 66.00 -2.50
EMLD Emerald Financial Corp. of OH 21.25 5,073 107.8 24.75 11.38 22.00 -3.41 78.87 -3.98
EFBC Empire Federal Bancorp of MT 17.88 2,592 46.3 18.25 12.50 18.00 -0.67 33.63 4.38
EFBI Enterprise Fed. Bancorp of OH 32.50 1,986 64.5 35.00 15.25 33.00 -1.52 104.66 3.17
EQSB Equitable FSB of Wheaton MD 30.25 1,215 36.8 31.50 16.63 31.50 -3.97 81.90 14.15
FCBF FCB Fin. Corp. of Neenah WI 33.00 3,863 127.5 33.31 20.13 32.25 2.33 46.67 11.86
FFDF FFD Financial Corp. of OH 22.63 1,445 32.7 22.63 13.00 20.88 8.38 61.64 25.72
FFLC FFLC Bancorp of Leesburg FL 19.50 3,744 73.0 23.50 15.00 19.75 -1.27 23.81 -10.34
FFFC FFVA Financial Corp. of VA(8) 38.75 4,581 177.5 40.00 20.50 38.25 1.31 81.24 -0.97
FFWC FFW Corporation of Wabash IN 19.00 1,443 27.4 21.50 12.75 19.00 0.00 42.00 0.00
FFYF FFY Financial Corp. of OH 33.25 4,070 135.3 35.38 25.50 34.38 -3.29 30.39 0.36
FMCO FMS Financial Corp. of NJ 34.50 2,388 82.4 36.00 18.75 34.75 -0.72 74.68 -2.82
FFHH FSF Financial Corp. of MN 20.00 3,015 60.3 21.25 16.38 20.00 0.00 15.07 -4.49
FOBC Fed One Bancorp of Wheeling WV(8) 36.38 2,375 86.4 37.00 17.63 37.00 -1.68 94.03 32.29
FBCI Fidelity Bancorp of Chicago IL 25.25 2,814 71.1 26.00 18.50 25.00 1.00 26.25 -1.48
FSBI Fidelity Bancorp, Inc. of PA 31.00 1,562 48.4 32.00 18.41 30.75 0.81 46.64 6.90
FFFL Fidelity Bcsh MHC of FL (47.7) 29.75 6,783 95.9 35.38 18.75 31.25 -4.80 52.56 -8.46
FFED Fidelity Fed. Bancorp of IN 9.63 3,128 30.1 10.50 7.50 9.38 2.67 10.06 -6.60
FFOH Fidelity Financial of OH 18.13 5,593 101.4 18.25 12.38 18.00 0.72 36.83 16.97
FIBC Financial Bancorp, Inc. of NY 26.00 1,710 44.5 27.00 14.88 25.75 0.97 55.22 7.75
FBSI First Bancshares, Inc. of MO 16.50 2,186 36.1 17.50 9.50 16.75 -1.49 69.23 5.57
FBBC First Bell Bancorp of PA 21.63 6,511 140.8 21.63 14.50 21.00 3.00 33.11 13.84
SKBO First Carnegie MHC of PA(45.0) 20.00 2,300 20.7 20.00 11.63 19.50 2.56 100.00 6.67
FSTC First Citizens Corp of GA 33.75 2,765 93.3 35.50 15.50 32.00 5.47 110.94 -0.74
FCME First Coastal Corp. of ME* 13.88 1,359 18.9 15.75 8.88 13.75 0.95 44.13 -6.72
FFBA First Colorado Bancorp of CO 28.75 16,808 483.2 28.75 16.00 28.44 1.09 71.64 21.05
FDEF First Defiance Fin.Corp. of OH 15.25 8,528 130.1 16.25 12.38 15.38 -0.85 8.93 -4.69
FESX First Essex Bancorp of MA* 23.81 7,536 179.4 26.13 14.50 24.63 -3.33 44.30 2.41
FFSX First FSB MHC Sxld of IA(46.1) 33.50 2,834 43.7 35.75 20.75 35.75 -6.29 63.41 5.51
FFES First Fed of E. Hartford CT 40.13 2,706 108.6 40.13 23.00 40.00 0.32 51.43 7.73
BDJI First Fed. Bancorp. of MN 19.88 998 19.8 22.00 11.83 20.00 -0.60 61.23 -9.64
FFBH First Fed. Bancshares of AR 28.56 4,896 139.8 28.56 17.50 26.25 8.80 52.32 20.25
FTFC First Fed. Capital Corp. of WI 32.50 9,191 298.7 34.00 16.83 31.50 3.17 74.08 -4.07
FFKY First Fed. Fin. Corp. of KY 21.50 4,144 89.1 23.50 18.25 21.48 0.09 7.50 -5.49
FFBZ First Federal Bancorp of OH 24.88 1,575 39.2 25.75 17.00 25.00 -0.48 34.49 17.75
FFCH First Fin. Holdings Inc. of SC 53.25 6,761 360.0 53.50 23.75 51.75 2.90 110.89 0.23
FFHS First Franklin Corp. of OH 26.25 1,192 31.3 31.25 17.00 26.50 -0.94 41.89 -16.00
FGHC First Georgia Hold. Corp of GA 12.00 3,052 36.6 12.63 7.00 10.75 11.63 57.27 26.32
FSPG First Home Bancorp of NJ(8) 31.88 2,708 86.3 31.88 17.88 31.63 0.79 77.11 5.81
FFSL First Independence Corp. of KS 15.00 954 14.3 15.63 10.88 15.00 0.00 25.00 7.14
FISB First Indiana Corp. of IN 27.00 12,668 342.0 30.00 14.48 27.00 0.00 72.74 7.10
FKFS First Keystone Fin. Corp of PA 18.25 2,413 44.0 19.00 10.63 17.00 7.35 65.01 2.07
FLKY First Lancaster Bncshrs of KY 15.25 953 14.5 16.38 14.63 15.13 0.79 -1.61 -4.33
FLFC First Liberty Fin. Corp. of GA 34.25 7,748 265.4 34.38 21.00 34.00 0.74 60.20 7.03
CASH First Midwest Fin., Inc. of OH 23.06 2,692 62.1 23.25 15.00 22.88 0.79 35.65 2.49
<CAPTION>
Current Per Share Financials
----------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- -------- ------- ------- ------- -------
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
COOP Cooperative Bancshares of NC 0.75 0.74 9.48 9.48 123.70
CRZY Crazy Woman Creek Bncorp of WY 0.75 0.76 15.04 15.04 63.64
DNFC D&N Financial Corp. of MI 1.57 1.41 10.78 10.68 199.51
DCBI Delphos Citizens Bancorp of OH 0.93 0.93 14.83 14.83 55.37
DIME Dime Community Bancorp of NY* 0.95 0.91 14.97 12.94 119.64
DIBK Dime Financial Corp. of CT* 3.24 3.22 15.35 14.95 185.61
EGLB Eagle BancGroup of IL 0.43 0.31 17.24 17.24 145.28
EBSI Eagle Bancshares of Tucker GA 0.96 0.97 12.80 12.80 163.40
EGFC Eagle Financial Corp. of CT(8) 1.18 1.56 23.38 18.96 331.16
ETFS East Texas Fin. Serv. of TX 0.47 0.44 13.62 13.62 77.98
ESBK Elmira Svgs Bank (The) of NY* 1.18 1.27 19.71 19.71 311.72
EMLD Emerald Financial Corp. of OH 1.21 1.15 9.56 9.43 119.05
EFBC Empire Federal Bancorp of MT 0.62 0.62 15.51 15.51 42.65
EFBI Enterprise Fed. Bancorp of OH 1.11 1.00 16.31 16.30 151.69
EQSB Equitable FSB of Wheaton MD 1.90 1.87 13.77 13.77 264.76
FCBF FCB Fin. Corp. of Neenah WI 1.00 0.68 18.80 18.80 135.38
FFDF FFD Financial Corp. of OH 1.11 0.53 15.38 15.38 63.92
FFLC FFLC Bancorp of Leesburg FL 1.00 0.95 13.74 13.74 106.90
FFFC FFVA Financial Corp. of VA(8) 1.40 1.66 17.33 17.00 126.54
FFWC FFW Corporation of Wabash IN 1.24 1.21 12.69 11.57 132.57
FFYF FFY Financial Corp. of OH 1.91 1.88 20.53 20.53 151.04
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 14.58 14.58 133.62
FOBC Fed One Bancorp of Wheeling WV(8) 1.37 1.35 17.09 16.37 154.43
FBCI Fidelity Bancorp of Chicago IL 0.38 1.09 18.22 18.19 174.01
FSBI Fidelity Bancorp, Inc. of PA 1.77 1.73 17.21 17.21 251.65
FFFL Fidelity Bcsh MHC of FL (47.7) 0.93 0.79 12.65 12.57 154.16
FFED Fidelity Fed. Bancorp of IN 0.56 0.52 5.02 5.02 69.00
FFOH Fidelity Financial of OH 0.87 0.84 11.49 10.13 95.67
FIBC Financial Bancorp, Inc. of NY 1.53 1.63 16.10 16.03 180.26
FBSI First Bancshares, Inc. of MO 0.86 0.82 10.64 10.64 73.89
FBBC First Bell Bancorp of PA 1.16 1.14 11.21 11.21 103.78
SKBO First Carnegie MHC of PA(45.0) 0.41 0.46 10.74 10.74 62.46
FSTC First Citizens Corp of GA 2.15 1.92 12.34 9.73 121.95
FCME First Coastal Corp. of ME* 0.93 0.75 10.90 10.90 107.73
FFBA First Colorado Bancorp of CO 1.18 1.13 12.45 12.20 92.53
FDEF First Defiance Fin.Corp. of OH 0.63 0.62 12.53 12.53 67.98
FESX First Essex Bancorp of MA* 1.29 1.15 12.08 10.62 158.90
FFSX First FSB MHC Sxld of IA(46.1) 1.19 1.15 14.34 14.23 161.94
FFES First Fed of E. Hartford CT 2.06 2.28 24.76 24.76 363.17
BDJI First Fed. Bancorp. of MN 0.73 0.73 12.12 12.12 119.08
FFBH First Fed. Bancshares of AR 1.13 1.08 16.64 16.64 111.75
FTFC First Fed. Capital Corp. of WI 1.89 1.49 11.90 11.25 168.02
FFKY First Fed. Fin. Corp. of KY 1.49 1.47 12.81 12.11 93.71
FFBZ First Federal Bancorp of OH 1.22 1.22 10.09 10.08 132.60
FFCH First Fin. Holdings Inc. of SC 2.16 2.11 17.08 17.08 265.25
FFHS First Franklin Corp. of OH 1.42 1.30 17.81 17.72 193.38
FGHC First Georgia Hold. Corp of GA 0.58 0.48 4.53 4.20 54.52
FSPG First Home Bancorp of NJ(8) 1.75 1.71 13.81 13.61 198.60
FFSL First Independence Corp. of KS 0.76 0.76 11.91 11.91 119.15
FISB First Indiana Corp. of IN 1.40 1.13 12.08 11.94 127.36
FKFS First Keystone Fin. Corp of PA 1.12 1.01 10.38 10.38 156.87
FLKY First Lancaster Bncshrs of KY 0.53 0.53 14.92 14.92 52.34
FLFC First Liberty Fin. Corp. of GA 1.23 1.27 12.49 11.36 164.61
CASH First Midwest Fin., Inc. of OH 1.37 1.28 16.39 14.62 151.41
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit 1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of March 27, 1998
<TABLE>
<CAPTION>
Price Change Data
Market Capitalization -----------------------------------------------
----------------------- 52 Week (1) % Change From
Shares Market --------------- -----------------------
Price/ Outst- Capital- Last Last 52 Wks Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week Ago(2) 1997(2)
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
FMBD First Mutual Bancorp Inc of IL 20.00 3,507 70.1 25.00 13.75 19.75 1.27 35.59 -20.00
FMSB First Mutual SB of Bellevue WA* 18.50 4,125 76.3 20.17 10.61 18.25 1.37 58.53 0.00
FNGB First Northern Cap. Corp of WI 13.38 8,846 118.4 14.00 9.13 13.50 -0.89 38.94 -4.43
FFPB First Palm Beach Bancorp of FL 39.50 5,055 199.7 44.94 26.56 37.50 5.33 40.42 -8.42
FSLA First SB SLA MHC of NJ (47.5)(8) 43.75 8,016 148.9 54.50 19.09 44.38 -1.42 123.79 -19.72
FWWB First Savings Bancorp of WA 26.75 10,156 271.7 28.56 18.75 27.00 -0.93 37.18 -2.73
FSFF First SecurityFed Fin of IL 15.38 6,408 98.6 16.63 14.50 15.50 -0.77 53.80 -2.35
SHEN First Shenango Bancorp of PA(8) 42.13 2,069 87.2 43.88 21.75 41.94 0.45 83.17 13.86
SOPN First Svgs Bancorp of NC 24.25 3,700 89.7 26.00 19.38 24.63 -1.54 24.36 -4.90
FBNW FirstBank Corp of Clarkston WA 20.25 1,984 40.2 21.00 15.50 19.88 1.86 102.50 7.26
FFDB FirstFed Bancorp, Inc. of AL 25.50 1,155 29.5 25.50 14.38 23.75 7.37 77.33 17.89
FSPT FirstSpartan Fin. Corp. of SC 43.28 4,430 191.7 44.00 35.00 44.00 -1.64 116.40 7.53
FLAG Flag Financial Corp of GA 19.63 2,037 40.0 21.50 11.75 19.88 -1.26 57.04 -8.70
FLGS Flagstar Bancorp, Inc of MI 25.88 13,670 353.8 25.88 13.00 23.38 10.69 N.A. 30.71
FFIC Flushing Fin. Corp. of NY* 25.00 7,865 196.6 25.50 17.88 24.50 2.04 31.58 4.69
FBHC Fort Bend Holding Corp. of TX(8) 27.75 1,668 46.3 28.00 11.88 20.75 33.73 124.15 27.59
FTSB Fort Thomas Fin. Corp. of KY 15.38 1,474 22.7 15.63 9.25 15.25 0.85 43.07 0.00
FKKY Frankfort First Bancorp of KY 16.38 1,619 26.5 24.50 15.75 16.75 -2.21 -23.81 -7.09
FTNB Fulton Bancorp, Inc. of MO 22.00 1,719 37.8 26.50 17.50 21.88 0.55 23.04 -0.59
GFSB GFS Bancorp of Grinnell IA(8) 17.88 996 17.8 17.88 11.50 17.88 0.00 55.48 4.81
GUPB GFSB Bancorp, Inc of Gallup NM 22.50 801 18.0 22.50 17.13 22.00 2.27 34.33 6.48
GSLA GS Financial Corp. of LA 20.75 3,439 71.4 21.00 13.38 20.63 0.58 107.50 -1.19
GOSB GSB Financial Corp. of NY* 16.75 2,248 37.7 18.94 14.25 17.13 -2.22 67.50 -7.25
GFCO Glenway Financial Corp. of OH 19.50 2,281 44.5 21.25 10.25 20.00 -2.50 72.41 4.00
GTPS Great American Bancorp of IL 20.88 1,672 34.9 21.50 15.50 21.00 -0.57 26.55 9.89
PEDE Great Pee Dee Bancorp of SC 15.75 2,202 34.7 16.25 14.75 15.75 0.00 57.50 -2.36
GSBC Great Southern Bancorp of MO 25.75 8,066 207.7 26.25 16.00 25.75 0.00 48.16 5.10
GDVS Greater DV SB,MHC of PA (19.9) 32.75 3,273 21.3 32.75 12.25 31.75 3.15 147.17 5.65
GSFC Green Street Fin. Corp. of NC 17.88 4,298 76.8 20.75 17.00 17.88 0.00 -1.38 -2.03
GFED Guaranty Fed Bancshares of MO 12.38 6,222 77.0 14.44 6.41 12.63 -1.98 83.95 -3.88
HCBB HCB Bancshares of Camden AR 14.75 2,645 39.0 15.25 12.63 14.69 0.41 47.50 1.72
HEMT HF Bancorp of Hemet CA 17.13 6,293 107.8 18.25 12.25 17.00 0.76 33.00 -2.11
HFFC HF Financial Corp. of SD 29.25 2,977 87.1 29.75 18.75 29.50 -0.85 50.00 10.38
HFNC HFNC Financial Corp. of NC 13.13 17,193 225.7 19.88 13.13 13.50 -2.74 -28.56 -9.45
HMNF HMN Financial, Inc. of MN 30.00 4,144 124.3 32.50 19.00 30.00 0.00 46.34 -7.69
HALL Hallmark Capital Corp. of WI 16.00 2,934 46.9 18.00 8.75 15.50 3.23 68.42 -5.88
HRBF Harbor Federal Bancorp of MD 24.00 1,693 40.6 25.25 15.50 24.81 -3.26 40.11 -4.95
HARBD Harbor Florida Bancshrs of FL 11.75 30,699 360.7 12.56 5.82 12.50 -6.00 94.86 6.62
HFSA Hardin Bancorp of Hardin MO 19.38 824 16.0 19.38 13.50 18.88 2.65 31.39 6.19
HARL Harleysville SB of PA 31.00 1,666 51.6 31.13 20.25 30.25 2.48 49.40 12.73
HFGI Harrington Fin. Group of IN 11.31 3,246 36.7 13.75 10.50 11.13 1.62 2.82 -13.00
HARS Harris Fin. MHC of PA (24.3) 26.50 33,790 216.5 26.50 6.04 24.75 7.07 293.76 33.30
HFFB Harrodsburg 1st Fin Bcrp of KY 16.88 1,986 33.5 18.00 14.75 16.56 1.93 6.30 0.78
HHFC Harvest Home Fin. Corp. of OH 15.00 891 13.4 15.75 10.25 15.06 -0.40 27.66 -4.76
HAVN Haven Bancorp of Woodhaven NY 24.25 8,785 213.0 25.00 15.25 24.63 -1.54 40.58 7.78
HTHR Hawthorne Fin. Corp. of CA 19.75 3,091 61.0 24.00 9.25 19.44 1.59 107.89 -1.89
HMLK Hemlock Fed. Fin. Corp. of IL 18.75 2,076 38.9 19.00 12.50 18.75 0.00 87.50 9.46
HFWA Heritage Financial Corp of WA 15.44 9,749 150.5 15.44 13.00 15.13 2.05 54.40 54.40
HCBC High Country Bancorp of CO 15.38 1,323 20.3 15.50 14.44 15.50 -0.77 53.80 -0.77
HBNK Highland Bancorp of CA 37.25 2,318 86.3 37.38 20.50 36.50 2.05 60.22 13.74
HIFS Hingham Inst. for Sav. of MA* 35.66 1,304 46.5 36.00 18.00 34.00 4.88 92.76 24.03
HBEI Home Bancorp of Elgin IL 17.13 6,856 117.4 19.31 14.13 17.63 -2.84 10.95 -4.19
HBFW Home Bancorp of Fort Wayne IN 34.38 2,385 82.0 37.63 20.13 36.63 -6.14 64.66 16.54
HCFC Home City Fin. Corp. of OH 18.63 905 16.9 19.25 12.75 18.63 0.00 38.00 0.70
HOMF Home Fed Bancorp of Seymour IN 30.50 5,113 155.9 32.75 16.67 30.50 0.00 69.44 17.31
</TABLE>
<TABLE>
<CAPTION>
Current Per Share Financials
----------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- -------- ------- ------- ------- -------
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
FMBD First Mutual Bancorp Inc of IL 0.28 0.23 15.45 11.85 111.62
FMSB First Mutual SB of Bellevue WA* 1.06 1.04 7.43 7.43 109.36
FNGB First Northern Cap. Corp of WI 0.68 0.65 8.34 8.34 75.48
FFPB First Palm Beach Bancorp of FL 1.86 1.43 22.95 22.44 360.25
FSLA First SB SLA MHC of NJ (47.5)(8) 1.16 1.22 12.69 11.59 130.90
FWWB First Savings Bancorp of WA 1.25 1.17 14.80 13.67 108.17
FSFF First SecurityFed Fin of IL 0.61 0.61 12.80 12.80 47.35
SHEN First Shenango Bancorp of PA(8) 2.22 2.21 23.13 23.13 181.23
SOPN First Svgs Bancorp of NC 1.35 1.35 18.51 18.51 81.30
FBNW FirstBank Corp of Clarkston WA 0.48 0.24 14.95 14.95 92.39
FFDB FirstFed Bancorp, Inc. of AL 1.48 1.48 15.00 13.77 154.80
FSPT FirstSpartan Fin. Corp. of SC 1.33 1.33 29.52 29.52 111.81
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* 1.08 1.09 17.35 16.67 138.39
FBHC Fort Bend Holding Corp. of TX(8) 1.41 1.04 12.29 11.52 181.49
FTSB Fort Thomas Fin. Corp. of KY 0.80 0.80 10.72 10.72 67.76
FKKY Frankfort First Bancorp of KY 0.14 0.59 13.92 13.92 82.03
FTNB Fulton Bancorp, Inc. of MO 0.75 0.60 15.06 15.06 62.82
GFSB GFS Bancorp of Grinnell IA(8) 1.18 1.12 11.23 11.23 94.93
GUPB GFSB Bancorp, Inc of Gallup NM 1.08 1.08 17.90 17.90 143.25
GSLA GS Financial Corp. of LA 0.49 0.48 16.30 16.30 38.21
GOSB GSB Financial Corp. of NY* 0.34 0.31 14.66 14.66 51.55
GFCO Glenway Financial Corp. of OH 1.05 1.05 12.41 12.28 133.55
GTPS Great American Bancorp of IL 0.52 0.52 16.92 16.92 84.91
PEDE Great Pee Dee Bancorp of SC 0.56 0.56 13.51 13.51 35.68
GSBC Great Southern Bancorp of MO 1.66 1.53 8.13 8.07 93.04
GDVS Greater DV SB,MHC of PA (19.9) 0.62 0.62 8.91 8.91 79.58
GSFC Green Street Fin. Corp. of NC 0.66 0.66 14.73 14.73 41.81
GFED Guaranty Fed Bancshares of MO 0.33 0.32 11.18 11.18 37.06
HCBB HCB Bancshares of Camden AR 0.22 0.22 14.45 13.94 77.48
HEMT HF Bancorp of Hemet CA 0.06 0.35 13.29 11.18 168.96
HFFC HF Financial Corp. of SD 2.05 1.90 18.68 18.68 195.05
HFNC HFNC Financial Corp. of NC 0.63 0.48 9.66 9.66 52.97
HMNF HMN Financial, Inc. of MN 1.35 1.07 20.38 18.92 166.80
HALL Hallmark Capital Corp. of WI 0.94 0.92 10.74 10.74 140.94
HRBF Harbor Federal Bancorp of MD 0.96 0.92 17.23 17.23 137.96
HARBD Harbor Florida Bancshrs of FL 0.58 0.56 8.01 7.91 41.50
HFSA Hardin Bancorp of Hardin MO 0.99 0.90 15.89 15.89 140.09
HARL Harleysville SB of PA 2.06 2.07 14.23 14.23 208.81
HFGI Harrington Fin. Group of IN 0.30 0.32 7.50 7.50 167.80
HARS Harris Fin. MHC of PA (24.3) 0.53 0.45 5.29 4.72 65.15
HFFB Harrodsburg 1st Fin Bcrp of KY 0.74 0.74 14.66 14.66 54.84
HHFC Harvest Home Fin. Corp. of OH 0.80 0.70 11.61 11.61 105.31
HAVN Haven Bancorp of Woodhaven NY 1.26 1.27 12.85 12.81 224.80
HTHR Hawthorne Fin. Corp. of CA 2.52 3.02 13.69 13.69 300.29
HMLK Hemlock Fed. Fin. Corp. of IL 0.45 0.77 14.66 14.66 85.11
HFWA Heritage Financial Corp of WA 0.49 0.49 9.34 9.34 31.95
HCBC High Country Bancorp of CO 0.47 0.47 13.48 13.48 65.86
HBNK Highland Bancorp of CA 2.64 2.03 17.91 17.91 237.12
HIFS Hingham Inst. for Sav. of MA* 2.04 2.04 16.39 16.39 170.69
HBEI Home Bancorp of Elgin IL 0.41 0.41 13.89 13.89 51.43
HBFW Home Bancorp of Fort Wayne IN 1.22 1.21 17.84 17.84 146.77
HCFC Home City Fin. Corp. of OH 0.98 0.99 15.47 15.47 79.40
HOMF Home Fed Bancorp of Seymour IN 1.84 1.62 12.21 11.87 138.75
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit 1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of March 27, 1998
<TABLE>
<CAPTION>
Price Change Data
Market Capitalization -----------------------------------------------
----------------------- 52 Week (1) % Change From
Shares Market --------------- -----------------------
Price/ Outst- Capital- Last Last 52 Wks Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week Ago(2) 1997(2)
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
HWEN Home Financial Bancorp of IN 8.81 929 8.2 9.75 7.38 9.25 -4.76 17.47 -4.76
HPBC Home Port Bancorp, Inc. of MA* 25.88 1,842 47.7 27.63 16.50 26.00 -0.46 47.89 11.89
HFBC HopFed Bancorp of KY 17.63 4,034 71.1 17.75 16.00 17.25 2.20 76.30 76.30
HZFS Horizon Fin'l. Services of IA 15.75 853 13.4 16.75 8.50 16.25 -3.08 77.36 31.25
HRZB Horizon Financial Corp. of WA* 18.50 7,454 137.9 19.25 11.96 18.88 -2.01 33.00 4.23
IBSF IBS Financial Corp. of NJ 20.00 10,944 218.9 21.19 14.25 21.19 -5.62 35.32 13.06
ITLA ITLA Capital Corp of CA* 20.75 7,871 163.3 21.25 14.00 21.25 -2.35 40.68 7.79
ICBC Independence Comm Bnk Cp of NY 18.13 70,411 1,276.6 18.19 17.25 0.00 -1.00 81.30 81.30
IFSB Independence FSB of DC 19.50 1,281 25.0 19.50 7.50 17.63 10.61 136.36 14.71
INCB Indiana Comm. Bank, SB of IN(8) 20.63 922 19.0 21.13 15.00 21.13 -2.37 25.03 0.63
INBI Industrial Bancorp of OH 22.75 5,103 116.1 23.38 12.00 22.00 3.41 76.63 28.17
IWBK Interwest Bancorp of WA 44.25 8,037 355.6 44.88 27.63 42.00 5.36 34.09 17.22
IPSW Ipswich SB of Ipswich MA* 15.63 2,385 37.3 16.50 6.88 14.00 11.64 101.68 -5.27
JXVL Jacksonville Bancorp of TX 20.63 2,444 50.4 23.25 13.25 20.13 2.48 39.86 -11.27
JXSB Jcksnville SB,MHC of IL (45.6) 24.50 1,908 14.2 24.75 10.67 23.25 5.38 104.17 22.50
JSBA Jefferson Svgs Bancorp of MO 27.25 10,013 272.9 27.25 13.88 27.00 0.93 90.43 32.93
JOAC Joachim Bancorp, Inc. of MO(8) 16.44 722 11.9 16.63 14.00 16.25 1.17 17.43 2.75
KSBK KSB Bancorp of Kingfield ME* 18.88 1,239 23.4 22.50 9.00 18.50 2.05 102.36 -16.09
KFBI Klamath First Bancorp of OR 23.00 9,994 229.9 24.25 16.50 23.00 0.00 29.58 6.98
LSBI LSB Fin. Corp. of Lafayette IN 31.50 916 28.9 33.00 19.05 30.50 3.28 59.41 10.53
LVSB Lakeview Financial of NJ 25.00 3,882 97.1 26.56 13.63 25.28 -1.11 61.29 -1.96
LARK Landmark Bancshares, Inc of KS 26.00 1,689 43.9 27.25 18.75 23.50 10.64 38.67 4.50
LARL Laurel Capital Group of PA 21.00 2,175 45.7 23.50 13.42 21.63 -2.91 50.00 -3.09
LSBX Lawrence Savings Bank of MA* 17.44 4,288 74.8 19.31 9.13 18.88 -7.63 74.40 6.47
LFED Leeds FSB, MHC of MD (36.3) 23.00 5,182 43.3 23.50 11.83 22.50 2.22 85.19 5.75
LXMO Lexington B&L Fin. Corp. of MO 16.38 1,121 18.4 17.88 14.13 16.63 -1.50 5.68 -7.72
LFCO Life Financial Corp of CA(8) 19.63 6,546 128.5 21.88 10.75 19.50 0.67 N.A. 55.42
LFBI Little Falls Bancorp of NJ 19.25 2,608 50.2 20.50 12.75 20.19 -4.66 45.28 -6.10
LOGN Logansport Fin. Corp. of IN 18.13 1,261 22.9 18.13 12.50 17.50 3.60 29.50 0.72
LISB Long Island Bancorp, Inc of NY 63.69 24,029 1,530.4 65.75 33.00 64.75 -1.64 87.32 28.33
MAFB MAF Bancorp, Inc. of IL 38.50 15,013 578.0 39.25 24.83 39.00 -1.28 48.53 8.82
MBLF MBLA Financial Corp. of MO 27.38 1,270 34.8 30.63 20.25 27.50 -0.44 36.90 -10.23
MECH MECH Financial Inc of CT* 29.38 5,293 155.5 29.38 16.75 29.00 1.31 65.52 12.74
MFBC MFB Corp. of Mishawaka IN 26.50 1,627 43.1 30.38 18.75 26.25 0.95 39.47 -12.77
MSBF MSB Financial, Inc of MI 16.63 1,237 20.6 19.50 10.38 17.00 -2.18 60.21 -12.47
MARN Marion Capital Holdings of IN 28.63 1,782 51.0 29.00 21.25 28.00 2.25 34.73 5.53
MRKF Market Fin. Corp. of OH 17.50 1,336 23.4 17.50 12.25 17.06 2.58 35.24 11.96
MFSL Maryland Fed. Bancorp of MD(8) 38.00 6,476 246.1 38.38 17.19 37.88 0.32 115.54 8.57
MASB MassBank Corp. of Reading MA* 51.00 3,571 182.1 51.25 29.91 51.00 0.00 65.85 7.08
MFLR Mayflower Co-Op. Bank of MA* 27.00 899 24.3 27.50 15.75 27.00 0.00 42.11 0.93
MDBK Medford Bancorp, Inc. of MA* 43.50 4,541 197.5 44.00 24.50 43.00 1.16 64.15 10.83
MERI Meritrust FSB of Thibodaux LA(8) 78.94 774 61.1 80.00 34.00 78.94 0.00 122.37 14.41
MWBX MetroWest Bank of MA* 7.75 14,108 109.3 9.50 4.63 7.88 -1.65 51.07 -13.89
METF Metropolitan Fin. Corp. of OH 16.75 7,051 118.1 18.88 5.38 16.63 0.72 197.51 8.06
MIFC Mid Iowa Financial Corp. of IA 12.25 1,710 20.9 12.63 7.31 12.13 0.99 53.13 6.52
MCBN Mid-Coast Bancorp of ME 39.00 237 9.2 40.75 18.50 38.00 2.63 105.26 30.00
MWBI Midwest Bancshares, Inc. of IA 16.00 1,021 16.3 19.50 9.33 16.00 0.00 71.49 -12.33
MWFD Midwest Fed. Fin. Corp of WI(8) 32.00 1,628 52.1 32.00 17.63 30.75 4.07 82.86 13.76
MFFC Milton Fed. Fin. Corp. of OH 16.00 2,267 36.3 17.00 13.25 16.13 -0.81 17.39 4.03
MBSP Mitchell Bancorp, Inc. of NC 17.38 931 16.2 18.00 15.25 17.00 2.24 8.62 2.24
MBBC Monterey Bay Bancorp of CA 26.00 3,230 84.0 26.75 15.50 22.00 18.18 55.22 33.33
MONT Montgomery Fin. Corp. of IN 12.88 1,653 21.3 14.00 11.00 13.13 -1.90 28.80 0.00
MSBK Mutual SB, FSB of Bay City MI 12.75 4,282 54.6 14.63 6.50 13.00 -1.92 82.14 -1.92
MYST Mystic Financial of MA* 18.00 2,711 48.8 18.56 14.44 17.88 0.67 80.00 80.00
NHTB NH Thrift Bancshares of NH 21.25 2,088 44.4 22.75 11.75 20.63 3.01 68.25 3.66
<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)
- ---------------------------------------
HWEN Home Financial Bancorp of IN 0.36 0.26 7.95 7.95 46.83
HPBC Home Port Bancorp, Inc. of MA* 1.79 1.75 11.92 11.92 113.36
HFBC HopFed Bancorp of KY 0.58 0.58 13.26 13.26 58.70
HZFS Horizon Fin'l. Services of IA 0.83 0.66 10.58 10.58 104.07
HRZB Horizon Financial Corp. of WA* 1.09 1.08 11.38 11.38 71.47
IBSF IBS Financial Corp. of NJ 0.53 0.53 11.80 11.80 66.54
ITLA ITLA Capital Corp of CA* 1.52 1.52 12.28 12.23 114.54
ICBC Independence Comm Bnk Cp of NY 0.37 0.49 12.55 11.75 57.83
IFSB Independence FSB of DC 1.09 0.45 14.23 12.67 196.38
INCB Indiana Comm. Bank, SB of IN(8) 0.53 0.53 12.57 12.57 103.45
INBI Industrial Bancorp of OH 1.00 1.00 11.93 11.93 71.34
IWBK Interwest Bancorp of WA 2.55 2.22 16.60 16.32 246.65
IPSW Ipswich SB of Ipswich MA* 0.93 0.76 4.96 4.96 95.28
JXVL Jacksonville Bancorp of TX 1.38 1.38 14.09 14.09 96.32
JXSB Jcksnville SB,MHC of IL (45.6) 0.51 0.41 9.17 9.17 88.07
JSBA Jefferson Svgs Bancorp of MO 0.97 0.94 11.34 8.89 125.61
JOAC Joachim Bancorp, Inc. of MO(8) 0.37 0.37 13.71 13.71 47.41
KSBK KSB Bancorp of Kingfield ME* 1.22 1.22 8.89 8.45 120.79
KFBI Klamath First Bancorp of OR 0.88 0.88 14.71 13.44 97.58
LSBI LSB Fin. Corp. of Lafayette IN 1.71 1.54 19.36 19.36 225.53
LVSB Lakeview Financial of NJ 1.82 1.14 11.75 9.64 121.76
LARK Landmark Bancshares, Inc of KS 1.46 1.32 19.49 19.49 138.33
LARL Laurel Capital Group of PA 1.34 1.35 10.37 10.37 98.11
LSBX Lawrence Savings Bank of MA* 1.89 1.87 8.77 8.77 83.92
LFED Leeds FSB, MHC of MD (36.3) 0.66 0.66 9.35 9.35 56.23
LXMO Lexington B&L Fin. Corp. of MO 0.65 0.65 15.12 14.18 82.47
LFCO Life Financial Corp of CA(8) 1.94 2.03 8.37 8.37 62.91
LFBI Little Falls Bancorp of NJ 0.66 0.60 14.53 13.40 124.40
LOGN Logansport Fin. Corp. of IN 0.98 1.01 13.12 13.12 68.29
LISB Long Island Bancorp, Inc of NY 2.11 1.74 23.19 22.98 252.72
MAFB MAF Bancorp, Inc. of IL 2.53 2.49 17.55 15.46 230.31
MBLF MBLA Financial Corp. of MO 1.41 1.43 22.32 22.32 176.03
MECH MECH Financial Inc of CT* 2.47 2.44 16.73 16.73 168.59
MFBC MFB Corp. of Mishawaka IN 1.25 1.24 20.61 20.61 162.32
MSBF MSB Financial, Inc of MI 0.91 0.84 10.56 10.56 62.61
MARN Marion Capital Holdings of IN 1.58 1.58 22.37 21.89 107.66
MRKF Market Fin. Corp. of OH 0.43 0.43 15.13 15.13 42.54
MFSL Maryland Fed. Bancorp of MD(8) 1.14 1.61 15.39 15.22 181.44
MASB MassBank Corp. of Reading MA* 2.85 2.63 29.06 28.65 259.14
MFLR Mayflower Co-Op. Bank of MA* 1.56 1.48 14.31 14.10 146.73
MDBK Medford Bancorp, Inc. of MA* 2.51 2.42 22.35 21.04 250.07
MERI Meritrust FSB of Thibodaux LA(8) 3.51 3.51 25.66 25.66 302.07
MWBX MetroWest Bank of MA* 0.54 0.53 3.17 3.17 43.16
METF Metropolitan Fin. Corp. of OH 0.82 0.77 5.20 4.78 131.18
MIFC Mid Iowa Financial Corp. of IA 0.89 0.98 7.41 7.40 79.15
MCBN Mid-Coast Bancorp of ME 1.92 1.80 22.03 22.03 264.27
MWBI Midwest Bancshares, Inc. of IA 1.24 1.10 10.46 10.46 144.69
MWFD Midwest Fed. Fin. Corp of WI(8) 1.80 1.42 11.70 11.31 130.03
MFFC Milton Fed. Fin. Corp. of OH 0.56 0.54 11.43 11.43 96.53
MBSP Mitchell Bancorp, Inc. of NC 0.56 0.56 15.56 15.56 38.78
MBBC Monterey Bay Bancorp of CA 0.55 0.50 14.84 13.84 126.35
MONT Montgomery Fin. Corp. of IN 0.44 0.44 11.89 11.89 63.93
MSBK Mutual SB, FSB of Bay City MI -2.14 -0.75 7.66 7.66 150.57
MYST Mystic Financial of MA* 0.52 0.52 13.00 13.00 66.76
NHTB NH Thrift Bancshares of NH 1.33 1.08 12.24 10.59 152.29
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit 1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of March 27, 1998
<TABLE>
<CAPTION>
Price Change Data
Market Capitalization -----------------------------------------------
----------------------- 52 Week (1) % Change From
Shares Market --------------- -----------------------
Price/ Outst- Capital- Last Last 52 Wks Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week Ago(2) 1997(2)
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
NSLB NS&L Bancorp, Inc of Neosho MO 17.50 686 12.0 19.50 16.25 17.50 0.00 4.48 -7.31
NSSY NSS Bancorp of CT* 47.00 2,427 114.1 47.00 23.00 42.63 10.25 100.00 24.50
NMSB Newmil Bancorp, Inc. of CT* 13.63 3,879 52.9 14.50 8.88 13.88 -1.80 43.47 4.85
NASB North American SB, FSB of MO 69.00 2,240 154.6 71.00 38.00 69.00 0.00 81.58 29.87
NBSI North Bancshares of Chicago IL 17.75 1,430 25.4 18.83 12.75 17.50 1.43 39.22 -0.73
FFFD North Central Bancshares of IA 22.50 3,266 73.5 22.88 15.00 22.44 0.27 35.30 13.18
NEIB Northeast Indiana Bncrp of IN 21.25 1,763 37.5 22.75 13.25 21.13 0.57 41.67 -3.98
NWEQ Northwest Equity Corp. of WI 21.50 839 18.0 22.25 13.75 21.63 -0.60 52.16 3.61
NWSB Northwest SB, MHC of PA (30.7) 17.19 46,798 246.7 17.19 7.13 17.00 1.12 123.54 21.66
NTMG Nutmeg FS&LA of CT 10.75 986 10.6 11.25 5.25 10.88 -1.19 104.76 2.38
OHSL OHSL Financial Corp. of OH 32.19 1,241 39.9 36.75 22.63 33.75 -4.62 35.54 19.22
OCFC Ocean Fin. Corp. of NJ 36.75 7,853 288.6 38.38 27.63 36.56 0.52 27.25 -1.34
OTFC Oregon Trail Fin. Corp. of OR 17.81 4,333 77.2 18.50 15.63 18.38 -3.10 78.10 2.47
OFCP Ottawa Financial Corp. of MI 29.25 5,313 155.4 34.00 18.64 29.25 0.00 56.92 -13.97
PFFB PFF Bancorp of Pomona CA 20.38 17,956 365.9 21.50 13.63 20.44 -0.29 36.96 2.52
PSFI PS Financial of Chicago IL 13.75 2,167 29.8 22.38 12.88 14.13 -2.69 2.77 -38.56
PVFC PVF Capital Corp. of OH 23.75 2,659 63.2 24.00 15.23 24.00 -1.04 55.94 17.63
PBCI Pamrapo Bancorp, Inc. of NJ 28.00 2,843 79.6 28.00 18.50 27.75 0.90 41.77 2.75
PFED Park Bancorp of Chicago IL 18.75 2,333 43.7 19.75 14.25 18.75 0.00 20.97 0.64
PVSA Parkvale Financial Corp of PA 31.63 5,108 161.6 34.25 20.80 31.25 1.22 45.09 -7.65
PBHC Pathfinder BC MHC of NY (46.1)* 21.50 2,875 19.0 24.63 7.17 22.25 -3.37 147.98 7.50
PEEK Peekskill Fin. Corp. of NY 17.00 3,127 53.2 18.25 13.38 16.88 0.71 19.30 1.49
PFSB PennFed Fin. Services of NJ 18.25 9,646 176.0 19.00 11.13 18.50 -1.35 51.70 6.54
PWBC PennFirst Bancorp of PA 19.31 5,271 101.8 20.00 12.27 19.31 0.00 54.48 0.31
PWBK Pennwood Bancorp, Inc. of PA 20.00 551 11.0 22.00 13.75 18.75 6.67 41.54 1.27
PBKB People's Bancshares of MA* 25.25 3,289 83.0 26.00 11.63 26.00 -2.88 110.42 10.99
PFDC Peoples Bancorp of Auburn IN 23.00 3,391 78.0 25.00 14.50 22.50 2.22 56.78 4.55
PBCT Peoples Bank, MHC of CT (40.1)* 38.00 61,162 929.2 38.75 19.00 38.75 -1.94 65.79 0.00
TSBS Peoples Bcrp, MHC of NJ (35.9)(8)* 43.88 9,046 142.5 45.25 18.00 44.75 -1.94 143.78 -3.03
PFFC Peoples Fin. Corp. of OH 16.50 1,417 23.4 19.00 12.75 16.63 -0.78 3.13 9.05
PHBK Peoples Heritage Fin Grp of ME* 47.50 27,737 1,317.5 48.00 27.50 46.75 1.60 50.79 3.26
PSFC Peoples Sidney Fin. Corp of OH 18.38 1,785 32.8 18.63 12.56 18.00 2.11 83.80 2.80
PERM Permanent Bancorp, Inc. of IN 34.88 2,103 73.4 36.50 20.75 36.00 -3.11 65.07 12.05
PMFI Perpetual Midwest Fin. of IA(8) 30.00 1,891 56.7 30.50 18.75 29.38 2.11 51.90 2.56
PERT Perpetual of SC, MHC (46.8)(8) 63.88 1,509 45.0 66.75 24.13 65.88 -3.04 150.51 5.36
PCBC Perry Co. Fin. Corp. of MO 23.38 828 19.4 25.00 18.75 23.25 0.56 15.46 -3.11
PHFC Pittsburgh Home Fin Corp of PA 17.88 1,969 35.2 20.81 14.00 17.88 0.00 15.35 -0.67
PFSL Pocahnts Fed, MHC of AR (47.0)(8) 45.00 1,632 34.6 46.00 17.75 45.88 -1.92 125.00 1.12
PTRS Potters Financial Corp of OH 19.13 973 18.6 22.25 9.50 18.75 2.03 91.30 -4.35
PKPS Poughkeepsie Fin. Corp. of NY(8) 11.38 12,610 143.5 11.63 5.44 11.41 -0.26 85.64 -2.15
PHSB Ppls Home SB, MHC of PA (45.0) 19.75 2,760 24.5 20.00 13.63 19.75 0.00 97.50 4.61
PRBC Prestige Bancorp of PA 19.38 915 17.7 20.00 15.50 19.25 0.68 21.12 -3.10
PFNC Progress Financial Corp. of PA 18.38 4,064 74.7 18.50 7.68 18.38 0.00 120.65 11.39
PSBK Progressive Bank, Inc. of NY(8)* 42.25 3,832 161.9 44.50 23.38 43.50 -2.87 69.00 10.46
PROV Provident Fin. Holdings of CA 23.00 4,693 107.9 24.25 14.13 24.25 -5.15 44.84 5.12
PULB Pulaski SB, MHC of MO (29.8)(8) 49.50 2,097 30.9 51.00 17.38 50.25 -1.49 147.50 57.74
PLSK Pulaski SB, MHC of NJ (46.0) 19.00 2,108 18.1 24.50 11.50 20.00 -5.00 90.00 -1.30
PULS Pulse Bancorp of S. River NJ 26.63 3,088 82.2 29.75 17.88 26.63 0.00 48.94 1.91
QCFB QCF Bancorp of Virginia MN 28.25 1,382 39.0 29.75 19.00 28.25 0.00 48.68 -5.04
QCBC Quaker City Bancorp of CA 22.88 4,673 106.9 24.56 14.40 22.63 1.10 47.61 7.67
QCSB Queens County Bancorp of NY* 43.25 14,913 645.0 43.25 23.78 42.13 2.66 76.53 6.79
RARB Raritan Bancorp of Raritan NJ* 28.25 2,372 67.0 29.25 16.33 26.50 6.60 72.99 0.89
REDF RedFed Bancorp of Redlands CA(8) 20.00 7,233 144.7 21.13 12.38 19.88 0.60 41.54 0.60
RELY Reliance Bancorp, Inc. of NY 38.00 9,634 366.1 38.00 22.00 37.25 2.01 55.10 3.74
RELI Reliance Bancshares Inc of WI 8.94 2,562 22.9 10.13 7.13 8.88 0.68 17.17 -5.89
<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)
- ---------------------------------------
NSLB NS&L Bancorp, Inc of Neosho MO 0.62 0.61 16.64 16.51 84.29
NSSY NSS Bancorp of CT* 2.76 3.13 22.49 21.83 276.37
NMSB Newmil Bancorp, Inc. of CT* 0.71 0.72 8.54 8.54 91.65
NASB North American SB, FSB of MO 5.40 4.39 27.83 27.01 327.72
NBSI North Bancshares of Chicago IL 0.44 0.42 11.60 11.60 86.00
FFFD North Central Bancshares of IA 1.16 1.16 15.10 15.10 65.87
NEIB Northeast Indiana Bncrp of IN 1.18 1.18 15.51 15.51 107.95
NWEQ Northwest Equity Corp. of WI 1.22 1.17 13.77 13.77 118.66
NWSB Northwest SB, MHC of PA (30.7) 0.41 0.42 4.44 3.94 48.05
NTMG Nutmeg FS&LA of CT 0.67 0.43 5.88 5.88 106.64
OHSL OHSL Financial Corp. of OH 1.62 1.55 20.98 20.98 192.51
OCFC Ocean Fin. Corp. of NJ 1.78 1.77 27.45 27.45 192.40
OTFC Oregon Trail Fin. Corp. of OR 0.63 0.64 10.64 10.64 85.17
OFCP Ottawa Financial Corp. of MI 1.42 1.35 14.37 11.69 166.73
PFFB PFF Bancorp of Pomona CA 0.79 0.75 14.95 14.80 154.04
PSFI PS Financial of Chicago IL 0.72 0.73 14.76 14.76 39.55
PVFC PVF Capital Corp. of OH 1.90 1.79 10.85 10.85 149.01
PBCI Pamrapo Bancorp, Inc. of NJ 1.78 1.70 17.07 16.96 132.51
PFED Park Bancorp of Chicago IL 0.66 0.71 16.55 16.55 75.85
PVSA Parkvale Financial Corp of PA 2.07 2.07 15.79 15.70 199.52
PBHC Pathfinder BC MHC of NY (46.1)* 0.64 0.58 8.20 6.95 68.44
PEEK Peekskill Fin. Corp. of NY 0.64 0.64 14.87 14.87 58.91
PFSB PennFed Fin. Services of NJ 1.11 1.10 10.64 9.12 152.97
PWBC PennFirst Bancorp of PA 1.03 1.03 13.00 11.58 172.79
PWBK Pennwood Bancorp, Inc. of PA 0.83 0.96 15.41 15.41 85.68
PBKB People's Bancshares of MA* 1.44 0.74 8.94 8.58 218.14
PFDC Peoples Bancorp of Auburn IN 1.26 1.26 13.25 13.25 86.79
PBCT Peoples Bank, MHC of CT (40.1)* 1.51 0.87 11.61 11.55 133.81
TSBS Peoples Bcrp, MHC of NJ (35.9)(8)* 0.82 0.61 12.16 10.99 70.80
PFFC Peoples Fin. Corp. of OH 0.56 0.55 10.97 10.97 58.20
PHBK Peoples Heritage Fin Grp of ME* 2.65 2.62 17.13 12.87 244.99
PSFC Peoples Sidney Fin. Corp of OH 0.64 0.64 14.72 14.72 59.52
PERM Permanent Bancorp, Inc. of IN 1.25 1.24 19.96 19.72 199.63
PMFI Perpetual Midwest Fin. of IA(8) 1.02 0.91 18.49 18.49 207.35
PERT Perpetual of SC, MHC (46.8)(8) 1.27 1.40 20.28 20.28 170.31
PCBC Perry Co. Fin. Corp. of MO 1.07 1.07 19.75 19.75 102.69
PHFC Pittsburgh Home Fin Corp of PA 1.07 0.92 12.52 12.37 152.19
PFSL Pocahnts Fed, MHC of AR (47.0)(8) 1.45 1.43 15.17 15.17 238.61
PTRS Potters Financial Corp of OH 1.23 1.21 11.31 11.31 126.04
PKPS Poughkeepsie Fin. Corp. of NY(8) 0.19 0.24 5.76 5.76 69.43
PHSB Ppls Home SB, MHC of PA (45.0) 0.59 0.56 10.37 10.37 78.89
PRBC Prestige Bancorp of PA 0.86 0.84 17.08 17.08 156.57
PFNC Progress Financial Corp. of PA 0.95 0.72 6.18 5.19 121.41
PSBK Progressive Bank, Inc. of NY(8)* 2.25 2.20 20.48 18.57 230.56
PROV Provident Fin. Holdings of CA 1.04 0.55 17.85 17.85 154.21
PULB Pulaski SB, MHC of MO (29.8)(8) 1.03 0.90 11.38 11.38 85.56
PLSK Pulaski SB, MHC of NJ (46.0) 0.53 0.53 10.29 10.29 86.21
PULS Pulse Bancorp of S. River NJ 1.85 1.87 14.31 14.31 174.65
QCFB QCF Bancorp of Virginia MN 1.81 1.81 18.83 18.83 114.47
QCBC Quaker City Bancorp of CA 1.27 1.22 15.73 15.73 182.36
QCSB Queens County Bancorp of NY* 1.56 1.54 11.43 11.43 107.51
RARB Raritan Bancorp of Raritan NJ* 1.65 1.62 13.02 12.83 172.14
REDF RedFed Bancorp of Redlands CA(8) 1.44 1.48 11.65 11.61 139.60
RELY Reliance Bancorp, Inc. of NY 1.88 1.97 19.92 13.56 232.83
RELI Reliance Bancshares Inc of WI 0.19 0.20 8.71 8.71 17.39
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit 1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of March 27, 1998
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
----------------------- -----------------------------------------------
52 Week (1) % Change From
Shares Market --------------- -----------------------
Price/ Outst- Capital- Last Last 52 Wks Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week Ago(2) 1997(2)
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
RCBK Richmond County Fin Corp of NY 19.28 24,466 471.7 19.63 15.69 17.94 7.47 92.80 92.80
RIVR River Valley Bancorp of IN 19.75 1,190 23.5 19.75 13.63 19.50 1.28 37.34 5.33
RVSB Riverview Bancorp of WA 16.88 6,133 103.5 18.00 7.10 17.00 -0.71 125.37 -4.90
RSLN Roslyn Bancorp, Inc. of NY* 23.19 43,642 1,012.1 24.50 15.88 23.59 -1.70 35.93 -0.26
SCCB S. Carolina Comm. Bnshrs of SC 22.50 583 13.1 25.25 17.50 22.13 1.67 12.50 0.00
SBFL SB Fngr Lakes MHC of NY (33.1) 19.50 3,570 11.5 24.75 7.38 24.75 -21.21 160.00 21.88
SFED SFS Bancorp of Schenectady NY 24.50 1,208 29.6 27.25 16.00 23.75 3.16 40.00 -8.85
SGVB SGV Bancorp of W. Covina CA 17.63 2,345 41.3 19.38 11.38 17.50 0.74 39.59 -0.68
SHSB SHS Bancorp, Inc. of PA 17.00 820 13.9 18.00 14.75 17.12 -0.70 70.00 1.49
SISB SIS Bancorp, Inc. of MA* 40.50 6,948 281.4 40.50 23.38 39.50 2.53 62.00 0.77
SWCB Sandwich Bancorp of MA(8)* 63.50 1,942 123.3 64.50 27.25 57.75 9.96 117.09 44.32
SFSL Security First Corp. of OH 22.50 7,571 170.3 22.50 12.00 22.50 0.00 77.58 7.76
SKAN Skaneateles Bancorp Inc of NY* 19.56 1,437 28.1 22.25 12.25 19.38 0.93 51.39 -11.61
SOBI Sobieski Bancorp of S. Bend IN 20.75 764 15.9 24.25 14.50 21.25 -2.35 43.10 1.82
SOSA Somerset Savings Bank of MA(8)* 4.94 16,659 82.3 5.94 2.25 4.94 0.00 79.64 -1.20
SSFC South Street Fin. Corp. of NC* 12.38 4,676 57.9 20.00 11.75 12.38 0.00 -22.63 -34.84
SCBS Southern Commun. Bncshrs of AL 19.88 1,137 22.6 20.75 13.50 18.50 7.46 44.58 8.93
SMBC Southern Missouri Bncrp of MO 22.50 1,612 36.3 23.25 15.50 21.75 3.45 38.46 9.76
SWBI Southwest Bancshares of IL(8) 32.88 2,715 89.3 33.00 18.75 32.50 1.17 66.48 10.52
SVRN Sovereign Bancorp, Inc. of PA 18.94 112,133 2,123.8 18.94 9.48 21.88 -13.44 83.71 9.54
STFR St. Francis Cap. Corp. of WI 45.00 5,251 236.3 50.75 29.00 46.50 -3.23 53.17 -10.89
SPBC St. Paul Bancorp, Inc. of IL 25.63 34,205 876.7 28.50 17.58 26.19 -2.14 37.28 -2.36
SFFC StateFed Financial Corp. of IA 14.00 1,557 21.8 14.75 9.00 14.50 -3.45 47.37 -5.08
SFIN Statewide Fin. Corp. of NJ 23.25 4,591 106.7 24.13 14.75 22.75 2.20 46.41 -3.13
STSA Sterling Financial Corp. of WA 26.00 7,570 196.8 26.00 15.25 25.50 1.96 51.78 19.54
SFSB SuburbFed Fin. Corp. of IL(8) 47.50 1,266 60.1 50.00 22.25 47.75 -0.52 111.11 -5.00
ROSE T R Financial Corp. of NY* 35.50 17,598 624.7 35.50 16.69 35.50 0.00 97.22 6.77
THRD TF Financial Corp. of PA 28.38 3,187 90.4 30.00 16.63 27.25 4.15 53.41 -5.40
TPNZ Tappan Zee Fin., Inc. of NY(8) 20.13 1,478 29.8 22.63 14.00 20.25 -0.59 41.26 7.36
TSBK Timberland Bancorp of WA 17.94 6,613 118.6 18.50 14.50 18.13 -1.05 79.40 79.40
TRIC Tri-County Bancorp of WY 13.75 1,167 16.0 15.00 9.25 15.00 -8.33 48.65 -8.33
TWIN Twin City Bancorp, Inc. of TN 14.63 1,269 18.6 15.50 12.00 14.75 -0.81 15.47 -5.61
USAB USABancshares, Inc of PA* 12.25 732 9.0 13.38 6.56 12.25 0.00 59.30 22.50
UCBC Union Community Bancorp of IN 15.81 3,042 48.1 15.81 13.94 15.50 2.00 58.10 8.07
UFRM United FSB of Rocky Mount NC(8) 18.50 3,169 58.6 21.00 9.50 19.00 -2.63 92.11 -5.76
UBMT United Fin. Corp. of MT 27.00 1,223 33.0 28.25 19.00 28.25 -4.42 38.46 5.88
UTBI United Tenn. Bancshares of TN 15.50 1,455 22.6 15.50 13.63 14.56 6.46 55.00 55.00
VABF Va. Beach Fed. Fin. Corp of VA 20.25 4,981 100.9 20.88 9.75 19.63 3.16 102.50 10.17
WHGB WHG Bancshares of MD 17.88 1,389 24.8 19.00 13.75 18.00 -0.67 23.31 -4.64
WSFS WSFS Financial Corp. of DE* 21.63 12,460 269.5 21.88 10.63 21.88 -1.14 84.09 8.15
WVFC WVS Financial Corp. of PA 38.06 1,753 66.7 39.00 23.50 38.75 -1.78 47.81 7.97
WRNB Warren Bancorp of Peabody MA* 24.25 3,806 92.3 24.88 15.00 24.00 1.04 51.56 5.43
WSBI Warwick Community Bncrp of NY* 17.75 6,414 113.8 17.75 15.38 17.63 0.68 77.50 2.13
WFSL Washington Federal, Inc. of WA 28.25 52,286 1,477.1 30.29 20.46 29.00 -2.59 21.87 -1.15
WAMU Washington Mutual, Inc. of WA* 74.53 257,56019,195.9 74.94 45.38 73.94 0.80 50.38 16.80
WYNE Wayne Bancorp, Inc. of NJ 30.00 2,014 60.4 30.25 16.00 28.75 4.35 80.40 12.15
WAYN Wayne Svgs Bks MHC of OH (47.8 30.00 2,257 32.3 33.00 17.00 30.00 0.00 73.11 3.45
WCFB Wbstr Cty FSB MHC of IA (45.2) 19.75 2,109 18.8 22.00 13.75 20.88 -5.41 38.60 -1.25
WBST Webster Financial Corp. of CT 69.50 13,653 948.9 70.00 35.13 66.50 4.51 90.41 4.51
WEFC Wells Fin. Corp. of Wells MN 19.25 1,959 37.7 19.63 14.00 18.75 2.67 35.09 7.66
WCBI WestCo Bancorp, Inc. of IL 29.38 2,464 72.4 29.38 22.00 29.38 0.00 33.55 7.82
WSTR WesterFed Fin. Corp. of MT 25.94 5,577 144.7 27.00 17.63 25.88 0.23 30.48 1.73
WOFC Western Ohio Fin. Corp. of OH 26.00 2,356 61.3 29.25 21.00 26.00 0.00 19.54 -3.27
WEHO Westwood Hmstd Fin Corp of OH 14.50 2,843 41.2 18.13 12.50 14.63 -0.89 6.38 -14.71
FFWD Wood Bancorp of OH 20.50 2,651 54.3 27.00 8.47 20.00 2.50 136.45 9.04
<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)
- ---------------------------------------
RCBK Richmond County Fin Corp of NY 0.56 0.56 11.79 11.79 45.97
RIVR River Valley Bancorp of IN 0.91 0.76 14.80 14.59 116.35
RVSB Riverview Bancorp of WA 0.54 0.53 9.75 9.41 42.89
RSLN Roslyn Bancorp, Inc. of NY* 0.77 0.94 14.40 14.33 82.51
SCCB S. Carolina Comm. Bnshrs of SC 0.79 0.79 16.00 16.00 77.34
SBFL SB Fngr Lakes MHC of NY (33.1) 0.24 0.21 6.07 6.07 69.39
SFED SFS Bancorp of Schenectady NY 0.88 0.85 17.74 17.74 144.39
SGVB SGV Bancorp of W. Covina CA 0.57 0.66 13.13 12.94 173.91
SHSB SHS Bancorp, Inc. of PA 0.81 0.81 14.65 14.65 108.01
SISB SIS Bancorp, Inc. of MA* 1.37 1.87 18.06 18.06 249.51
SWCB Sandwich Bancorp of MA(8)* 2.50 2.44 21.63 20.88 267.09
SFSL Security First Corp. of OH 1.19 1.19 8.38 8.26 89.54
SKAN Skaneateles Bancorp Inc of NY* 1.16 1.12 12.30 11.97 178.22
SOBI Sobieski Bancorp of S. Bend IN 0.65 0.65 16.49 16.49 114.60
SOSA Somerset Savings Bank of MA(8)* 0.36 0.35 2.15 2.15 32.40
SSFC South Street Fin. Corp. of NC* 0.43 0.44 7.28 7.28 48.86
SCBS Southern Commun. Bncshrs of AL 0.70 0.70 12.73 12.73 62.34
SMBC Southern Missouri Bncrp of MO 0.85 0.81 16.47 16.47 99.21
SWBI Southwest Bancshares of IL(8) 1.51 1.52 16.22 16.22 135.65
SVRN Sovereign Bancorp, Inc. of PA 0.51 0.70 6.08 5.05 127.85
STFR St. Francis Cap. Corp. of WI 2.35 2.26 25.17 22.44 304.26
SPBC St. Paul Bancorp, Inc. of IL 1.43 1.44 12.22 12.18 133.24
SFFC StateFed Financial Corp. of IA 0.70 0.70 10.05 10.05 56.91
SFIN Statewide Fin. Corp. of NJ 1.19 1.19 14.34 14.31 153.15
STSA Sterling Financial Corp. of WA 1.15 1.04 13.59 12.56 247.85
SFSB SuburbFed Fin. Corp. of IL(8) 2.20 1.78 23.31 23.24 346.34
ROSE T R Financial Corp. of NY* 1.97 1.76 13.69 13.69 218.38
THRD TF Financial Corp. of PA 1.53 1.30 15.72 13.12 187.34
TPNZ Tappan Zee Fin., Inc. of NY(8) 0.70 0.69 14.46 14.46 84.29
TSBK Timberland Bancorp of WA 0.75 0.75 12.38 12.38 40.65
TRIC Tri-County Bancorp of WY 0.77 0.79 11.85 11.85 77.12
TWIN Twin City Bancorp, Inc. of TN 0.85 0.70 11.04 11.04 85.65
USAB USABancshares, Inc of PA* 0.32 0.28 7.40 7.29 87.80
UCBC Union Community Bancorp of IN 0.58 0.58 13.40 13.40 36.73
UFRM United FSB of Rocky Mount NC(8) 0.57 0.37 6.94 6.94 95.98
UBMT United Fin. Corp. of MT 1.22 1.21 20.24 20.24 84.29
UTBI United Tenn. Bancshares of TN 0.66 0.66 12.95 12.95 52.89
VABF Va. Beach Fed. Fin. Corp of VA 0.82 0.66 8.86 8.86 123.71
WHGB WHG Bancshares of MD 0.54 0.55 14.34 14.34 72.95
WSFS WSFS Financial Corp. of DE* 1.32 1.30 6.96 6.92 121.61
WVFC WVS Financial Corp. of PA 2.13 2.15 17.76 17.76 166.58
WRNB Warren Bancorp of Peabody MA* 1.91 1.70 10.52 10.52 97.48
WSBI Warwick Community Bncrp of NY* 0.55 0.55 12.60 12.60 53.02
WFSL Washington Federal, Inc. of WA 2.07 2.04 14.09 13.00 109.27
WAMU Washington Mutual, Inc. of WA* 1.28 2.38 20.15 18.77 376.54
WYNE Wayne Bancorp, Inc. of NJ 0.97 0.97 16.85 16.85 134.08
WAYN Wayne Svgs Bks MHC of OH (47.8 0.84 0.78 10.72 10.72 113.04
WCFB Wbstr Cty FSB MHC of IA (45.2) 0.65 0.65 10.60 10.60 45.10
WBST Webster Financial Corp. of CT 2.31 3.52 27.99 24.41 514.14
WEFC Wells Fin. Corp. of Wells MN 1.13 1.10 15.13 15.13 102.83
WCBI WestCo Bancorp, Inc. of IL 1.91 1.78 19.72 19.72 128.22
WSTR WesterFed Fin. Corp. of MT 1.30 1.26 19.31 15.69 185.60
WOFC Western Ohio Fin. Corp. of OH 0.61 0.71 23.39 21.83 168.69
WEHO Westwood Hmstd Fin Corp of OH 0.31 0.49 10.60 10.60 47.22
FFWD Wood Bancorp of OH 0.89 0.80 8.04 8.04 62.82
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit 1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of March 27, 1998
<TABLE>
<CAPTION>
Price Change Data
Market Capitalization -----------------------------------------------
----------------------- 52 Week (1) % Change From
Shares Market --------------- -----------------------
Price/ Outst- Capital- Last Last 52 Wks Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week Ago(2) 1997(2)
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
YFCB Yonkers Fin. Corp. of NY 19.75 3,021 59.7 22.00 14.38 20.00 -1.25 29.51 2.60
YFED York Financial Corp. of PA 25.38 8,852 224.7 27.25 14.20 25.50 -0.47 73.84 -1.44
<CAPTION>
Current Per Share Financials
----------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- -------- ------- ------- ------- -------
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
YFCB Yonkers Fin. Corp. of NY 1.02 1.01 14.87 14.87 109.83
YFED York Financial Corp. of PA 1.26 1.05 11.84 11.84 133.56
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit 1
Weekly Thrift Market Line - Part Two
Prices As Of March 27, 1998
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
---------------------------------------------------------- -----------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- --------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Market Averages. SAIF-Insured Thrifts(no MHCs)
- ----------------------------------------------
SAIF-Insured Thrifts(298) 13.79 13.54 0.95 8.12 4.45 0.90 7.59 0.75 129.30 0.79
NYSE Traded Companies(9) 8.16 7.94 1.18 14.92 5.73 0.63 9.40 1.78 91.95 1.34
AMEX Traded Companies(20) 14.04 13.94 0.90 6.47 4.26 0.85 5.84 0.63 153.15 0.73
NASDAQ Listed OTC Companies(269) 13.91 13.65 0.95 8.08 4.43 0.91 7.69 0.73 128.60 0.78
California Companies(20) 7.84 7.59 0.62 8.57 4.97 0.53 7.84 1.20 86.14 1.26
Florida Companies(6) 10.33 9.94 1.18 12.36 4.88 0.72 7.12 1.48 102.17 0.87
Mid-Atlantic Companies(58) 11.04 10.66 0.86 8.65 4.75 0.83 8.25 0.79 102.75 0.92
Mid-West Companies(138) 14.63 14.43 0.97 7.67 4.27 0.93 7.28 0.61 138.64 0.66
New England Companies(9) 7.67 7.37 0.62 8.87 4.66 0.65 9.11 0.69 152.00 1.01
North-West Companies(11) 16.87 16.51 1.17 8.71 4.33 1.11 8.12 0.61 284.86 0.77
South-East Companies(44) 17.37 17.21 1.08 7.65 4.09 1.02 7.12 0.98 108.12 0.83
South-West Companies(6) 11.37 11.26 0.97 10.69 6.41 0.94 10.30 0.71 67.56 0.64
Western Companies (Excl CA)(6) 17.89 17.52 1.10 6.66 4.45 1.09 6.59 0.32 153.87 0.70
Thrift Strategy(249) 14.92 14.69 0.98 7.63 4.52 0.94 7.26 0.68 131.98 0.73
Mortgage Banker Strategy(30) 7.68 7.23 0.77 10.32 4.25 0.71 9.64 1.03 116.00 1.01
Real Estate Strategy(8) 7.56 7.33 0.95 12.53 5.85 0.87 11.57 1.05 105.92 1.28
Diversified Strategy(7) 8.72 8.53 1.29 15.30 5.01 0.78 10.49 1.59 119.07 1.13
Retail Banking Strategy(4) 7.04 6.76 -0.23 -0.09 -4.16 -0.26 -0.99 0.82 142.67 1.25
Companies Issuing Dividends(250) 13.68 13.42 0.99 8.45 4.70 0.93 7.84 0.70 131.19 0.75
Companies Without Dividends(48) 14.35 14.17 0.75 6.41 3.11 0.72 6.30 0.99 119.14 1.00
Equity/Assets less than 6%(24) 5.05 4.72 0.58 11.67 4.25 0.56 11.21 0.83 106.71 0.94
Equity/Assets 6-12%(134) 8.90 8.56 0.84 9.82 4.85 0.77 9.05 0.83 123.18 0.88
Equity/Assets greater than 12%(140) 19.40 19.25 1.10 6.08 4.13 1.06 5.76 0.67 138.45 0.68
Converted Last 3 Mths (no MHC)(11) 27.74 27.59 1.30 4.98 3.37 1.32 5.03 0.72 197.82 0.96
Actively Traded Companies(36) 9.12 8.86 0.97 11.12 4.58 1.00 11.86 0.70 151.66 0.94
Market Value Below $20 Million(41) 15.20 15.12 0.93 6.59 4.85 0.86 6.01 0.82 106.00 0.67
Holding Company Structure(270) 14.03 13.78 0.95 7.92 4.43 0.90 7.44 0.75 129.64 0.78
Assets Over $1 Billion(60) 8.77 8.17 0.89 11.21 4.73 0.79 10.10 0.87 112.78 0.97
Assets $500 Million-$1 Billion(44) 9.87 9.62 0.85 8.98 4.02 0.80 8.75 0.66 162.06 0.90
Assets $250-$500 Million(67) 12.78 12.49 0.95 8.37 4.68 0.90 7.80 0.72 146.23 0.77
Assets less than $250 Million(127) 17.78 17.70 1.01 6.38 4.36 0.97 6.03 0.74 116.66 0.67
Goodwill Companies(123) 10.19 9.57 0.90 9.99 4.76 0.82 9.06 0.86 116.50 0.86
Non-Goodwill Companies(174) 16.09 16.09 0.98 6.89 4.25 0.95 6.64 0.68 137.95 0.74
Acquirors of FSLIC Cases(9) 8.68 8.26 1.00 12.16 5.96 0.91 11.00 0.85 66.56 0.59
<CAPTION>
Pricing Ratios Dividend Data(6)
----------------------------------------- -----------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
- --------------------- ------- ------- ------- ------- --------- ------- ------- -------
(X) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Market Averages. SAIF-Insured Thrifts(no MHCs)
- ----------------------------------------------
SAIF-Insured Thrifts(298) 20.32 165.04 20.84 169.06 21.38 0.36 1.55 30.13
NYSE Traded Companies(9) 17.86 201.49 21.02 207.95 18.25 0.24 0.70 11.01
AMEX Traded Companies(20) 19.64 142.34 19.41 143.87 20.75 0.34 1.79 36.69
NASDAQ Listed OTC Companies(269) 20.44 166.07 20.95 170.25 21.49 0.36 1.55 30.18
California Companies(20) 19.87 162.55 12.34 169.86 20.14 0.13 0.46 10.87
Florida Companies(6) 19.36 170.80 22.34 185.73 23.76 0.43 2.74 17.18
Mid-Atlantic Companies(58) 19.71 172.17 17.90 176.04 20.88 0.36 1.39 29.25
Mid-West Companies(138) 20.24 160.72 21.30 163.23 21.26 0.35 1.63 30.98
New England Companies(9) 17.80 176.16 13.07 186.03 20.50 0.44 1.45 27.37
North-West Companies(11) 22.49 172.51 26.53 178.58 23.24 0.30 1.16 27.85
South-East Companies(44) 22.16 172.89 26.27 177.46 23.17 0.43 1.82 40.18
South-West Companies(6) 14.98 140.11 15.10 145.81 15.19 0.30 1.30 24.34
Western Companies (Excl CA)(6) 21.39 140.30 24.16 146.26 21.62 0.47 2.10 37.25
Thrift Strategy(249) 20.65 156.64 21.61 159.89 21.48 0.36 1.66 32.12
Mortgage Banker Strategy(30) 19.04 212.21 15.94 223.60 21.66 0.32 1.03 20.89
Real Estate Strategy(8) 17.65 199.46 15.05 204.89 18.74 0.16 0.65 11.62
Diversified Strategy(7) 19.18 248.86 24.88 254.32 21.55 0.57 1.40 29.33
Retail Banking Strategy(4) 17.86 170.53 11.23 176.97 19.86 0.15 0.67 17.84
Companies Issuing Dividends(250) 20.29 167.44 20.84 172.44 21.45 0.43 1.85 36.13
Companies Without Dividends(48) 20.52 152.22 20.88 150.79 20.91 0.00 0.00 0.00
Equity/Assets less than 6%(24) 18.29 223.97 11.42 222.77 20.70 0.19 0.68 15.21
Equity/Assets 6-12%(134) 19.06 184.85 16.09 194.06 20.36 0.39 1.45 27.11
Equity/Assets greater than 12%(140) 21.98 138.35 26.44 139.93 22.58 0.36 1.78 35.59
Converted Last 3 Mths (no MHC)(11) 24.61 142.03 38.94 143.10 24.75 0.19 1.56 8.92
Actively Traded Companies(36) 18.99 221.86 19.02 227.20 19.72 0.48 1.46 28.69
Market Value Below $20 Million(41) 20.54 130.45 18.96 130.84 21.56 0.33 1.85 34.78
Holding Company Structure(270) 20.62 163.72 21.05 167.39 21.57 0.36 1.59 30.80
Assets Over $1 Billion(60) 19.83 208.33 17.96 224.46 21.44 0.41 1.30 22.13
Assets $500 Million-$1 Billion(44) 18.96 190.13 17.82 192.34 20.07 0.37 1.41 29.22
Assets $250-$500 Million(67) 19.68 166.25 20.40 169.08 20.70 0.35 1.40 26.42
Assets less than $250 Million(127) 21.38 137.74 23.33 138.63 22.17 0.33 1.78 36.15
Goodwill Companies(123) 19.54 187.67 18.03 198.72 21.03 0.40 1.47 25.65
Non-Goodwill Companies(174) 20.86 149.97 22.50 149.97 21.63 0.33 1.61 33.33
Acquirors of FSLIC Cases(9) 17.01 191.73 16.35 202.39 17.69 0.47 1.59 26.60
</TABLE>
(1) Average of high/low or bid/ask price per share.
(2) Or since offering price if converted or first listed in 1994 or 1995.
Percent change figures are actual year-to-date and are not annualized
(3) EPS (earnings per share) is based on actual trailing twelve month data and
is not shown on a pro forma basis.
(4) Excludes intangibles (such as goodwill, value of core deposits, etc.).
(5) ROA (return on assets) and ROE (return on equity) are indicated ratios based
on trailing twelve month common earnings and average common equity and
assets balances; ROI (return on investment) is current EPS divided by
current price.
(6) Annualized, based on last regular quarterly cash dividend announcement.
(7) Indicated dividend as a percent of trailing twelve month earnings.
(8) Excluded from averages due to actual or rumored acquisition activities
or unusual operating characteristics.
* All thrifts are SAIF insured unless otherwise noted with an asterisk.
Parentheses following market averages indicate the number of
institutions included in the respective averages. All figures have been
adjusted for stock splits, stock dividends, and secondary offerings.
Source: Corporate reports and offering circulars for publicly traded companies,
and RP Financial, Inc. calculations. The information provided in this
report has been obtained from sources we believe are reliable, but we
cannot guarantee the accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit 1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of March 27, 1998
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
---------------------------------------------------------- -----------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- --------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
Market Averages. BIF-Insured Thrifts(no MHCs)
- ---------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BIF-Insured Thrifts(58) 11.40 11.08 1.09 11.22 5.19 1.06 10.93 0.72 170.30 1.35
NYSE Traded Companies(4) 16.20 14.65 1.09 8.91 3.84 1.23 10.11 1.60 48.48 0.98
AMEX Traded Companies(7) 12.51 12.17 1.00 9.73 5.01 0.88 8.42 1.37 71.74 1.23
NASDAQ Listed OTC Companies(47) 10.84 10.63 1.09 11.60 5.33 1.07 11.29 0.59 189.29 1.40
California Companies(1) 10.72 10.68 1.46 13.06 7.33 1.46 13.06 0.00 0.00 1.50
Mid-Atlantic Companies(20) 13.76 13.26 0.95 8.58 4.09 0.97 8.67 0.79 131.96 1.18
New England Companies(31) 9.50 9.23 1.17 13.38 5.95 1.10 12.49 0.74 175.37 1.58
North-West Companies(3) 9.36 9.23 1.03 11.63 4.45 1.16 14.24 0.49 401.95 1.05
South-East Companies(3) 17.35 17.20 1.12 5.90 4.76 1.11 5.85 0.27 190.94 0.51
Thrift Strategy(43) 12.44 12.14 1.10 10.58 5.17 1.06 10.03 0.74 155.55 1.28
Mortgage Banker Strategy(7) 8.76 8.40 0.95 12.06 5.17 0.96 11.92 0.44 302.59 1.26
Real Estate Strategy(3) 10.76 10.73 1.73 16.25 7.60 1.62 15.19 0.83 132.18 1.59
Diversified Strategy(5) 6.58 5.97 0.87 13.30 4.44 0.98 15.25 0.82 151.87 1.94
Companies Issuing Dividends(47) 10.50 10.12 1.08 11.36 5.20 1.04 10.95 0.74 170.01 1.30
Companies Without Dividends(11) 15.29 15.20 1.10 10.61 5.15 1.15 10.87 0.60 171.52 1.55
Equity/Assets less than 6%(4) 5.09 4.95 0.90 16.51 4.87 0.85 15.67 0.93 94.22 1.54
Equity/Assets 6-12%(40) 8.70 8.33 1.11 12.81 5.76 1.06 12.33 0.81 173.34 1.49
Equity/Assets greater than 12%(14) 19.96 19.72 1.08 5.73 3.85 1.12 6.08 0.36 189.12 0.96
Converted Last 3 Mths (no MHC)(1) 19.47 19.47 0.78 4.00 2.89 0.78 4.00 0.18 315.24 0.91
Actively Traded Companies(17) 9.76 9.35 1.27 13.85 5.91 1.22 13.43 0.59 167.70 1.28
Market Value Below $20 Million(2) 9.27 9.21 0.67 7.36 4.66 0.56 6.13 0.56 198.01 1.61
Holding Company Structure(46) 12.36 12.11 1.10 10.78 5.15 1.08 10.51 0.62 171.84 1.36
Assets Over $1 Billion(17) 10.88 10.13 1.01 10.81 4.39 1.09 11.62 0.78 156.73 1.39
Assets $500 Million-$1 Billion(15) 9.41 9.25 1.24 13.90 6.32 1.17 12.84 0.77 169.47 1.52
Assets $250-$500 Million(11) 11.63 11.45 1.19 11.93 5.76 1.14 11.44 0.74 204.18 1.56
Assets less than $250 Million(15) 13.25 13.17 0.97 9.18 4.80 0.91 8.42 0.58 156.83 1.02
Goodwill Companies(31) 9.50 8.87 0.98 11.54 5.13 0.99 11.41 0.86 151.07 1.38
Non-Goodwill Companies(27) 13.38 13.38 1.19 10.89 5.25 1.14 10.43 0.56 192.16 1.32
<CAPTION>
Pricing Ratios Dividend Data(6)
----------------------------------------- ----------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
- --------------------- ------- ------- ------- ------- ------- ------- ------- -------
(X) (%) (%) (%) (x) ($) (%) (%)
Market Averages. BIF-Insured Thrifts(no MHCs)
- ---------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BIF-Insured Thrifts(58) 18.85 192.35 20.49 195.17 19.41 0.42 1.41 26.59
NYSE Traded Companies(4) 22.45 197.90 27.53 206.16 23.43 0.60 1.31 26.52
AMEX Traded Companies(7) 18.67 175.40 20.41 183.02 21.35 0.55 1.69 33.76
NASDAQ Listed OTC Companies(47) 18.58 193.83 19.86 195.84 18.88 0.39 1.39 25.74
California Companies(1) 13.65 168.97 18.12 169.66 13.65 0.00 0.00 0.00
Mid-Atlantic Companies(20) 22.21 177.95 22.89 181.02 22.27 0.38 1.21 27.11
New England Companies(31) 17.04 206.47 18.61 209.57 17.90 0.45 1.46 26.28
North-West Companies(3) 17.21 205.78 20.86 205.78 17.46 0.60 1.67 29.62
South-East Companies(3) 22.70 140.96 24.11 142.38 22.83 0.41 2.42 36.44
Thrift Strategy(43) 18.96 182.23 21.20 184.67 19.58 0.43 1.48 27.57
Mortgage Banker Strategy(7) 18.96 215.61 17.80 230.72 20.42 0.29 1.06 21.70
Real Estate Strategy(3) 13.17 199.74 21.50 200.09 13.96 0.26 1.07 13.61
Diversified Strategy(5) 20.58 252.36 17.64 253.67 19.28 0.65 1.47 30.83
Companies Issuing Dividends(47) 19.55 198.31 19.92 201.93 20.10 0.52 1.74 33.07
Companies Without Dividends(11) 13.22 167.89 22.96 168.77 14.03 0.00 0.00 0.00
Equity/Assets less than 6%(4) 16.91 302.78 16.39 307.33 18.60 0.45 1.12 16.85
Equity/Assets 6-12%(40) 18.32 202.99 17.96 206.29 18.61 0.45 1.46 27.32
Equity/Assets greater than 12%(14) 21.81 142.82 27.99 145.71 22.55 0.34 1.38 26.87
Converted Last 3 Mths (no MHC)(1) 0.00 138.46 26.96 138.46 0.00 0.00 0.00 0.00
Actively Traded Companies(17) 17.27 212.29 20.03 217.90 18.05 0.65 1.67 28.95
Market Value Below $20 Million(2) 14.92 146.44 13.42 147.69 18.51 0.00 0.00 0.00
Holding Company Structure(46) 18.46 183.06 21.32 185.23 19.22 0.41 1.39 25.69
Assets Over $1 Billion(17) 21.35 208.56 22.17 211.90 21.74 0.60 1.50 32.11
Assets $500 Million-$1 Billion(15) 16.81 203.38 18.09 208.52 15.86 0.44 1.34 23.54
Assets $250-$500 Million(11) 17.92 187.09 20.15 191.47 18.60 0.30 1.42 26.09
Assets less than $250 Million(15) 18.77 172.97 20.70 174.70 20.09 0.31 1.37 23.45
Goodwill Companies(31) 18.53 201.13 18.22 207.62 19.73 0.46 1.35 25.07
Non-Goodwill Companies(27) 19.18 183.21 22.85 183.21 19.07 0.39 1.49 28.16
</TABLE>
(1) Average of high/low or bid/ask price per share.
(2) Or since offering price if converted or first listed in 1994 or 1995.
Percent change figures are actual year-to-date and are not annualized
(3) EPS (earnings per share) is based on actual trailing twelve month data and
is not shown on a pro forma basis.
(4) Excludes intangibles (such as goodwill, value of core deposits, etc.).
(5) ROA (return on assets) and ROE (return on equity) are indicated ratios based
on trailing twelve month common earnings and average common equity and
assets balances; ROI (return on investment) is current EPS divided by
current price.
(6) Annualized, based on last regular quarterly cash dividend announcement.
(7) Indicated dividend as a percent of trailing twelve month earnings.
(8) Excluded from averages due to actual or rumored acquisition activities
or unusual operating characteristics.
* All thrifts are SAIF insured unless otherwise noted with an asterisk.
Parentheses following market averages indicate the number of
institutions included in the respective averages. All figures have been
adjusted for stock splits, stock dividends, and secondary offerings.
Source: Corporate reports and offering circulars for publicly traded companies,
and RP Financial, Inc. calculations. The information provided in this
report has been obtained from sources we believe are reliable, but we
cannot guarantee the accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit 1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of March 27, 1998
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
---------------------------------------------------------- -----------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ----------------------- --------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Market Averages. MHC Institutions
- ---------------------------------
SAIF-Insured Thrifts(19) 12.00 11.85 0.80 7.16 2.56 0.77 6.78 0.54 152.71 0.73
BIF-Insured Thrifts(3) 10.33 9.39 1.07 11.06 3.48 0.78 7.73 0.93 94.96 1.13
NASDAQ Listed OTC Companies(22) 11.79 11.54 0.84 7.65 2.67 0.77 6.90 0.59 145.49 0.78
Florida Companies(2) 9.75 9.72 0.72 7.22 2.93 0.64 6.39 0.41 70.12 0.44
Mid-Atlantic Companies(11) 12.02 11.61 0.80 7.27 2.35 0.78 6.99 0.70 117.79 0.87
Mid-West Companies(5) 13.06 13.05 0.89 7.16 2.93 0.84 6.66 0.41 243.41 0.54
New England Companies(2) 8.68 8.63 1.18 13.88 3.97 0.68 8.00 0.68 153.86 1.57
Thrift Strategy(20) 12.27 12.06 0.81 6.97 2.63 0.78 6.65 0.58 150.78 0.71
Mortgage Banker Strategy(1) 8.12 7.24 0.89 10.88 2.00 0.76 9.24 0.62 63.10 0.94
Diversified Strategy(1) 8.68 8.63 1.18 13.88 3.97 0.68 8.00 0.68 153.86 1.57
Companies Issuing Dividends(21) 11.79 11.54 0.84 7.65 2.67 0.77 6.90 0.59 145.49 0.78
Equity/Assets 6-12%(15) 9.84 9.52 0.78 8.09 2.63 0.69 7.07 0.68 85.64 0.77
Equity/Assets greater than 12%(7) 17.62 17.62 1.02 6.33 2.80 1.03 6.38 0.33 325.04 0.81
Holding Company Structure(3) 10.73 9.82 0.85 8.15 2.89 0.78 7.48 0.81 59.64 0.57
Assets Over $1 Billion(6) 8.56 8.06 0.92 10.51 2.87 0.74 8.40 0.61 88.80 0.91
Assets $500 Million-$1 Billion(2) 11.28 11.28 0.77 6.80 2.74 0.71 6.29 0.42 88.29 0.59
Assets $250-$500 Million(6) 11.54 11.52 0.88 7.81 2.78 0.86 7.59 0.55 192.81 0.56
Assets less than $250 Million(8) 13.85 13.58 0.78 6.04 2.49 0.75 5.72 0.63 159.02 0.85
Goodwill Companies(8) 9.18 8.53 0.89 9.83 3.00 0.76 8.24 0.63 97.85 0.80
Non-Goodwill Companies(14) 13.35 13.35 0.80 6.34 2.47 0.78 6.09 0.57 174.07 0.76
MHC Institutions(22) 11.79 11.54 0.84 7.65 2.67 0.77 6.90 0.59 145.49 0.78
<CAPTION>
Pricing Ratios Dividend Data(6)
----------------------------------------- ------------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
- --------------------- ------- ------- ------- ------- --------- ------- ------- --------
(X) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Market Averages. MHC Institutions
- ---------------------------------
SAIF-Insured Thrifts(19) 28.15 233.76 30.79 234.06 29.13 0.45 1.77 53.56
BIF-Insured Thrifts(3) 25.17 294.75 29.91 319.18 0.00 0.48 1.47 40.79
NASDAQ Listed OTC Companies(22) 26.66 243.14 30.68 247.15 29.13 0.46 1.73 51.24
Florida Companies(2) 0.00 237.90 23.23 238.65 0.00 0.90 2.69 0.00
Mid-Atlantic Companies(11) 0.00 231.79 33.01 239.65 0.00 0.28 1.28 48.61
Mid-West Companies(5) 28.15 241.74 29.71 242.19 29.13 0.55 2.19 57.66
New England Companies(2) 25.17 327.30 28.40 329.00 0.00 0.76 2.00 50.33
Thrift Strategy(20) 28.15 236.13 30.12 240.33 29.13 0.45 1.78 52.42
Mortgage Banker Strategy(1) 0.00 0.00 40.68 0.00 0.00 0.22 0.83 41.51
Diversified Strategy(1) 25.17 327.30 28.40 329.00 0.00 0.76 2.00 50.33
Companies Issuing Dividends(21) 26.66 243.14 30.68 247.15 29.13 0.46 1.73 51.24
Equity/Assets 6-12%(15) 26.66 261.32 29.09 267.11 29.13 0.45 1.54 49.97
Equity/Assets greater than 12%(7) 0.00 202.25 35.44 202.25 0.00 0.48 2.30 56.92
Holding Company Structure(3) 0.00 271.02 28.98 294.60 0.00 0.41 1.50 52.53
Assets Over $1 Billion(6) 25.17 281.24 31.04 282.84 0.00 0.51 1.70 43.62
Assets $500 Million-$1 Billion(2) 0.00 240.63 27.15 240.63 0.00 0.90 2.34 0.00
Assets $250-$500 Million(6) 28.15 253.15 32.32 253.75 29.13 0.51 1.76 57.40
Assets less than $250 Million(8) 0.00 228.32 30.03 235.06 0.00 0.33 1.65 52.11
Goodwill Companies(8) 26.66 264.57 29.37 277.61 29.13 0.45 1.52 40.49
Non-Goodwill Companies(14) 0.00 233.61 31.46 233.61 0.00 0.46 1.85 60.19
MHC Institutions(22) 26.66 243.14 30.68 247.15 29.13 0.46 1.73 51.24
</TABLE>
(1) Average of high/low or bid/ask price per share.
(2) Or since offering price if converted or first listed in 1994 or 1995.
Percent change figures are actual year-to-date and are not annualized (3)
EPS (earnings per share) is based on actual trailing twelve month data and
is not shown on a pro forma basis.
(4) Excludes intangibles (such as goodwill, value of core deposits, etc.).
(5) ROA (return on assets) and ROE (return on equity) are indicated ratios based
on trailing twelve month common earnings and average common equity and
assets balances; ROI (return on investment) is current EPS divided by
current price. (6) Annualized, based on last regular quarterly cash dividend
announcement.
(7) Indicated dividend as a percent of trailing twelve month earnings.
(8) Excluded from averages due to actual or rumored acquisition activities
or unusual operating characteristics.
* All thrifts are SAIF insured unless otherwise noted with an asterisk.
Parentheses following market averages indicate the number of
institutions included in the respective averages. All figures have been
adjusted for stock splits, stock dividends, and secondary offerings.
Source: Corporate reports and offering circulars for publicly traded companies,
and RP Financial, Inc. calculations. The information provided in this
report has been obtained from sources we believe are reliable, but we
cannot guarantee the accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit 1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of March 27, 1998
<TABLE>
<CAPTION>
Key Financial Ratios Asset Quality Ratios
---------------------------------------------------------- -----------------------
Tang. Reported Earnings Core Earnings
Equity/ Equity/ ---------------------- --------------- NPAs Resvs/ Resvs/
Financial Institution Assets Assets ROA(5) ROE(5) ROI(5) ROA(5) ROE(5) Assets NPAs Loans
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
(%) (%) (%) (%) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NYSE Traded Companies
- ---------------------
AHM Ahmanson and Co. H.F. of CA(8) 4.11 3.50 0.79 19.65 5.10 0.70 17.24 1.73 46.72 1.22
CFB Commercial Federal Corp. of NE 6.38 5.75 0.97 15.98 5.80 0.95 15.67 0.84 80.01 0.90
DME Dime Bancorp, Inc. of NY* 6.02 4.94 0.62 11.10 3.51 0.62 11.10 1.06 45.34 0.71
DSL Downey Financial Corp. of CA 7.37 7.29 0.80 11.04 5.26 0.77 10.58 0.89 61.86 0.60
FED FirstFed Fin. Corp. of CA 5.35 5.31 0.56 11.24 5.14 0.55 11.03 0.96 210.84 2.62
GSB Golden State Bancorp of CA(8) 6.04 5.45 0.60 10.47 4.77 0.72 12.56 1.08 90.12 1.31
GDW Golden West Fin. Corp. of CA 6.82 6.82 0.91 14.14 6.45 0.90 13.91 1.07 55.16 0.70
GPT GreenPoint Fin. Corp. of NY* 9.70 5.29 1.11 10.83 4.94 1.08 10.52 2.90 28.75 1.22
JSB JSB Financial, Inc. of NY* 23.21 23.21 1.92 8.59 5.38 1.71 7.64 NA NA 0.58
NYB New York Bancorp, Inc. of NY(8) 5.46 5.46 1.65 31.75 5.39 1.68 32.39 0.86 66.31 0.91
OCN Ocwen Financial Corp. of FL 13.68 13.16 2.82 26.05 4.52 0.80 7.41 6.19 14.31 1.43
SIB Staten Island Bancorp of NY* 25.87 25.17 0.70 5.11 1.52 1.53 11.18 0.83 71.34 1.43
WES Westcorp Inc. of Orange CA 9.35 9.33 1.03 11.08 7.22 -0.21 -2.22 0.70 129.53 1.81
AMEX Traded Companies
- ---------------------
ANA Acadiana Bancshares, Inc of LA 16.95 16.95 0.98 5.64 4.41 0.95 5.46 0.50 201.03 1.32
ANE Alliance Bancorp of NE, of CT* 7.61 7.39 0.84 11.87 5.86 0.59 8.30 1.60 75.91 1.91
BKC American Bank of Waterbury CT* 9.01 8.72 1.32 15.52 5.90 1.14 13.44 2.11 41.86 1.54
BFD BostonFed Bancorp of MA 8.37 8.06 0.76 8.43 5.82 0.67 7.50 0.18 371.41 0.82
CFX CFX Corp of Keene NH(8)* 8.55 8.25 0.61 7.38 1.75 0.99 11.95 0.59 128.94 1.06
CNY Carver Bancorp, Inc. of NY 8.48 8.16 -0.11 -1.33 -1.33 0.02 0.20 1.67 41.11 1.15
CBK Citizens First Fin.Corp. of IL 13.88 13.88 0.70 4.87 3.70 0.47 3.27 0.69 44.35 0.36
EBI Equality Bancorp, Inc. of MO 11.18 11.18 0.53 7.30 2.98 0.12 1.59 0.39 31.69 0.25
ESX Essex Bancorp of Norfolk VA(8) 0.02 -0.08 0.12 NM 4.00 0.10 NM 2.11 51.58 1.27
FCB Falmouth Bancorp, Inc. of MA* 23.94 23.94 0.98 4.06 2.72 0.83 3.42 NA NA 0.83
FAB FirstFed America Bancorp of MA 11.17 11.17 0.17 1.58 0.96 0.53 4.99 0.35 263.67 1.19
GAF GA Financial Corp. of PA 14.82 14.67 1.14 7.12 5.20 1.08 6.72 0.22 76.28 0.43
HBS Haywood Bancshares, Inc. of NC* 14.45 13.98 1.28 8.84 6.70 1.28 8.84 0.54 89.14 0.64
KNK Kankakee Bancorp, Inc. of IL 11.01 10.38 0.88 8.04 5.95 0.86 7.86 1.27 49.02 0.88
KYF Kentucky First Bancorp of KY 17.03 17.03 1.14 6.80 5.45 1.12 6.71 0.13 348.65 0.77
MBB MSB Bancorp of Middletown NY(8)* 8.23 4.39 0.53 7.06 4.12 0.40 5.29 0.78 39.12 0.63
NBN Northeast Bancorp of ME* 7.54 6.80 0.60 8.33 3.89 0.58 8.10 1.24 80.05 1.21
PDB Piedmont Bancorp, Inc. of NC 16.19 16.19 1.19 7.28 5.08 1.19 7.28 1.29 52.20 0.81
SSB Scotland Bancorp, Inc. of NC 24.07 24.07 1.67 5.26 5.80 1.67 5.26 NA NA 0.57
SZB SouthFirst Bancshares of AL 9.67 9.43 0.56 4.44 2.86 0.57 4.51 1.28 37.22 0.78
SRN Southern Banc Company of AL 17.08 16.93 0.48 2.77 2.45 0.48 2.77 NA NA 0.19
SSM Stone Street Bancorp of NC 28.74 28.74 1.45 4.58 3.90 1.45 4.58 0.27 193.22 0.61
TSH Teche Holding Company of LA 13.54 13.54 0.97 7.28 5.08 0.93 6.95 0.38 215.27 0.97
FTF Texarkana Fst. Fin. Corp of AR 15.15 15.15 1.76 11.23 6.14 1.72 10.97 0.17 377.18 0.76
THR Three Rivers Fin. Corp. of MI 13.77 13.72 0.90 6.47 4.66 0.85 6.08 1.08 47.87 0.80
WSB Washington SB, FSB of MD 8.51 8.51 0.88 10.51 6.40 0.52 6.26 NA NA 0.96
WFI Winton Financial Corp. of OH 7.17 7.03 1.05 14.68 5.53 0.86 12.03 0.25 100.24 0.29
NASDAQ Listed OTC Companies
- ---------------------------
FBCV 1st Bancorp of Vincennes IN 8.98 8.82 0.75 8.89 6.96 0.49 5.79 1.48 31.23 0.63
FBER 1st Bergen Bancorp of NJ 13.52 13.52 0.78 5.27 3.75 0.78 5.27 0.75 140.88 2.34
AFED AFSALA Bancorp, Inc. of NY 12.52 12.52 0.79 5.91 4.40 0.79 5.91 0.30 234.30 1.46
ALBK ALBANK Fin. Corp. of Albany NY 8.81 6.84 1.18 12.94 6.60 1.17 12.87 0.88 81.33 1.02
AMFC AMB Financial Corp. of IN 14.77 14.77 1.07 6.93 6.14 0.68 4.38 NA NA 0.53
ASBP ASB Financial Corp. of OH 15.47 15.47 0.92 5.85 4.35 0.92 5.85 0.91 78.25 1.03
ABBK Abington Bancorp of MA* 6.83 6.21 0.87 12.53 5.71 0.77 11.06 0.18 233.13 0.68
AABC Access Anytime Bancorp of NM 8.65 8.65 1.44 22.38 10.50 1.34 20.78 1.58 31.35 0.95
<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(8) 19.62 NM 15.98 NM 22.36 0.88 1.10 21.57
CFB Commercial Federal Corp. of NE 17.25 256.47 16.35 284.38 17.59 0.22 0.61 10.53
DME Dime Bancorp, Inc. of NY* 28.51 264.96 15.95 322.98 28.51 0.16 0.53 15.24
DSL Downey Financial Corp. of CA 19.01 199.81 14.73 202.20 19.83 0.32 1.00 18.93
FED FirstFed Fin. Corp. of CA 19.44 201.43 10.79 203.07 19.80 0.00 0.00 0.00
GSB Golden State Bancorp of CA(8) 20.95 204.38 12.33 226.48 17.45 0.00 0.00 0.00
GDW Golden West Fin. Corp. of CA 15.51 203.70 13.88 203.70 15.76 0.50 0.52 8.05
GPT GreenPoint Fin. Corp. of NY* 20.26 235.00 22.80 NM 20.86 0.64 1.82 36.78
JSB JSB Financial, Inc. of NY* 18.58 153.50 35.64 153.50 20.91 1.60 2.91 54.05
NYB New York Bancorp, Inc. of NY(8) 18.55 NM 30.09 NM 18.18 0.60 1.30 24.19
OCN Ocwen Financial Corp. of FL 22.12 NM 56.74 NM NM 0.00 0.00 0.00
SIB Staten Island Bancorp of NY* NM 138.16 35.74 141.99 NM 0.00 0.00 0.00
WES Westcorp Inc. of Orange CA 13.84 146.04 13.66 146.37 NM 0.40 2.06 28.57
AMEX Traded Companies
- ---------------------
ANA Acadiana Bancshares, Inc of LA 22.68 127.76 21.65 127.76 23.40 0.44 2.00 45.36
ANE Alliance Bancorp of NE, of CT* 17.07 182.77 13.90 188.00 24.42 0.20 0.95 16.26
BKC American Bank of Waterbury CT* 16.96 233.68 21.07 241.57 19.59 1.52 2.62 44.44
BFD BostonFed Bancorp of MA 17.19 148.85 12.46 154.49 19.30 0.28 1.27 21.88
CFX CFX Corp of Keene NH(8)* NM 308.52 26.38 319.80 NM 0.44 1.40 NM
CNY Carver Bancorp, Inc. of NY NM 98.43 8.35 102.32 NM 0.00 0.00 NM
CBK Citizens First Fin.Corp. of IL 27.06 134.97 18.73 134.97 NM 0.00 0.00 0.00
EBI Equality Bancorp, Inc. of MO NM 149.76 16.74 149.76 NM 0.24 1.55 52.17
ESX Essex Bancorp of Norfolk VA(8) 25.00 NM 2.76 NM 27.78 0.00 0.00 0.00
FCB Falmouth Bancorp, Inc. of MA* NM 144.11 34.50 144.11 NM 0.24 1.04 38.10
FAB FirstFed America Bancorp of MA NM 140.42 15.68 140.42 NM 0.00 0.00 0.00
GAF GA Financial Corp. of PA 19.21 137.87 20.43 139.26 20.34 0.48 2.31 44.44
HBS Haywood Bancshares, Inc. of NC* 14.92 126.16 18.23 130.42 14.92 0.60 2.68 40.00
KNK Kankakee Bancorp, Inc. of IL 16.82 134.20 14.78 142.36 17.21 0.48 1.30 21.82
KYF Kentucky First Bancorp of KY 18.35 124.82 21.25 124.82 18.59 0.50 3.54 64.94
MBB MSB Bancorp of Middletown NY(8)* 24.26 164.64 13.55 308.88 NM 0.56 1.52 36.84
NBN Northeast Bancorp of ME* 25.71 190.27 14.36 211.02 26.47 0.21 1.17 30.00
PDB Piedmont Bancorp, Inc. of NC 19.69 138.77 22.46 138.77 19.69 0.40 3.76 74.07
SSB Scotland Bancorp, Inc. of NC 17.24 129.37 31.13 129.37 17.24 0.20 2.00 34.48
SZB SouthFirst Bancshares of AL NM 134.23 12.98 137.67 NM 0.60 2.73 NM
SRN Southern Banc Company of AL NM 113.64 19.41 114.65 NM 0.35 2.09 NM
SSM Stone Street Bancorp of NC 25.62 126.76 36.44 126.76 25.62 0.46 2.22 56.79
TSH Teche Holding Company of LA 19.69 138.28 18.72 138.28 20.60 0.50 2.25 44.25
FTF Texarkana Fst. Fin. Corp of AR 16.28 180.41 27.34 180.41 16.67 0.56 2.00 32.56
THR Three Rivers Fin. Corp. of MI 21.44 136.39 18.77 136.82 22.81 0.44 2.05 44.00
WSB Washington SB, FSB of MD 15.63 158.48 13.49 158.48 26.23 0.10 1.23 19.23
WFI Winton Financial Corp. of OH 18.09 251.12 18.01 256.20 22.07 0.50 1.72 31.06
NASDAQ Listed OTC Companies
- ---------------------------
FBCV 1st Bancorp of Vincennes IN 14.36 123.34 11.07 125.54 22.03 0.27 1.04 14.92
FBER 1st Bergen Bancorp of NJ 26.69 144.06 19.48 144.06 26.69 0.20 1.01 27.03
AFED AFSALA Bancorp, Inc. of NY 22.75 139.46 17.46 139.46 22.75 0.28 1.38 31.46
ALBK ALBANK Fin. Corp. of Albany NY 15.14 182.63 16.08 235.12 15.23 0.72 1.42 21.43
AMFC AMB Financial Corp. of IN 16.27 112.60 16.63 112.60 25.75 0.28 1.62 26.42
ASBP ASB Financial Corp. of OH 22.98 134.56 20.81 134.56 22.98 0.40 2.81 64.52
ABBK Abington Bancorp of MA* 17.50 210.21 14.36 231.02 19.81 0.20 0.95 16.67
AABC Access Anytime Bancorp of NM 9.52 159.79 13.82 159.79 10.26 0.00 0.00 0.00
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit 1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of March 27, 1998
<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)
- ---------------------------------------
AFBC Advance Fin. Bancorp of WV 15.22 15.22 0.87 5.65 4.31 0.84 5.45 1.10 27.69 0.35
AADV Advantage Bancorp, Inc. of WI(8) 10.02 9.48 1.12 12.13 5.16 0.99 10.64 0.47 121.57 1.05
AFCB Affiliated Comm BC, Inc of MA(8) 9.79 9.74 1.08 11.08 4.77 1.05 10.71 0.39 192.06 1.21
ALBC Albion Banc Corp. of Albion NY 8.57 8.57 0.50 5.58 4.29 0.49 5.45 0.12 321.43 0.53
ABCL Alliance Bancorp, Inc. of IL 9.60 9.49 0.84 9.10 4.49 0.93 10.10 0.27 147.57 0.56
AHCI Ambanc Holding Co., Inc. of NY* 11.99 11.99 0.56 4.49 3.37 0.45 3.65 0.66 112.17 1.34
ASBI Ameriana Bancorp of IN 11.36 11.36 0.91 8.24 5.33 0.80 7.21 NA NA 0.39
ABCW Anchor Bancorp Wisconsin of WI 6.64 6.54 1.04 16.41 4.92 0.96 15.14 0.97 117.38 1.42
ANDB Andover Bancorp, Inc. of MA* 8.10 8.10 1.06 13.09 6.30 1.03 12.78 0.62 151.68 1.27
ASFC Astoria Financial Corp. of NY 8.07 5.61 0.82 10.37 4.10 0.76 9.64 0.56 67.77 0.92
AVND Avondale Fin. Corp. of IL 8.48 8.48 -2.10 -23.98 -23.68 -1.78 -20.34 1.35 86.34 2.56
BKCT Bancorp Connecticut of CT* 10.60 10.60 1.39 13.29 5.80 1.23 11.80 0.91 131.37 2.04
BPLS Bank Plus Corp. of CA 4.35 3.96 0.34 7.31 4.30 0.39 8.21 1.66 72.86 1.76
BNKU Bank United Corp. of TX 4.89 4.77 0.69 13.68 5.14 0.60 12.00 0.68 41.06 0.36
BWFC Bank West Fin. Corp. of MI 13.66 13.66 0.72 4.94 3.04 0.54 3.67 0.48 32.03 0.22
BANC BankAtlantic Bancorp of FL 5.51 4.56 1.04 18.21 7.31 0.55 9.62 1.10 84.73 1.35
BKUNA BankUnited Fin. Corp. of FL 4.28 3.80 0.28 6.95 2.69 0.21 5.30 0.37 37.97 0.16
BVCC Bay View Capital Corp. of CA 5.35 4.44 0.44 7.40 3.36 0.60 10.08 0.51 230.25 1.59
FSNJ Bayonne Banchsares of NJ 15.76 15.76 0.46 3.99 2.05 0.65 5.73 1.01 48.09 1.27
BFSB Bedford Bancshares, Inc. of VA 14.52 14.52 1.21 8.45 5.07 1.20 8.39 0.54 96.46 0.60
BFFC Big Foot Fin. Corp. of IL 17.53 17.53 0.60 3.46 2.43 0.53 3.05 0.09 150.75 0.30
BYFC Broadway Fin. Corp. of CA 9.84 9.84 0.29 2.75 3.36 0.33 3.14 1.62 52.84 1.02
BRKL Brookline Bncp MHC (47.0)of MA(8) 17.16 17.16 0.78 4.56 2.38 0.78 4.56 1.27 145.63 2.56
CBES CBES Bancorp, Inc. of MO 15.78 15.78 1.10 6.32 4.54 0.96 5.50 0.54 90.67 0.54
CCFH CCF Holding Company of GA 9.39 9.39 0.13 1.11 0.70 -0.22 -1.85 0.50 106.86 0.68
CENF CENFED Financial Corp. of CA(8) 6.14 6.13 0.61 11.27 4.99 0.55 10.15 NA NA 1.12
CFSB CFSB Bancorp of Lansing MI 7.92 7.92 1.26 16.41 4.79 1.18 15.36 0.11 526.14 0.62
CKFB CKF Bancorp of Danville KY 21.89 21.89 1.84 7.78 6.45 1.38 5.85 0.47 42.66 0.22
CNSB CNS Bancorp, Inc. of MO 24.43 24.43 0.88 3.56 2.85 0.88 3.56 0.13 293.18 0.58
CSBF CSB Financial Group Inc of IL 24.00 22.65 0.50 2.01 2.11 0.43 1.73 0.69 52.91 0.63
CBCI Calumet Bancorp of Chicago IL 16.77 16.77 1.61 10.01 7.06 1.62 10.09 1.64 76.23 1.58
CAFI Camco Fin. Corp. of OH 9.41 8.73 1.15 11.99 6.45 0.93 9.73 0.48 53.21 0.30
CMRN Cameron Fin. Corp. of MO 21.43 21.43 1.18 5.29 4.59 1.17 5.23 0.98 82.65 0.94
CAPS Capital Savings Bancorp of MO(8) 9.43 9.43 0.98 11.06 5.43 0.95 10.62 0.41 78.85 0.40
CFNC Carolina Fincorp of NC* 22.71 22.71 1.22 5.24 4.10 1.17 5.02 0.10 365.18 0.50
CASB Cascade Financial Corp. of WA 6.93 6.93 0.66 10.21 4.93 0.64 9.93 0.35 274.48 1.13
CATB Catskill Fin. Corp. of NY* 24.32 24.32 1.34 5.20 4.57 1.34 5.20 0.35 184.75 1.49
CAVB Cavalry Bancorp of TN 27.23 27.23 1.33 4.87 2.44 1.33 4.87 0.02 NA 1.02
CNIT Cenit Bancorp of Norfolk VA 6.95 6.36 0.80 11.30 4.40 0.74 10.50 0.52 103.38 0.77
CEBK Central Co-Op. Bank of MA* 9.90 8.91 0.87 8.69 4.58 0.83 8.22 0.42 185.68 1.08
CENB Century Bancorp, Inc. of NC(8) 30.15 30.15 1.61 5.35 3.45 1.62 5.37 0.58 93.95 0.84
CBSB Charter Financial Inc. of IL(8) 15.54 13.92 1.36 9.12 3.68 1.50 10.06 0.62 90.95 0.76
COFI Charter One Financial of OH 6.97 6.51 0.81 11.85 2.95 1.19 17.33 0.38 150.61 0.89
CVAL Chester Valley Bancorp of PA 8.81 8.81 1.00 11.61 4.03 0.96 11.05 0.25 385.96 1.15
CTZN CitFed Bancorp of Dayton OH(8) 6.06 5.54 0.87 13.86 3.79 0.87 13.86 0.37 143.60 1.01
CLAS Classic Bancshares, Inc. of KY 14.88 12.64 0.81 5.53 3.81 0.95 6.47 0.42 148.74 0.92
CBSA Coastal Bancorp of Houston TX 3.60 3.06 0.40 11.64 6.84 0.39 11.54 0.72 35.48 0.58
CFCP Coastal Fin. Corp. of SC 5.98 5.98 1.22 19.67 5.70 1.03 16.52 0.59 151.67 1.20
CMSB Commonwealth Bancorp Inc of PA 9.47 7.48 0.73 7.51 4.62 0.56 5.72 0.42 94.35 0.69
CMSV Commty. Svgs, MHC of FL (48.5) 11.28 11.28 0.77 6.80 2.74 0.71 6.29 0.42 88.29 0.59
CFTP Community Fed. Bancorp of MS 26.46 26.46 1.32 4.49 3.30 1.32 4.49 0.49 53.05 0.45
CFFC Community Fin. Corp. of VA 13.63 13.58 1.06 7.80 4.63 1.08 7.91 0.44 129.75 0.65
CFBC Community First Bnkg Co. of GA 17.80 17.57 0.59 6.09 2.04 0.59 6.09 2.19 25.76 0.75
CIBI Community Inv. Bancorp of OH 11.58 11.58 0.97 8.30 5.75 0.97 8.30 0.65 82.39 0.62
COOP Cooperative Bancshares of NC 7.66 7.66 0.63 8.32 3.75 0.62 8.21 0.17 142.58 0.30
CRZY Crazy Woman Creek Bncorp of WY 23.63 23.63 1.28 4.92 4.41 1.30 4.99 0.18 237.50 0.92
<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)
- ---------------------------------------
AFBC Advance Fin. Bancorp of WV 23.21 128.54 19.57 128.54 24.07 0.32 1.64 38.10
AADV Advantage Bancorp, Inc. of WI(8) 19.40 217.84 21.83 230.37 22.12 0.40 0.58 11.20
AFCB Affiliated Comm BC, Inc of MA(8) 20.95 219.39 21.47 220.53 21.66 0.60 1.57 32.97
ALBC Albion Banc Corp. of Albion NY 23.30 126.70 10.86 126.70 23.84 0.11 1.07 25.00
ABCL Alliance Bancorp, Inc. of IL 22.27 174.63 16.76 176.69 20.07 0.44 1.54 34.38
AHCI Ambanc Holding Co., Inc. of NY* 29.69 133.71 16.03 133.71 NM 0.24 1.26 37.50
ASBI Ameriana Bancorp of IN 18.75 152.84 17.37 152.84 21.43 0.64 3.05 57.14
ABCW Anchor Bancorp Wisconsin of WI 20.34 314.04 20.87 319.19 22.04 0.32 0.72 14.55
ANDB Andover Bancorp, Inc. of MA* 15.87 196.09 15.87 196.09 16.25 0.76 1.87 29.69
ASFC Astoria Financial Corp. of NY 24.41 192.78 15.55 277.04 26.26 0.80 1.28 31.25
AVND Avondale Fin. Corp. of IL NM 114.82 9.74 114.82 NM 0.00 0.00 NM
BKCT Bancorp Connecticut of CT* 17.24 216.92 22.99 216.92 19.42 0.52 2.60 44.83
BPLS Bank Plus Corp. of CA 23.28 161.65 7.03 177.37 20.73 0.00 0.00 0.00
BNKU Bank United Corp. of TX 19.44 252.71 12.36 259.40 22.17 0.64 1.31 25.40
BWFC Bank West Fin. Corp. of MI NM 160.02 21.86 160.02 NM 0.24 1.70 55.81
BANC BankAtlantic Bancorp of FL 13.68 238.49 13.13 287.70 25.89 0.13 0.90 12.26
BKUNA BankUnited Fin. Corp. of FL NM 154.76 6.63 174.44 NM 0.00 0.00 0.00
BVCC Bay View Capital Corp. of CA 29.74 239.75 12.83 288.94 21.84 0.40 1.16 34.48
FSNJ Bayonne Banchsares of NJ NM 137.63 21.68 137.63 NM 0.17 1.16 56.67
BFSB Bedford Bancshares, Inc. of VA 19.72 160.83 23.36 160.83 19.86 0.56 2.00 39.44
BFFC Big Foot Fin. Corp. of IL NM 139.17 24.40 139.17 NM 0.00 0.00 0.00
BYFC Broadway Fin. Corp. of CA 29.76 84.63 8.33 84.63 26.04 0.20 1.60 47.62
BRKL Brookline Bncp MHC (47.0)of MA(8) NM 191.36 32.84 191.36 NM 0.00 0.00 0.00
CBES CBES Bancorp, Inc. of MO 22.02 139.86 22.07 139.86 25.26 0.40 1.67 36.70
CCFH CCF Holding Company of GA NM 164.75 15.48 164.75 NM 0.64 2.98 NM
CENF CENFED Financial Corp. of CA(8) 20.06 204.30 12.54 204.66 22.29 0.36 0.78 15.65
CFSB CFSB Bancorp of Lansing MI 20.89 329.39 26.09 329.39 22.33 0.52 1.78 37.14
CKFB CKF Bancorp of Danville KY 15.50 126.02 27.58 126.02 20.62 0.50 2.50 38.76
CNSB CNS Bancorp, Inc. of MO NM 126.12 30.82 126.12 NM 0.24 1.32 46.15
CSBF CSB Financial Group Inc of IL NM 99.13 23.80 105.04 NM 0.00 0.00 0.00
CBCI Calumet Bancorp of Chicago IL 14.17 138.57 23.24 138.57 14.06 0.00 0.00 0.00
CAFI Camco Fin. Corp. of OH 15.50 178.25 16.77 192.14 19.11 0.56 2.06 32.00
CMRN Cameron Fin. Corp. of MO 21.81 116.08 24.88 116.08 22.04 0.28 1.37 29.79
CAPS Capital Savings Bancorp of MO(8) 18.40 190.40 17.96 190.40 19.17 0.24 1.04 19.20
CFNC Carolina Fincorp of NC* 24.40 126.67 28.77 126.67 25.44 0.24 1.35 32.88
CASB Cascade Financial Corp. of WA 20.27 173.81 12.05 173.81 20.83 0.00 0.00 0.00
CATB Catskill Fin. Corp. of NY* 21.88 115.89 28.19 115.89 21.88 0.32 1.78 39.02
CAVB Cavalry Bancorp of TN NM 199.52 54.32 199.52 NM 0.00 0.00 0.00
CNIT Cenit Bancorp of Norfolk VA 22.75 261.72 18.18 285.77 24.49 1.20 1.56 35.40
CEBK Central Co-Op. Bank of MA* 21.81 180.06 17.82 199.88 23.05 0.32 0.98 21.48
CENB Century Bancorp, Inc. of NC(8) 29.00 153.12 46.16 153.12 28.93 2.00 1.72 50.00
CBSB Charter Financial Inc. of IL(8) 27.18 240.52 37.39 268.63 24.64 0.32 0.93 25.40
COFI Charter One Financial of OH NM 310.20 21.61 331.91 23.22 1.00 1.50 50.76
CVAL Chester Valley Bancorp of PA 24.83 272.11 23.98 272.11 26.09 0.44 1.22 30.34
CTZN CitFed Bancorp of Dayton OH(8) 26.37 343.12 20.81 NM 26.37 0.36 0.65 17.14
CLAS Classic Bancshares, Inc. of KY 26.22 142.10 21.14 167.32 22.40 0.28 1.30 34.15
CBSA Coastal Bancorp of Houston TX 14.61 161.25 5.81 189.71 14.74 0.48 1.42 20.78
CFCP Coastal Fin. Corp. of SC 17.56 319.00 19.06 319.00 20.91 0.36 1.57 27.48
CMSB Commonwealth Bancorp Inc of PA 21.66 165.51 15.67 209.58 28.42 0.32 1.46 31.68
CMSV Commty. Svgs, MHC of FL (48.5) NM 240.63 27.15 240.63 NM 0.90 2.34 NM
CFTP Community Fed. Bancorp of MS NM 141.55 37.45 141.55 NM 0.32 1.73 52.46
CFFC Community Fin. Corp. of VA 21.58 161.37 22.00 162.04 21.28 0.28 1.78 38.36
CFBC Community First Bnkg Co. of GA NM 161.51 28.75 163.71 NM 0.60 1.28 62.50
CIBI Community Inv. Bancorp of OH 17.40 144.19 16.70 144.19 17.40 0.32 1.80 31.37
COOP Cooperative Bancshares of NC 26.67 210.97 16.17 210.97 27.03 0.00 0.00 0.00
CRZY Crazy Woman Creek Bncorp of WY 22.67 113.03 26.71 113.03 22.37 0.40 2.35 53.33
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit 1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of March 27, 1998
<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)
- ---------------------------------------
DNFC D&N Financial Corp. of MI 5.40 5.35 0.87 15.65 5.61 0.78 14.06 0.29 199.00 0.80
DCBI Delphos Citizens Bancorp of OH 26.78 26.78 1.69 6.10 4.54 1.69 6.10 0.35 29.22 0.13
DIME Dime Community Bancorp of NY* 12.51 10.82 0.89 6.05 3.88 0.85 5.80 0.53 145.69 1.36
DIBK Dime Financial Corp. of CT* 8.27 8.05 1.94 23.88 8.76 1.92 23.73 0.30 433.25 3.30
EGLB Eagle BancGroup of IL 11.87 11.87 0.29 2.43 2.04 0.21 1.75 1.36 40.27 0.76
EBSI Eagle Bancshares of Tucker GA 7.83 7.83 0.66 8.05 3.76 0.67 8.14 1.18 56.90 0.92
EGFC Eagle Financial Corp. of CT(8) 7.06 5.73 0.42 5.96 1.97 0.55 7.88 0.52 87.45 0.86
ETFS East Texas Fin. Serv. of TX 17.47 17.47 0.63 3.46 3.21 0.59 3.24 0.33 68.42 0.45
ESBK Elmira Svgs Bank (The) of NY* 6.32 6.32 0.39 6.11 4.03 0.42 6.57 0.70 90.95 0.82
EMLD Emerald Financial Corp. of OH 8.03 7.92 1.03 13.43 5.69 0.98 12.76 0.47 57.48 0.35
EFBC Empire Federal Bancorp of MT 36.37 36.37 1.47 3.98 3.47 1.47 3.98 0.05 357.14 0.45
EFBI Enterprise Fed. Bancorp of OH 10.75 10.75 0.82 6.96 3.42 0.74 6.27 0.01 NA 0.32
EQSB Equitable FSB of Wheaton MD 5.20 5.20 0.76 14.86 6.28 0.74 14.62 0.54 32.66 0.26
FCBF FCB Fin. Corp. of Neenah WI 13.89 13.89 1.04 6.66 3.03 0.71 4.53 0.26 269.82 0.89
FFDF FFD Financial Corp. of OH 24.06 24.06 1.82 7.45 4.90 0.87 3.56 0.05 642.86 0.42
FFLC FFLC Bancorp of Leesburg FL 12.85 12.85 1.00 7.15 5.13 0.95 6.80 0.19 224.83 0.53
FFFC FFVA Financial Corp. of VA(8) 13.70 13.43 1.15 8.57 3.61 1.36 10.16 0.11 530.28 1.02
FFWC FFW Corporation of Wabash IN 9.57 8.73 1.03 10.52 6.53 1.00 10.26 0.31 120.30 0.56
FFYF FFY Financial Corp. of OH 13.59 13.59 1.29 9.32 5.74 1.27 9.17 0.62 74.80 0.61
FMCO FMS Financial Corp. of NJ 6.49 6.39 1.02 15.82 6.78 1.01 15.69 1.15 43.53 0.94
FFHH FSF Financial Corp. of MN 10.91 10.91 0.83 7.18 5.20 0.82 7.11 0.22 102.41 0.32
FOBC Fed One Bancorp of Wheeling WV(8) 11.07 10.60 0.92 8.13 3.77 0.91 8.01 0.36 111.94 0.88
FBCI Fidelity Bancorp of Chicago IL 10.47 10.45 0.22 2.11 1.50 0.63 6.06 NA NA 0.13
FSBI Fidelity Bancorp, Inc. of PA 6.84 6.84 0.77 11.22 5.71 0.76 10.96 0.15 349.48 1.04
FFFL Fidelity Bcsh MHC of FL (47.7) 8.21 8.15 0.67 7.64 3.13 0.57 6.49 0.40 51.95 0.28
FFED Fidelity Fed. Bancorp of IN 7.28 7.28 0.73 12.79 5.82 0.68 11.87 0.35 240.48 1.01
FFOH Fidelity Financial of OH 12.01 10.59 0.94 7.26 4.80 0.90 7.01 0.18 167.81 0.38
FIBC Financial Bancorp, Inc. of NY 8.93 8.89 0.92 9.85 5.88 0.98 10.50 1.94 25.52 0.95
FBSI First Bancshares, Inc. of MO 14.40 14.40 1.17 8.23 5.21 1.11 7.85 0.42 76.11 0.37
FBBC First Bell Bancorp of PA 10.80 10.80 1.10 10.10 5.36 1.08 9.93 0.09 112.78 0.12
SKBO First Carnegie MHC of PA(45.0) 17.20 17.20 0.64 4.58 2.05 0.71 5.13 0.78 47.72 0.85
FSTC First Citizens Corp of GA 10.12 7.98 1.96 20.63 6.37 1.75 18.43 1.12 99.21 1.46
FCME First Coastal Corp. of ME* 10.12 10.12 0.85 9.00 6.70 0.68 7.26 0.56 325.79 2.47
FFBA First Colorado Bancorp of CO 13.46 13.18 1.30 9.81 4.10 1.25 9.39 0.15 201.71 0.40
FDEF First Defiance Fin.Corp. of OH 18.43 18.43 0.96 4.71 4.13 0.95 4.63 0.33 140.92 0.60
FESX First Essex Bancorp of MA* 7.60 6.68 0.83 11.19 5.42 0.74 9.97 0.54 164.26 1.47
FFSX First FSB MHC Sxld of IA(46.1) 8.86 8.79 0.73 8.67 3.55 0.71 8.38 0.19 195.85 0.49
FFES First Fed of E. Hartford CT 6.82 6.82 0.57 8.80 5.13 0.63 9.74 0.30 88.43 1.33
BDJI First Fed. Bancorp. of MN 10.18 10.18 0.65 6.01 3.67 0.65 6.01 0.19 198.64 0.79
FFBH First Fed. Bancshares of AR 14.89 14.89 1.06 6.78 3.96 1.01 6.48 0.96 23.38 0.29
FTFC First Fed. Capital Corp. of WI 7.08 6.70 1.12 17.09 5.82 0.89 13.47 0.32 155.81 0.61
FFKY First Fed. Fin. Corp. of KY 13.67 12.92 1.64 11.98 6.93 1.61 11.82 0.47 98.79 0.52
FFBZ First Federal Bancorp of OH 7.61 7.60 0.97 12.68 4.90 0.97 12.68 0.64 149.74 1.10
FFCH First Fin. Holdings Inc. of SC 6.44 6.44 0.87 14.13 4.06 0.85 13.80 1.35 48.83 0.82
FFHS First Franklin Corp. of OH 9.21 9.16 0.74 8.28 5.41 0.68 7.58 0.58 76.37 0.66
FGHC First Georgia Hold. Corp of GA 8.31 7.70 1.13 13.71 4.83 0.94 11.35 4.97 12.42 0.71
FSPG First Home Bancorp of NJ(8) 6.95 6.85 0.91 13.59 5.49 0.89 13.28 0.78 85.83 1.29
FFSL First Independence Corp. of KS 10.00 10.00 0.65 6.26 5.07 0.65 6.26 1.44 40.91 0.81
FISB First Indiana Corp. of IN 9.48 9.38 1.16 12.17 5.19 0.93 9.83 1.38 100.34 1.63
FKFS First Keystone Fin. Corp of PA 6.62 6.62 0.80 11.37 6.14 0.72 10.25 1.15 38.88 0.86
FLKY First Lancaster Bncshrs of KY 28.51 28.51 1.16 3.62 3.48 1.16 3.62 3.49 8.62 0.34
FLFC First Liberty Fin. Corp. of GA 7.59 6.90 0.76 10.21 3.59 0.78 10.54 1.00 96.64 1.37
CASH First Midwest Fin., Inc. of OH 10.82 9.66 0.96 8.50 5.94 0.89 7.95 0.74 67.97 0.80
FMBD First Mutual Bancorp Inc of IL 13.84 10.62 0.25 1.75 1.40 0.20 1.44 0.40 92.09 0.46
FMSB First Mutual SB of Bellevue WA* 6.79 6.79 1.03 15.34 5.73 1.01 15.05 0.15 720.77 1.33
FNGB First Northern Cap. Corp of WI 11.05 11.05 0.94 8.35 5.08 0.90 7.99 0.09 535.75 0.53
<CAPTION>
Pricing Ratios Dividend Data(6)
----------------------------------------- -----------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
- --------------------- ------- ------- ------- ------- --------- ------- ------- -------
(X) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
DNFC D&N Financial Corp. of MI 17.83 259.74 14.03 262.17 19.86 0.20 0.71 12.74
DCBI Delphos Citizens Bancorp of OH 22.04 138.23 37.02 138.23 22.04 0.24 1.17 25.81
DIME Dime Community Bancorp of NY* 25.79 163.66 20.48 189.34 26.92 0.32 1.31 33.68
DIBK Dime Financial Corp. of CT* 11.42 241.04 19.93 247.49 11.49 0.48 1.30 14.81
EGLB Eagle BancGroup of IL NM 122.56 14.54 122.56 NM 0.00 0.00 0.00
EBSI Eagle Bancshares of Tucker GA 26.56 199.22 15.61 199.22 26.29 0.60 2.35 62.50
EGFC Eagle Financial Corp. of CT(8) NM 255.56 18.04 315.14 NM 1.00 1.67 NM
ETFS East Texas Fin. Serv. of TX NM 107.42 18.76 107.42 NM 0.13 0.89 27.66
ESBK Elmira Svgs Bank (The) of NY* 24.79 148.40 9.38 148.40 23.03 0.64 2.19 54.24
EMLD Emerald Financial Corp. of OH 17.56 222.28 17.85 225.34 18.48 0.28 1.32 23.14
EFBC Empire Federal Bancorp of MT 28.84 115.28 41.92 115.28 28.84 0.30 1.68 48.39
EFBI Enterprise Fed. Bancorp of OH 29.28 199.26 21.43 199.39 NM 1.00 3.08 NM
EQSB Equitable FSB of Wheaton MD 15.92 219.68 11.43 219.68 16.18 0.00 0.00 0.00
FCBF FCB Fin. Corp. of Neenah WI NM 175.53 24.38 175.53 NM 0.80 2.42 NM
FFDF FFD Financial Corp. of OH 20.39 147.14 35.40 147.14 NM 0.30 1.33 27.03
FFLC FFLC Bancorp of Leesburg FL 19.50 141.92 18.24 141.92 20.53 0.36 1.85 36.00
FFFC FFVA Financial Corp. of VA(8) 27.68 223.60 30.62 227.94 23.34 0.60 1.55 42.86
FFWC FFW Corporation of Wabash IN 15.32 149.72 14.33 164.22 15.70 0.36 1.89 29.03
FFYF FFY Financial Corp. of OH 17.41 161.96 22.01 161.96 17.69 0.80 2.41 41.88
FMCO FMS Financial Corp. of NJ 14.74 218.35 14.16 221.58 14.87 0.28 0.81 11.97
FFHH FSF Financial Corp. of MN 19.23 137.17 14.97 137.17 19.42 0.50 2.50 48.08
FOBC Fed One Bancorp of Wheeling WV(8) 26.55 212.87 23.56 222.24 26.95 0.62 1.70 45.26
FBCI Fidelity Bancorp of Chicago IL NM 138.58 14.51 138.81 23.17 0.40 1.58 NM
FSBI Fidelity Bancorp, Inc. of PA 17.51 180.13 12.32 180.13 17.92 0.36 1.16 20.34
FFFL Fidelity Bcsh MHC of FL (47.7) NM 235.18 19.30 236.67 NM 0.90 3.03 NM
FFED Fidelity Fed. Bancorp of IN 17.20 191.83 13.96 191.83 18.52 0.40 4.15 71.43
FFOH Fidelity Financial of OH 20.84 157.79 18.95 178.97 21.58 0.32 1.77 36.78
FIBC Financial Bancorp, Inc. of NY 16.99 161.49 14.42 162.20 15.95 0.50 1.92 32.68
FBSI First Bancshares, Inc. of MO 19.19 155.08 22.33 155.08 20.12 0.10 0.61 11.63
FBBC First Bell Bancorp of PA 18.65 192.95 20.84 192.95 18.97 0.40 1.85 34.48
SKBO First Carnegie MHC of PA(45.0) NM 186.22 32.02 186.22 NM 0.30 1.50 73.17
FSTC First Citizens Corp of GA 15.70 273.50 27.68 346.87 17.58 0.32 0.95 14.88
FCME First Coastal Corp. of ME* 14.92 127.34 12.88 127.34 18.51 0.00 0.00 0.00
FFBA First Colorado Bancorp of CO 24.36 230.92 31.07 235.66 25.44 0.52 1.81 44.07
FDEF First Defiance Fin.Corp. of OH 24.21 121.71 22.43 121.71 24.60 0.36 2.36 57.14
FESX First Essex Bancorp of MA* 18.46 197.10 14.98 224.20 20.70 0.56 2.35 43.41
FFSX First FSB MHC Sxld of IA(46.1) 28.15 233.61 20.69 235.42 29.13 0.48 1.43 40.34
FFES First Fed of E. Hartford CT 19.48 162.08 11.05 162.08 17.60 0.68 1.69 33.01
BDJI First Fed. Bancorp. of MN 27.23 164.03 16.69 164.03 27.23 0.00 0.00 0.00
FFBH First Fed. Bancshares of AR 25.27 171.63 25.56 171.63 26.44 0.28 0.98 24.78
FTFC First Fed. Capital Corp. of WI 17.20 273.11 19.34 288.89 21.81 0.48 1.48 25.40
FFKY First Fed. Fin. Corp. of KY 14.43 167.84 22.94 177.54 14.63 0.56 2.60 37.58
FFBZ First Federal Bancorp of OH 20.39 246.58 18.76 246.83 20.39 0.28 1.13 22.95
FFCH First Fin. Holdings Inc. of SC 24.65 311.77 20.08 311.77 25.24 0.84 1.58 38.89
FFHS First Franklin Corp. of OH 18.49 147.39 13.57 148.14 20.19 0.40 1.52 28.17
FGHC First Georgia Hold. Corp of GA 20.69 264.90 22.01 285.71 25.00 0.40 3.33 68.97
FSPG First Home Bancorp of NJ(8) 18.22 230.85 16.05 234.24 18.64 0.40 1.25 22.86
FFSL First Independence Corp. of KS 19.74 125.94 12.59 125.94 19.74 0.30 2.00 39.47
FISB First Indiana Corp. of IN 19.29 223.51 21.20 226.13 23.89 0.48 1.78 34.29
FKFS First Keystone Fin. Corp of PA 16.29 175.82 11.63 175.82 18.07 0.20 1.10 17.86
FLKY First Lancaster Bncshrs of KY 28.77 102.21 29.14 102.21 28.77 0.50 3.28 NM
FLFC First Liberty Fin. Corp. of GA 27.85 274.22 20.81 301.50 26.97 0.44 1.28 35.77
CASH First Midwest Fin., Inc. of OH 16.83 140.70 15.23 157.73 18.02 0.48 2.08 35.04
FMBD First Mutual Bancorp Inc of IL NM 129.45 17.92 168.78 NM 0.32 1.60 NM
FMSB First Mutual SB of Bellevue WA* 17.45 248.99 16.92 248.99 17.79 0.20 1.08 18.87
FNGB First Northern Cap. Corp of WI 19.68 160.43 17.73 160.43 20.58 0.36 2.69 52.94
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit 1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of March 27, 1998
<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)
- ---------------------------------------
FFPB First Palm Beach Bancorp of FL 6.37 6.23 0.56 8.55 4.71 0.43 6.57 0.54 53.27 0.45
FSLA First SB SLA MHC of NJ (47.5)(8) 9.69 8.85 0.90 9.58 2.65 0.95 10.07 0.59 98.01 1.03
FWWB First Savings Bancorp of WA 13.68 12.64 1.24 8.47 4.67 1.16 7.93 0.25 263.53 0.97
FSFF First SecurityFed Fin of IL 27.03 27.03 1.29 4.77 3.97 1.29 4.77 0.78 85.16 0.98
SHEN First Shenango Bancorp of PA(8) 12.76 12.76 1.15 10.18 5.27 1.15 10.14 1.04 83.27 1.25
SOPN First Svgs Bancorp of NC 22.77 22.77 1.75 7.41 5.57 1.75 7.41 0.20 101.34 0.30
FBNW FirstBank Corp of Clarkston WA 16.18 16.18 0.59 4.73 2.37 0.30 2.37 0.64 90.64 0.74
FFDB FirstFed Bancorp, Inc. of AL 9.69 8.90 0.96 9.89 5.80 0.96 9.89 1.42 45.57 0.95
FSPT FirstSpartan Fin. Corp. of SC 26.40 26.40 1.16 6.68 3.07 1.16 6.68 0.47 82.73 0.48
FLAG Flag Financial Corp of GA 9.11 9.11 0.91 9.84 5.15 0.75 8.19 3.92 49.66 2.82
FLGS Flagstar Bancorp, Inc of MI 5.98 5.74 1.41 28.47 6.41 0.70 14.24 3.04 8.02 0.27
FFIC Flushing Fin. Corp. of NY* 12.54 12.05 0.94 6.35 4.32 0.95 6.40 0.27 223.94 1.07
FBHC Fort Bend Holding Corp. of TX(8) 6.77 6.35 0.78 12.28 5.08 0.57 9.06 0.47 114.18 1.02
FTSB Fort Thomas Fin. Corp. of KY 15.82 15.82 1.23 7.55 5.20 1.23 7.55 2.04 23.24 0.52
FKKY Frankfort First Bancorp of KY 16.97 16.97 0.17 0.84 0.85 0.73 3.55 0.10 71.94 0.08
FTNB Fulton Bancorp, Inc. of MO 23.97 23.97 1.26 5.11 3.41 1.01 4.08 1.05 86.26 1.10
GFSB GFS Bancorp of Grinnell IA(8) 11.83 11.83 1.29 11.12 6.60 1.22 10.56 1.55 44.35 0.81
GUPB GFSB Bancorp, Inc of Gallup NM 12.50 12.50 0.89 6.08 4.80 0.89 6.08 0.24 132.26 0.58
GSLA GS Financial Corp. of LA 42.66 42.66 1.38 3.88 2.36 1.36 3.80 0.13 246.99 0.76
GOSB GSB Financial Corp. of NY* 28.44 28.44 0.63 3.39 2.03 0.58 3.09 0.10 137.39 0.23
GFCO Glenway Financial Corp. of OH 9.29 9.20 0.83 8.74 5.38 0.83 8.74 0.06 542.78 0.38
GTPS Great American Bancorp of IL 19.93 19.93 0.63 2.98 2.49 0.63 2.98 0.28 126.79 0.44
PEDE Great Pee Dee Bancorp of SC 37.86 37.86 1.57 4.15 3.56 1.57 4.15 0.45 97.55 0.57
GSBC Great Southern Bancorp of MO 8.74 8.67 1.89 21.59 6.45 1.75 19.90 1.84 114.98 2.48
GDVS Greater DV SB,MHC of PA (19.9) 11.20 11.20 0.83 7.17 1.89 0.83 7.17 1.52 38.83 1.00
GSFC Green Street Fin. Corp. of NC 35.23 35.23 1.61 4.50 3.69 1.61 4.50 0.07 197.67 0.20
GFED Guaranty Fed Bancshares of MO 30.17 30.17 1.00 5.76 2.67 0.97 5.58 0.61 154.73 1.24
HCBB HCB Bancshares of Camden AR 18.65 17.99 0.30 2.05 1.49 0.30 2.05 0.23 316.88 1.42
HEMT HF Bancorp of Hemet CA 7.87 6.62 0.04 0.46 0.35 0.22 2.69 1.38 27.21 0.67
HFFC HF Financial Corp. of SD 9.58 9.58 1.08 11.49 7.01 1.00 10.65 0.36 241.11 1.14
HFNC HFNC Financial Corp. of NC 18.24 18.24 1.23 6.02 4.80 0.93 4.58 0.79 100.96 0.98
HMNF HMN Financial, Inc. of MN 12.22 11.34 0.95 6.79 4.50 0.76 5.39 0.12 340.52 0.61
HALL Hallmark Capital Corp. of WI 7.62 7.62 0.67 9.29 5.88 0.66 9.09 0.11 471.85 0.71
HRBF Harbor Federal Bancorp of MD 12.49 12.49 0.74 5.73 4.00 0.70 5.49 0.53 37.43 0.31
HARBD Harbor Florida Bancshrs of FL 19.30 19.06 1.40 7.24 4.94 1.35 6.99 0.51 197.92 1.31
HFSA Hardin Bancorp of Hardin MO 11.34 11.34 0.75 6.03 5.11 0.69 5.48 0.19 106.88 0.39
HARL Harleysville SB of PA 6.81 6.81 1.02 15.58 6.65 1.02 15.66 NA NA 0.78
HFGI Harrington Fin. Group of IN 4.47 4.47 0.19 3.96 2.65 0.20 4.22 0.18 21.99 0.19
HARS Harris Fin. MHC of PA (24.3) 8.12 7.24 0.89 10.88 2.00 0.76 9.24 0.62 63.10 0.94
HFFB Harrodsburg 1st Fin Bcrp of KY 26.73 26.73 1.35 5.05 4.38 1.35 5.05 0.45 70.72 0.41
HHFC Harvest Home Fin. Corp. of OH 11.02 11.02 0.83 6.96 5.33 0.73 6.09 0.03 393.33 0.27
HAVN Haven Bancorp of Woodhaven NY 5.72 5.70 0.62 10.47 5.20 0.63 10.56 0.66 96.47 1.09
HTHR Hawthorne Fin. Corp. of CA 4.56 4.56 0.89 19.31 12.76 1.07 23.14 NA NA 1.56
HMLK Hemlock Fed. Fin. Corp. of IL 17.22 17.22 0.57 3.47 2.40 0.98 5.93 0.15 301.56 1.01
HFWA Heritage Financial Corp of WA 29.23 29.23 1.53 5.25 3.17 1.53 5.25 0.10 817.44 1.30
HCBC High Country Bancorp of CO 20.47 20.47 0.76 5.23 3.06 0.76 5.23 0.42 177.96 0.93
HBNK Highland Bancorp of CA 7.55 7.55 1.20 16.15 7.09 0.93 12.42 1.94 82.92 2.03
HIFS Hingham Inst. for Sav. of MA* 9.60 9.60 1.25 13.09 5.72 1.25 13.09 0.77 91.33 0.89
HBEI Home Bancorp of Elgin IL 27.01 27.01 0.80 2.90 2.39 0.80 2.90 0.35 85.19 0.35
HBFW Home Bancorp of Fort Wayne IN 12.16 12.16 0.86 6.55 3.55 0.86 6.49 0.09 464.55 0.47
HCFC Home City Fin. Corp. of OH 19.48 19.48 1.27 6.33 5.26 1.29 6.39 0.36 174.52 0.72
HOMF Home Fed Bancorp of Seymour IN 8.80 8.55 1.38 16.20 6.03 1.22 14.26 0.55 101.25 0.67
HWEN Home Financial Bancorp of IN 16.98 16.98 0.81 4.51 4.09 0.59 3.26 1.63 38.73 0.79
HPBC Home Port Bancorp, Inc. of MA* 10.52 10.52 1.67 15.70 6.92 1.63 15.35 NA NA 1.47
HFBC HopFed Bancorp of KY 22.59 22.59 0.99 4.37 3.29 0.99 4.37 0.12 93.93 0.23
HZFS Horizon Fin'l. Services of IA 10.17 10.17 0.85 8.33 5.27 0.68 6.63 0.96 44.55 0.67
<CAPTION>
Pricing Ratios Dividend Data(6)
----------------------------------------- -----------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
- --------------------- ------- ------- ------- ------- ------- ------- ------- -------
(X) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
FFPB First Palm Beach Bancorp of FL 21.24 172.11 10.96 176.02 27.62 0.70 1.77 37.63
FSLA First SB SLA MHC of NJ (47.5)(8) NM 344.76 33.42 NM NM 0.48 1.10 41.38
FWWB First Savings Bancorp of WA 21.40 180.74 24.73 195.68 22.86 0.36 1.35 28.80
FSFF First SecurityFed Fin of IL 25.21 120.16 32.48 120.16 25.21 0.00 0.00 0.00
SHEN First Shenango Bancorp of PA(8) 18.98 182.14 23.25 182.14 19.06 0.60 1.42 27.03
SOPN First Svgs Bancorp of NC 17.96 131.01 29.83 131.01 17.96 1.00 4.12 74.07
FBNW FirstBank Corp of Clarkston WA NM 135.45 21.92 135.45 NM 0.28 1.38 58.33
FFDB FirstFed Bancorp, Inc. of AL 17.23 170.00 16.47 185.19 17.23 0.50 1.96 33.78
FSPT FirstSpartan Fin. Corp. of SC NM 146.61 38.71 146.61 NM 0.60 1.39 45.11
FLAG Flag Financial Corp of GA 19.44 184.15 16.77 184.15 23.37 0.34 1.73 33.66
FLGS Flagstar Bancorp, Inc of MI 15.59 291.11 17.40 303.04 NM 0.24 0.93 14.46
FFIC Flushing Fin. Corp. of NY* 23.15 144.09 18.06 149.97 22.94 0.32 1.28 29.63
FBHC Fort Bend Holding Corp. of TX(8) 19.68 225.79 15.29 240.89 26.68 0.40 1.44 28.37
FTSB Fort Thomas Fin. Corp. of KY 19.23 143.47 22.70 143.47 19.23 0.25 1.63 31.25
FKKY Frankfort First Bancorp of KY NM 117.67 19.97 117.67 27.76 0.80 4.88 NM
FTNB Fulton Bancorp, Inc. of MO 29.33 146.08 35.02 146.08 NM 0.24 1.09 32.00
GFSB GFS Bancorp of Grinnell IA(8) 15.15 159.22 18.83 159.22 15.96 0.26 1.45 22.03
GUPB GFSB Bancorp, Inc of Gallup NM 20.83 125.70 15.71 125.70 20.83 0.40 1.78 37.04
GSLA GS Financial Corp. of LA NM 127.30 54.31 127.30 NM 0.28 1.35 57.14
GOSB GSB Financial Corp. of NY* NM 114.26 32.49 114.26 NM 0.00 0.00 0.00
GFCO Glenway Financial Corp. of OH 18.57 157.13 14.60 158.79 18.57 0.40 2.05 38.10
GTPS Great American Bancorp of IL NM 123.40 24.59 123.40 NM 0.40 1.92 NM
PEDE Great Pee Dee Bancorp of SC 28.13 116.58 44.14 116.58 28.13 0.00 0.00 0.00
GSBC Great Southern Bancorp of MO 15.51 316.73 27.68 319.08 16.83 0.44 1.71 26.51
GDVS Greater DV SB,MHC of PA (19.9) NM NM 41.15 NM NM 0.36 1.10 58.06
GSFC Green Street Fin. Corp. of NC 27.09 121.38 42.76 121.38 27.09 0.44 2.46 66.67
GFED Guaranty Fed Bancshares of MO NM 110.73 33.41 110.73 NM 0.30 2.42 NM
HCBB HCB Bancshares of Camden AR NM 102.08 19.04 105.81 NM 0.20 1.36 NM
HEMT HF Bancorp of Hemet CA NM 128.89 10.14 153.22 NM 0.00 0.00 0.00
HFFC HF Financial Corp. of SD 14.27 156.58 15.00 156.58 15.39 0.42 1.44 20.49
HFNC HFNC Financial Corp. of NC 20.84 135.92 24.79 135.92 27.35 0.32 2.44 50.79
HMNF HMN Financial, Inc. of MN 22.22 147.20 17.99 158.56 28.04 0.00 0.00 0.00
HALL Hallmark Capital Corp. of WI 17.02 148.98 11.35 148.98 17.39 0.00 0.00 0.00
HRBF Harbor Federal Bancorp of MD 25.00 139.29 17.40 139.29 26.09 0.48 2.00 50.00
HARBD Harbor Florida Bancshrs of FL 20.26 146.69 28.31 148.55 20.98 1.40 11.91 NM
HFSA Hardin Bancorp of Hardin MO 19.58 121.96 13.83 121.96 21.53 0.52 2.68 52.53
HARL Harleysville SB of PA 15.05 217.85 14.85 217.85 14.98 0.44 1.42 21.36
HFGI Harrington Fin. Group of IN NM 150.80 6.74 150.80 NM 0.12 1.06 40.00
HARS Harris Fin. MHC of PA (24.3) NM NM 40.68 NM NM 0.22 0.83 41.51
HFFB Harrodsburg 1st Fin Bcrp of KY 22.81 115.14 30.78 115.14 22.81 0.40 2.37 54.05
HHFC Harvest Home Fin. Corp. of OH 18.75 129.20 14.24 129.20 21.43 0.44 2.93 55.00
HAVN Haven Bancorp of Woodhaven NY 19.25 188.72 10.79 189.31 19.09 0.30 1.24 23.81
HTHR Hawthorne Fin. Corp. of CA 7.84 144.27 6.58 144.27 6.54 0.00 0.00 0.00
HMLK Hemlock Fed. Fin. Corp. of IL NM 127.90 22.03 127.90 24.35 0.28 1.49 62.22
HFWA Heritage Financial Corp of WA NM 165.31 48.33 165.31 NM 0.14 0.91 28.57
HCBC High Country Bancorp of CO NM 114.09 23.35 114.09 NM 0.00 0.00 0.00
HBNK Highland Bancorp of CA 14.11 207.98 15.71 207.98 18.35 0.00 0.00 0.00
HIFS Hingham Inst. for Sav. of MA* 17.48 217.57 20.89 217.57 17.48 0.52 1.46 25.49
HBEI Home Bancorp of Elgin IL NM 123.33 33.31 123.33 NM 0.40 2.34 NM
HBFW Home Bancorp of Fort Wayne IN 28.18 192.71 23.42 192.71 28.41 0.20 0.58 16.39
HCFC Home City Fin. Corp. of OH 19.01 120.43 23.46 120.43 18.82 0.36 1.93 36.73
HOMF Home Fed Bancorp of Seymour IN 16.58 249.80 21.98 256.95 18.83 0.40 1.31 21.74
HWEN Home Financial Bancorp of IN 24.47 110.82 18.81 110.82 NM 0.10 1.14 27.78
HPBC Home Port Bancorp, Inc. of MA* 14.46 217.11 22.83 217.11 14.79 0.80 3.09 44.69
HFBC HopFed Bancorp of KY NM 132.96 30.03 132.96 NM 0.00 0.00 0.00
HZFS Horizon Fin'l. Services of IA 18.98 148.87 15.13 148.87 23.86 0.18 1.14 21.69
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit 1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of March 27, 1998
<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)
- ---------------------------------------
HRZB Horizon Financial Corp. of WA* 15.92 15.92 1.56 10.02 5.89 1.55 9.93 NA NA 0.84
IBSF IBS Financial Corp. of NJ 17.73 17.73 0.79 4.51 2.65 0.79 4.51 0.11 130.18 0.49
ITLA ITLA Capital Corp of CA* 10.72 10.68 1.46 13.06 7.33 1.46 13.06 NA NA 1.50
ICBC Independence Comm Bnk Cp of NY 21.70 20.32 0.64 2.95 2.04 0.85 3.90 0.70 126.32 1.24
IFSB Independence FSB of DC 7.25 6.45 0.54 8.04 5.59 0.22 3.32 NA NA 0.39
INCB Indiana Comm. Bank, SB of IN(8) 12.15 12.15 0.52 4.28 2.57 0.52 4.28 NA NA 0.94
INBI Industrial Bancorp of OH 16.72 16.72 1.48 8.31 4.40 1.48 8.31 0.31 155.81 0.54
IWBK Interwest Bancorp of WA 6.73 6.62 1.10 16.46 5.76 0.96 14.33 0.69 62.65 0.74
IPSW Ipswich SB of Ipswich MA* 5.21 5.21 1.18 20.53 5.95 0.96 16.78 0.95 77.31 0.96
JXVL Jacksonville Bancorp of TX 14.63 14.63 1.49 9.87 6.69 1.49 9.87 0.70 70.27 0.66
JXSB Jcksnville SB,MHC of IL (45.6) 10.41 10.41 0.61 5.69 2.08 0.49 4.57 0.94 42.01 0.51
JSBA Jefferson Svgs Bancorp of MO 9.03 7.08 0.79 9.68 3.56 0.77 9.38 0.67 101.16 0.89
JOAC Joachim Bancorp, Inc. of MO(8) 28.92 28.92 0.76 2.64 2.25 0.76 2.64 0.25 89.29 0.30
KSBK KSB Bancorp of Kingfield ME* 7.36 7.00 1.07 14.93 6.46 1.07 14.93 NA NA 1.12
KFBI Klamath First Bancorp of OR 15.07 13.77 1.09 6.06 3.83 1.09 6.06 0.02 932.65 0.24
LSBI LSB Fin. Corp. of Lafayette IN 8.58 8.58 0.80 9.10 5.43 0.72 8.20 1.01 70.58 0.82
LVSB Lakeview Financial of NJ 9.65 7.92 1.44 13.78 7.28 0.90 8.63 1.27 57.56 1.42
LARK Landmark Bancshares, Inc of KS 14.09 14.09 1.09 7.61 5.62 0.98 6.88 0.30 151.09 0.62
LARL Laurel Capital Group of PA 10.57 10.57 1.39 13.35 6.38 1.40 13.45 0.42 203.92 1.22
LSBX Lawrence Savings Bank of MA* 10.45 10.45 2.30 25.00 10.84 2.28 24.74 0.52 168.85 1.91
LFED Leeds FSB, MHC of MD (36.3) 16.63 16.63 1.20 7.33 2.87 1.20 7.33 0.04 453.33 0.30
LXMO Lexington B&L Fin. Corp. of MO 18.33 17.19 1.10 4.29 3.97 1.10 4.29 0.54 119.11 0.94
LFCO Life Financial Corp of CA(8) 13.30 13.30 5.46 38.04 9.88 5.71 39.80 1.59 39.19 0.80
LFBI Little Falls Bancorp of NJ 11.68 10.77 0.57 4.32 3.43 0.52 3.93 0.90 38.49 0.77
LOGN Logansport Fin. Corp. of IN 19.21 19.21 1.50 7.75 5.41 1.55 7.99 0.62 45.62 0.38
LISB Long Island Bancorp, Inc of NY 9.18 9.09 0.86 9.44 3.31 0.71 7.79 0.89 62.67 0.91
MAFB MAF Bancorp, Inc. of IL 7.62 6.71 1.14 14.72 6.57 1.12 14.49 0.32 138.86 0.57
MBLF MBLA Financial Corp. of MO 12.68 12.68 0.81 6.31 5.15 0.82 6.40 0.48 62.09 0.51
MECH MECH Financial Inc of CT* 9.92 9.92 1.60 15.91 8.41 1.58 15.72 0.58 270.14 2.39
MFBC MFB Corp. of Mishawaka IN 12.70 12.70 0.83 6.00 4.72 0.82 5.96 0.09 162.45 0.18
MSBF MSB Financial, Inc of MI 16.87 16.87 1.52 8.83 5.47 1.40 8.15 0.84 51.31 0.46
MARN Marion Capital Holdings of IN 20.78 20.33 1.57 7.09 5.52 1.57 7.09 1.43 74.17 1.30
MRKF Market Fin. Corp. of OH 35.57 35.57 1.06 3.30 2.46 1.06 3.30 0.34 26.94 0.18
MFSL Maryland Fed. Bancorp of MD(8) 8.48 8.39 0.65 7.77 3.00 0.91 10.97 0.60 65.66 0.47
MASB MassBank Corp. of Reading MA* 11.21 11.06 1.12 10.54 5.59 1.03 9.73 0.19 131.79 0.86
MFLR Mayflower Co-Op. Bank of MA* 9.75 9.61 1.11 11.52 5.78 1.05 10.93 0.69 124.95 1.49
MDBK Medford Bancorp, Inc. of MA* 8.94 8.41 1.05 11.80 5.77 1.02 11.38 0.16 379.54 1.17
MERI Meritrust FSB of Thibodaux LA(8) 8.49 8.49 1.18 14.53 4.45 1.18 14.53 0.35 62.38 0.41
MWBX MetroWest Bank of MA* 7.34 7.34 1.34 18.12 6.97 1.32 17.79 1.03 130.81 1.78
METF Metropolitan Fin. Corp. of OH 3.96 3.64 0.69 17.52 4.90 0.65 16.45 0.56 108.45 0.79
MIFC Mid Iowa Financial Corp. of IA 9.36 9.35 1.21 12.97 7.27 1.33 14.29 0.21 105.32 0.41
MCBN Mid-Coast Bancorp of ME 8.34 8.34 0.76 8.86 4.92 0.71 8.30 1.09 48.53 0.66
MWBI Midwest Bancshares, Inc. of IA 7.23 7.23 0.88 12.56 7.75 0.78 11.14 0.73 52.45 0.62
MWFD Midwest Fed. Fin. Corp of WI(8) 9.00 8.70 1.45 16.68 5.63 1.14 13.16 0.09 879.14 1.02
MFFC Milton Fed. Fin. Corp. of OH 11.84 11.84 0.65 4.81 3.50 0.62 4.64 0.26 83.77 0.35
MBSP Mitchell Bancorp, Inc. of NC 40.12 40.12 1.52 3.59 3.22 1.52 3.59 1.77 29.42 0.64
MBBC Monterey Bay Bancorp of CA 11.75 10.95 0.43 3.81 2.12 0.39 3.47 0.65 62.58 0.63
MONT Montgomery Fin. Corp. of IN 18.60 18.60 0.72 4.29 3.42 0.72 4.29 0.78 22.34 0.19
MSBK Mutual SB, FSB of Bay City MI 5.09 5.09 -1.39 -23.41 -16.78 -0.49 -8.21 0.07 434.66 0.62
MYST Mystic Financial of MA* 19.47 19.47 0.78 4.00 2.89 0.78 4.00 0.18 315.24 0.91
NHTB NH Thrift Bancshares of NH 8.04 6.95 0.91 11.84 6.26 0.74 9.62 0.66 146.88 1.18
NSLB NS&L Bancorp, Inc of Neosho MO 19.74 19.59 0.72 3.62 3.54 0.71 3.56 0.23 36.57 0.14
NSSY NSS Bancorp of CT* 8.14 7.90 1.05 13.40 5.87 1.19 15.20 1.31 73.30 1.46
NMSB Newmil Bancorp, Inc. of CT* 9.32 9.32 0.85 8.52 5.21 0.86 8.64 0.90 172.67 3.24
NASB North American SB, FSB of MO 8.49 8.24 1.67 21.16 7.83 1.35 17.20 3.07 27.86 0.99
NBSI North Bancshares of Chicago IL 13.49 13.49 0.52 3.69 2.48 0.50 3.52 NA NA 0.26
<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)
- ---------------------------------------
HRZB Horizon Financial Corp. of WA* 16.97 162.57 25.88 162.57 17.13 0.44 2.38 40.37
IBSF IBS Financial Corp. of NJ NM 169.49 30.06 169.49 NM 0.40 2.00 NM
ITLA ITLA Capital Corp of CA* 13.65 168.97 18.12 169.66 13.65 0.00 0.00 0.00
ICBC Independence Comm Bnk Cp of NY NM 144.46 31.35 154.30 NM 0.00 0.00 0.00
IFSB Independence FSB of DC 17.89 137.03 9.93 153.91 NM 0.25 1.28 22.94
INCB Indiana Comm. Bank, SB of IN(8) NM 164.12 19.94 164.12 NM 0.36 1.75 67.92
INBI Industrial Bancorp of OH 22.75 190.70 31.89 190.70 22.75 0.56 2.46 56.00
IWBK Interwest Bancorp of WA 17.35 266.57 17.94 271.14 19.93 0.76 1.72 29.80
IPSW Ipswich SB of Ipswich MA* 16.81 315.12 16.40 315.12 20.57 0.16 1.02 17.20
JXVL Jacksonville Bancorp of TX 14.95 146.42 21.42 146.42 14.95 0.50 2.42 36.23
JXSB Jcksnville SB,MHC of IL (45.6) NM 267.18 27.82 267.18 NM 0.30 1.22 58.82
JSBA Jefferson Svgs Bancorp of MO 28.09 240.30 21.69 306.52 28.99 0.28 1.03 28.87
JOAC Joachim Bancorp, Inc. of MO(8) NM 119.91 34.68 119.91 NM 0.50 3.04 NM
KSBK KSB Bancorp of Kingfield ME* 15.48 212.37 15.63 223.43 15.48 0.10 0.53 8.20
KFBI Klamath First Bancorp of OR 26.14 156.36 23.57 171.13 26.14 0.34 1.48 38.64
LSBI LSB Fin. Corp. of Lafayette IN 18.42 162.71 13.97 162.71 20.45 0.40 1.27 23.39
LVSB Lakeview Financial of NJ 13.74 212.77 20.53 259.34 21.93 0.13 0.52 7.14
LARK Landmark Bancshares, Inc of KS 17.81 133.40 18.80 133.40 19.70 0.40 1.54 27.40
LARL Laurel Capital Group of PA 15.67 202.51 21.40 202.51 15.56 0.35 1.67 26.12
LSBX Lawrence Savings Bank of MA* 9.23 198.86 20.78 198.86 9.33 0.00 0.00 0.00
LFED Leeds FSB, MHC of MD (36.3) NM 245.99 40.90 245.99 NM 0.56 2.43 NM
LXMO Lexington B&L Fin. Corp. of MO 25.20 108.33 19.86 115.51 25.20 0.30 1.83 46.15
LFCO Life Financial Corp of CA(8) 10.12 234.53 31.20 234.53 9.67 0.00 0.00 0.00
LFBI Little Falls Bancorp of NJ 29.17 132.48 15.47 143.66 NM 0.20 1.04 30.30
LOGN Logansport Fin. Corp. of IN 18.50 138.19 26.55 138.19 17.95 0.40 2.21 40.82
LISB Long Island Bancorp, Inc of NY NM 274.64 25.20 277.15 NM 0.60 0.94 28.44
MAFB MAF Bancorp, Inc. of IL 15.22 219.37 16.72 249.03 15.46 0.28 0.73 11.07
MBLF MBLA Financial Corp. of MO 19.42 122.67 15.55 122.67 19.15 0.40 1.46 28.37
MECH MECH Financial Inc of CT* 11.89 175.61 17.43 175.61 12.04 0.00 0.00 0.00
MFBC MFB Corp. of Mishawaka IN 21.20 128.58 16.33 128.58 21.37 0.34 1.28 27.20
MSBF MSB Financial, Inc of MI 18.27 157.48 26.56 157.48 19.80 0.30 1.80 32.97
MARN Marion Capital Holdings of IN 18.12 127.98 26.59 130.79 18.12 0.88 3.07 55.70
MRKF Market Fin. Corp. of OH NM 115.66 41.14 115.66 NM 0.28 1.60 65.12
MFSL Maryland Fed. Bancorp of MD(8) NM 246.91 20.94 249.67 23.60 0.00 0.00 0.00
MASB MassBank Corp. of Reading MA* 17.89 175.50 19.68 178.01 19.39 1.00 1.96 35.09
MFLR Mayflower Co-Op. Bank of MA* 17.31 188.68 18.40 191.49 18.24 0.80 2.96 51.28
MDBK Medford Bancorp, Inc. of MA* 17.33 194.63 17.40 206.75 17.98 0.80 1.84 31.87
MERI Meritrust FSB of Thibodaux LA(8) 22.49 307.64 26.13 307.64 22.49 0.70 0.89 19.94
MWBX MetroWest Bank of MA* 14.35 244.48 17.96 244.48 14.62 0.12 1.55 22.22
METF Metropolitan Fin. Corp. of OH 20.43 322.12 12.77 NM 21.75 0.00 0.00 0.00
MIFC Mid Iowa Financial Corp. of IA 13.76 165.32 15.48 165.54 12.50 0.08 0.65 8.99
MCBN Mid-Coast Bancorp of ME 20.31 177.03 14.76 177.03 21.67 0.52 1.33 27.08
MWBI Midwest Bancshares, Inc. of IA 12.90 152.96 11.06 152.96 14.55 0.24 1.50 19.35
MWFD Midwest Fed. Fin. Corp of WI(8) 17.78 273.50 24.61 282.94 22.54 0.34 1.06 18.89
MFFC Milton Fed. Fin. Corp. of OH 28.57 139.98 16.58 139.98 29.63 0.60 3.75 NM
MBSP Mitchell Bancorp, Inc. of NC NM 111.70 44.82 111.70 NM 0.40 2.30 71.43
MBBC Monterey Bay Bancorp of CA NM 175.20 20.58 187.86 NM 0.14 0.54 25.45
MONT Montgomery Fin. Corp. of IN 29.27 108.33 20.15 108.33 29.27 0.22 1.71 50.00
MSBK Mutual SB, FSB of Bay City MI NM 166.45 8.47 166.45 NM 0.00 0.00 NM
MYST Mystic Financial of MA* NM 138.46 26.96 138.46 NM 0.00 0.00 0.00
NHTB NH Thrift Bancshares of NH 15.98 173.61 13.95 200.66 19.68 0.60 2.82 45.11
NSLB NS&L Bancorp, Inc of Neosho MO 28.23 105.17 20.76 106.00 28.69 0.50 2.86 NM
NSSY NSS Bancorp of CT* 17.03 208.98 17.01 215.30 15.02 0.40 0.85 14.49
NMSB Newmil Bancorp, Inc. of CT* 19.20 159.60 14.87 159.60 18.93 0.32 2.35 45.07
NASB North American SB, FSB of MO 12.78 247.93 21.05 255.46 15.72 1.00 1.45 18.52
NBSI North Bancshares of Chicago IL NM 153.02 20.64 153.02 NM 0.40 2.25 NM
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit 1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of March 27, 1998
<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)
- ---------------------------------------
FFFD North Central Bancshares of IA 22.92 22.92 1.83 7.49 5.16 1.83 7.49 NA NA 1.11
NEIB Northeast Indiana Bncrp of IN 14.37 14.37 1.20 7.72 5.55 1.20 7.72 0.17 350.00 0.67
NWEQ Northwest Equity Corp. of WI 11.60 11.60 1.06 9.03 5.67 1.01 8.66 1.35 35.37 0.58
NWSB Northwest SB, MHC of PA (30.7) 9.24 8.20 0.93 9.65 2.39 0.95 9.88 0.72 86.28 0.85
NTMG Nutmeg FS&LA of CT 5.51 5.51 0.68 12.20 6.23 0.43 7.83 1.57 30.83 0.55
OHSL OHSL Financial Corp. of OH 10.90 10.90 0.87 7.88 5.03 0.84 7.54 0.30 73.10 0.31
OCFC Ocean Fin. Corp. of NJ 14.27 14.27 0.98 5.94 4.84 0.97 5.91 0.45 97.91 0.84
OTFC Oregon Trail Fin. Corp. of OR 12.49 12.49 0.93 8.04 3.54 0.94 8.16 0.18 180.70 0.55
OFCP Ottawa Financial Corp. of MI 8.62 7.01 0.87 9.92 4.85 0.83 9.43 0.34 109.69 0.44
PFFB PFF Bancorp of Pomona CA 9.71 9.61 0.54 5.26 3.88 0.52 4.99 1.40 67.00 1.38
PSFI PS Financial of Chicago IL 37.32 37.32 1.96 6.07 5.24 1.99 6.15 0.68 31.79 0.52
PVFC PVF Capital Corp. of OH 7.28 7.28 1.36 19.21 8.00 1.28 18.10 1.06 65.77 0.75
PBCI Pamrapo Bancorp, Inc. of NJ 12.88 12.80 1.37 10.35 6.36 1.31 9.89 2.20 29.81 1.16
PFED Park Bancorp of Chicago IL 21.82 21.82 0.87 3.86 3.52 0.94 4.15 0.23 125.00 0.73
PVSA Parkvale Financial Corp of PA 7.91 7.87 1.07 14.01 6.54 1.07 14.01 0.36 397.79 1.88
PBHC Pathfinder BC MHC of NY (46.1)* 11.98 10.15 0.96 8.24 2.98 0.87 7.46 1.17 36.05 0.68
PEEK Peekskill Fin. Corp. of NY 25.24 25.24 1.09 4.23 3.76 1.09 4.23 0.90 39.49 1.34
PFSB PennFed Fin. Services of NJ 6.96 5.96 0.81 11.02 6.08 0.80 10.92 0.58 33.00 0.28
PWBC PennFirst Bancorp of PA 7.52 6.70 0.69 8.90 5.33 0.69 8.90 0.45 117.30 1.41
PWBK Pennwood Bancorp, Inc. of PA 17.99 17.99 0.95 5.12 4.15 1.10 5.92 1.49 34.66 0.80
PBKB People's Bancshares of MA* 4.10 3.93 0.83 15.42 5.70 0.43 7.92 0.57 98.78 1.04
PFDC Peoples Bancorp of Auburn IN 15.27 15.27 1.49 9.76 5.48 1.49 9.76 0.30 102.04 0.37
PBCT Peoples Bank, MHC of CT (40.1)* 8.68 8.63 1.18 13.88 3.97 0.68 8.00 0.68 153.86 1.57
TSBS Peoples Bcrp, MHC of NJ (35.9)(8)* 17.18 15.52 1.18 6.97 1.87 0.88 5.18 0.78 68.34 0.85
PFFC Peoples Fin. Corp. of OH 18.85 18.85 0.96 5.10 3.39 0.95 5.01 0.04 480.65 0.25
PHBK Peoples Heritage Fin Grp of ME* 6.99 5.25 1.25 16.39 5.58 1.24 16.20 0.88 114.30 1.40
PSFC Peoples Sidney Fin. Corp of OH 24.73 24.73 1.15 5.90 3.48 1.15 5.90 1.13 34.69 0.45
PERM Permanent Bancorp, Inc. of IN 10.00 9.88 0.62 6.51 3.58 0.61 6.46 0.70 70.95 0.97
PMFI Perpetual Midwest Fin. of IA(8) 8.92 8.92 0.49 5.66 3.40 0.44 5.05 0.39 193.33 0.86
PERT Perpetual of SC, MHC (46.8)(8) 11.91 11.91 0.80 6.41 1.99 0.89 7.07 NA NA 1.02
PCBC Perry Co. Fin. Corp. of MO 19.23 19.23 1.08 5.70 4.58 1.08 5.70 0.01 277.78 0.17
PHFC Pittsburgh Home Fin Corp of PA 8.23 8.13 0.82 7.69 5.98 0.70 6.61 1.68 28.88 0.76
PFSL Pocahnts Fed, MHC of AR (47.0)(8) 6.36 6.36 0.62 9.84 3.22 0.61 9.71 0.23 194.26 1.02
PTRS Potters Financial Corp of OH 8.97 8.97 1.00 11.18 6.43 0.99 11.00 0.17 NA 2.54
PKPS Poughkeepsie Fin. Corp. of NY(8) 8.30 8.30 0.27 3.28 1.67 0.35 4.15 4.03 26.72 1.40
PHSB Ppls Home SB, MHC of PA (45.0) 13.14 13.14 0.77 7.20 2.99 0.73 6.83 0.44 146.58 1.38
PRBC Prestige Bancorp of PA 10.91 10.91 0.60 5.15 4.44 0.58 5.03 0.43 65.96 0.42
PFNC Progress Financial Corp. of PA 5.09 4.27 0.90 17.37 5.17 0.69 13.16 1.05 63.33 1.00
PSBK Progressive Bank, Inc. of NY(8)* 8.88 8.05 0.98 11.44 5.33 0.96 11.19 0.74 150.14 1.71
PROV Provident Fin. Holdings of CA 11.58 11.58 0.77 5.71 4.52 0.41 3.02 1.49 56.25 0.96
PULB Pulaski SB, MHC of MO (29.8)(8) 13.30 13.30 1.21 9.32 2.08 1.06 8.14 NA NA 0.46
PLSK Pulaski SB, MHC of NJ (46.0) 11.94 11.94 0.63 6.25 2.79 0.63 6.25 0.53 95.10 0.89
PULS Pulse Bancorp of S. River NJ 8.19 8.19 1.09 13.66 6.95 1.11 13.81 0.98 43.79 1.67
QCFB QCF Bancorp of Virginia MN 16.45 16.45 1.65 9.37 6.41 1.65 9.37 0.39 214.67 1.95
QCBC Quaker City Bancorp of CA 8.63 8.63 0.73 8.41 5.55 0.70 8.08 1.33 70.08 1.18
QCSB Queens County Bancorp of NY* 10.63 10.63 1.58 12.45 3.61 1.56 12.29 0.54 108.40 0.67
RARB Raritan Bancorp of Raritan NJ* 7.56 7.45 1.01 13.22 5.84 0.99 12.98 0.23 349.74 1.23
REDF RedFed Bancorp of Redlands CA(8) 8.35 8.32 1.11 13.41 7.20 1.14 13.78 1.69 45.34 0.86
RELY Reliance Bancorp, Inc. of NY 8.56 5.82 0.90 10.87 4.95 0.94 11.39 0.56 69.33 0.88
RELI Reliance Bancshares Inc of WI 50.09 50.09 1.06 2.16 2.13 1.11 2.27 NA NA 0.57
RCBK Richmond County Fin Corp of NY 25.65 25.65 1.22 4.75 2.90 1.22 4.75 NA NA 1.12
RIVR River Valley Bancorp of IN 12.72 12.54 0.84 7.18 4.61 0.70 5.99 0.71 122.47 1.05
RVSB Riverview Bancorp of WA 22.73 21.94 1.35 8.56 3.20 1.33 8.40 0.17 218.00 0.58
RSLN Roslyn Bancorp, Inc. of NY* 17.45 17.37 1.03 5.39 3.32 1.25 6.58 0.18 362.05 2.42
SCCB S. Carolina Comm. Bnshrs of SC 20.69 20.69 1.00 4.02 3.51 1.00 4.02 1.53 42.40 0.81
SBFL SB Fngr Lakes MHC of NY (33.1) 8.75 8.75 0.39 4.11 1.23 0.34 3.60 0.50 93.11 0.96
<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)
- ---------------------------------------
FFFD North Central Bancshares of IA 19.40 149.01 34.16 149.01 19.40 0.32 1.42 27.59
NEIB Northeast Indiana Bncrp of IN 18.01 137.01 19.69 137.01 18.01 0.34 1.60 28.81
NWEQ Northwest Equity Corp. of WI 17.62 156.14 18.12 156.14 18.38 0.60 2.79 49.18
NWSB Northwest SB, MHC of PA (30.7) NM NM 35.78 NM NM 0.16 0.93 39.02
NTMG Nutmeg FS&LA of CT 16.04 182.82 10.08 182.82 25.00 0.20 1.86 29.85
OHSL OHSL Financial Corp. of OH 19.87 153.43 16.72 153.43 20.77 0.88 2.73 54.32
OCFC Ocean Fin. Corp. of NJ 20.65 133.88 19.10 133.88 20.76 0.80 2.18 44.94
OTFC Oregon Trail Fin. Corp. of OR 28.27 167.39 20.91 167.39 27.83 0.20 1.12 31.75
OFCP Ottawa Financial Corp. of MI 20.60 203.55 17.54 250.21 21.67 0.40 1.37 28.17
PFFB PFF Bancorp of Pomona CA 25.80 136.32 13.23 137.70 27.17 0.00 0.00 0.00
PSFI PS Financial of Chicago IL 19.10 93.16 34.77 93.16 18.84 0.48 3.49 66.67
PVFC PVF Capital Corp. of OH 12.50 218.89 15.94 218.89 13.27 0.00 0.00 0.00
PBCI Pamrapo Bancorp, Inc. of NJ 15.73 164.03 21.13 165.09 16.47 1.12 4.00 62.92
PFED Park Bancorp of Chicago IL 28.41 113.29 24.72 113.29 26.41 0.00 0.00 0.00
PVSA Parkvale Financial Corp of PA 15.28 200.32 15.85 201.46 15.28 0.60 1.90 28.99
PBHC Pathfinder BC MHC of NY (46.1)* NM 262.20 31.41 309.35 NM 0.20 0.93 31.25
PEEK Peekskill Fin. Corp. of NY 26.56 114.32 28.86 114.32 26.56 0.36 2.12 56.25
PFSB PennFed Fin. Services of NJ 16.44 171.52 11.93 200.11 16.59 0.14 0.77 12.61
PWBC PennFirst Bancorp of PA 18.75 148.54 11.18 166.75 18.75 0.36 1.86 34.95
PWBK Pennwood Bancorp, Inc. of PA 24.10 129.79 23.34 129.79 20.83 0.36 1.80 43.37
PBKB People's Bancshares of MA* 17.53 282.44 11.58 294.29 NM 0.48 1.90 33.33
PFDC Peoples Bancorp of Auburn IN 18.25 173.58 26.50 173.58 18.25 0.44 1.91 34.92
PBCT Peoples Bank, MHC of CT (40.1)* 25.17 327.30 28.40 329.00 NM 0.76 2.00 50.33
TSBS Peoples Bcrp, MHC of NJ (35.9)(8)* NM NM 61.98 NM NM 0.35 0.80 42.68
PFFC Peoples Fin. Corp. of OH 29.46 150.41 28.35 150.41 30.00 0.50 3.03 NM
PHBK Peoples Heritage Fin Grp of ME* 17.92 277.29 19.39 NM 18.13 0.88 1.85 33.21
PSFC Peoples Sidney Fin. Corp of OH 28.72 124.86 30.88 124.86 28.72 0.28 1.52 43.75
PERM Permanent Bancorp, Inc. of IN 27.90 174.75 17.47 176.88 28.13 0.44 1.26 35.20
PMFI Perpetual Midwest Fin. of IA(8) 29.41 162.25 14.47 162.25 NM 0.30 1.00 29.41
PERT Perpetual of SC, MHC (46.8)(8) NM 314.99 37.51 314.99 NM 1.40 2.19 NM
PCBC Perry Co. Fin. Corp. of MO 21.85 118.38 22.77 118.38 21.85 0.40 1.71 37.38
PHFC Pittsburgh Home Fin Corp of PA 16.71 142.81 11.75 144.54 19.43 0.24 1.34 22.43
PFSL Pocahnts Fed, MHC of AR (47.0)(8) NM 296.64 18.86 296.64 NM 0.90 2.00 62.07
PTRS Potters Financial Corp of OH 15.55 169.14 15.18 169.14 15.81 0.20 1.05 16.26
PKPS Poughkeepsie Fin. Corp. of NY(8) NM 197.57 16.39 197.57 NM 0.24 2.11 NM
PHSB Ppls Home SB, MHC of PA (45.0) NM 190.45 25.03 190.45 NM 0.24 1.22 40.68
PRBC Prestige Bancorp of PA 22.53 113.47 12.38 113.47 23.07 0.20 1.03 23.26
PFNC Progress Financial Corp. of PA 19.35 297.41 15.14 NM 25.53 0.12 0.65 12.63
PSBK Progressive Bank, Inc. of NY(8)* 18.78 206.30 18.32 227.52 19.20 0.80 1.89 35.56
PROV Provident Fin. Holdings of CA 22.12 128.85 14.91 128.85 NM 0.00 0.00 0.00
PULB Pulaski SB, MHC of MO (29.8)(8) NM NM 57.85 NM NM 1.10 2.22 NM
PLSK Pulaski SB, MHC of NJ (46.0) NM 184.65 22.04 184.65 NM 0.30 1.58 56.60
PULS Pulse Bancorp of S. River NJ 14.39 186.09 15.25 186.09 14.24 0.80 3.00 43.24
QCFB QCF Bancorp of Virginia MN 15.61 150.03 24.68 150.03 15.61 0.00 0.00 0.00
QCBC Quaker City Bancorp of CA 18.02 145.45 12.55 145.45 18.75 0.00 0.00 0.00
QCSB Queens County Bancorp of NY* 27.72 NM 40.23 NM 28.08 0.80 1.85 51.28
RARB Raritan Bancorp of Raritan NJ* 17.12 216.97 16.41 220.19 17.44 0.60 2.12 36.36
REDF RedFed Bancorp of Redlands CA(8) 13.89 171.67 14.33 172.27 13.51 0.00 0.00 0.00
RELY Reliance Bancorp, Inc. of NY 20.21 190.76 16.32 280.24 19.29 0.72 1.89 38.30
RELI Reliance Bancshares Inc of WI NM 102.64 51.41 102.64 NM 0.00 0.00 0.00
RCBK Richmond County Fin Corp of NY NM 163.53 41.94 163.53 NM 0.00 0.00 0.00
RIVR River Valley Bancorp of IN 21.70 133.45 16.97 135.37 25.99 0.20 1.01 21.98
RVSB Riverview Bancorp of WA NM 173.13 39.36 179.38 NM 0.14 0.83 25.93
RSLN Roslyn Bancorp, Inc. of NY* NM 161.04 28.11 161.83 24.67 0.32 1.38 41.56
SCCB S. Carolina Comm. Bnshrs of SC 28.48 140.63 29.09 140.63 28.48 0.64 2.84 NM
SBFL SB Fngr Lakes MHC of NY (33.1) NM 321.25 28.10 321.25 NM 0.20 1.03 NM
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit 1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of March 27, 1998
<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)
- ---------------------------------------
SFED SFS Bancorp of Schenectady NY 12.29 12.29 0.62 4.91 3.59 0.60 4.74 0.84 53.36 0.58
SGVB SGV Bancorp of W. Covina CA 7.55 7.44 0.33 4.42 3.23 0.39 5.12 1.23 26.58 0.42
SHSB SHS Bancorp, Inc. of PA 13.56 13.56 0.75 5.58 4.76 0.75 5.58 1.20 43.23 0.79
SISB SIS Bancorp, Inc. of MA* 7.24 7.24 0.65 8.83 3.38 0.88 12.06 0.47 279.99 2.67
SWCB Sandwich Bancorp of MA(8)* 8.10 7.82 0.98 12.12 3.94 0.96 11.83 0.56 140.03 1.11
SFSL Security First Corp. of OH 9.36 9.22 1.38 14.76 5.29 1.38 14.76 0.43 176.70 0.84
SKAN Skaneateles Bancorp Inc of NY* 6.90 6.72 0.67 9.83 5.93 0.65 9.49 1.89 52.90 1.19
SOBI Sobieski Bancorp of S. Bend IN 14.39 14.39 0.60 3.91 3.13 0.60 3.91 0.26 87.34 0.29
SOSA Somerset Savings Bank of MA(8)* 6.64 6.64 1.15 18.37 7.29 1.12 17.86 4.86 29.23 1.83
SSFC South Street Fin. Corp. of NC* 14.90 14.90 0.85 3.61 3.47 0.87 3.69 0.16 118.51 0.38
SCBS Southern Commun. Bncshrs of AL 20.42 20.42 1.15 5.98 3.52 1.15 5.98 2.34 48.64 1.73
SMBC Southern Missouri Bncrp of MO 16.60 16.60 0.85 5.22 3.78 0.81 4.98 0.83 58.44 0.66
SWBI Southwest Bancshares of IL(8) 11.96 11.96 1.09 9.85 4.59 1.10 9.92 0.18 115.50 0.29
SVRN Sovereign Bancorp, Inc. of PA 4.76 3.95 0.48 11.16 2.69 0.66 15.32 0.67 94.38 0.91
STFR St. Francis Cap. Corp. of WI 8.27 7.38 0.78 9.58 5.22 0.75 9.21 0.30 126.18 0.81
SPBC St. Paul Bancorp, Inc. of IL 9.17 9.14 1.08 12.20 5.58 1.09 12.29 0.24 308.50 1.06
SFFC StateFed Financial Corp. of IA 17.66 17.66 1.27 7.17 5.00 1.27 7.17 1.74 14.72 0.33
SFIN Statewide Fin. Corp. of NJ 9.36 9.34 0.81 8.36 5.12 0.81 8.36 0.38 104.03 0.84
STSA Sterling Financial Corp. of WA 5.48 5.07 0.51 10.96 4.42 0.46 9.91 0.73 65.29 0.83
SFSB SuburbFed Fin. Corp. of IL(8) 6.73 6.71 0.66 10.03 4.63 0.53 8.11 0.47 42.37 0.30
ROSE T R Financial Corp. of NY* 6.27 6.27 0.98 15.68 5.55 0.87 14.01 0.52 74.90 0.72
THRD TF Financial Corp. of PA 8.39 7.00 0.77 7.24 5.39 0.66 6.16 0.29 117.08 0.80
TPNZ Tappan Zee Fin., Inc. of NY(8) 17.16 17.16 0.85 4.86 3.48 0.84 4.79 1.39 39.34 1.18
TSBK Timberland Bancorp of WA 30.46 30.46 1.85 6.06 4.18 1.85 6.06 3.07 19.72 0.94
TRIC Tri-County Bancorp of WY 15.37 15.37 1.02 6.67 5.60 1.05 6.85 NA NA 1.01
TWIN Twin City Bancorp, Inc. of TN 12.89 12.89 1.01 7.87 5.81 0.83 6.48 0.09 131.58 0.16
USAB USABancshares, Inc of PA* 8.43 8.30 0.49 5.72 2.61 0.43 5.01 0.57 70.22 0.75
UCBC Union Community Bancorp of IN 36.48 36.48 1.58 4.33 3.67 1.58 4.33 NA NA 0.32
UFRM United FSB of Rocky Mount NC(8) 7.23 7.23 0.65 8.66 3.08 0.42 5.62 1.06 88.10 1.10
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
UTBI United Tenn. Bancshares of TN 24.48 24.48 1.25 5.10 4.26 1.25 5.10 0.93 74.91 1.29
VABF Va. Beach Fed. Fin. Corp of VA 7.16 7.16 0.67 9.65 4.05 0.54 7.76 1.13 61.96 0.92
WHGB WHG Bancshares of MD 19.66 19.66 0.76 3.59 3.02 0.77 3.65 0.95 19.59 0.24
WSFS WSFS Financial Corp. of DE* 5.72 5.69 1.12 20.56 6.10 1.10 20.25 1.39 117.68 3.15
WVFC WVS Financial Corp. of PA 10.66 10.66 1.31 11.07 5.60 1.32 11.17 0.20 312.48 1.14
WRNB Warren Bancorp of Peabody MA* 10.79 10.79 2.00 19.45 7.88 1.78 17.31 0.83 132.18 1.68
WSBI Warwick Community Bncrp of NY* 23.76 23.76 1.04 4.37 3.10 1.04 4.37 0.69 67.04 0.80
WFSL Washington Federal, Inc. of WA 12.89 11.90 1.88 15.54 7.33 1.85 15.32 0.60 69.21 0.56
WAMU Washington Mutual, Inc. of WA* 5.35 4.98 0.50 9.55 1.72 0.92 17.75 0.83 83.12 0.99
WYNE Wayne Bancorp, Inc. of NJ 12.57 12.57 0.76 5.59 3.23 0.76 5.59 0.92 87.82 1.20
WAYN Wayne Svgs Bks MHC of OH (47.8) 9.48 9.48 0.75 8.07 2.80 0.70 7.49 0.45 83.22 0.46
WCFB Wbstr Cty FSB MHC of IA (45.2) 23.50 23.50 1.45 6.21 3.29 1.45 6.21 0.06 652.54 0.70
WBST Webster Financial Corp. of CT 5.44 4.75 0.54 10.34 3.32 0.82 15.76 0.65 114.22 1.34
WEFC Wells Fin. Corp. of Wells MN 14.71 14.71 1.09 7.67 5.87 1.07 7.46 NA NA NA
WCBI WestCo Bancorp, Inc. of IL 15.38 15.38 1.51 9.79 6.50 1.41 9.13 0.19 147.79 0.37
WSTR WesterFed Fin. Corp. of MT 10.40 8.45 0.81 7.25 5.01 0.78 7.03 0.35 136.97 0.73
WOFC Western Ohio Fin. Corp. of OH 13.87 12.94 0.37 2.65 2.35 0.43 3.09 0.44 115.19 0.66
WEHO Westwood Hmstd Fin Corp of OH 22.45 22.45 0.67 2.33 2.14 1.05 3.68 0.12 171.61 0.23
FFWD Wood Bancorp of OH 12.80 12.80 1.44 11.41 4.34 1.29 10.26 0.39 93.94 0.44
YFCB Yonkers Fin. Corp. of NY 13.54 13.54 1.04 7.04 5.16 1.03 6.97 0.49 71.78 0.82
YFED York Financial Corp. of PA 8.86 8.86 0.96 11.17 4.96 0.80 9.31 2.24 29.20 0.75
<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)
- ---------------------------------------
SFED SFS Bancorp of Schenectady NY 27.84 138.11 16.97 138.11 28.82 0.32 1.31 36.36
SGVB SGV Bancorp of W. Covina CA NM 134.27 10.14 136.24 26.71 0.00 0.00 0.00
SHSB SHS Bancorp, Inc. of PA 20.99 116.04 15.74 116.04 20.99 0.00 0.00 0.00
SISB SIS Bancorp, Inc. of MA* 29.56 224.25 16.23 224.25 21.66 0.64 1.58 46.72
SWCB Sandwich Bancorp of MA(8)* 25.40 293.57 23.77 304.12 26.02 1.40 2.20 56.00
SFSL Security First Corp. of OH 18.91 268.50 25.13 272.40 18.91 0.32 1.42 26.89
SKAN Skaneateles Bancorp Inc of NY* 16.86 159.02 10.98 163.41 17.46 0.28 1.43 24.14
SOBI Sobieski Bancorp of S. Bend IN NM 125.83 18.11 125.83 NM 0.32 1.54 49.23
SOSA Somerset Savings Bank of MA(8)* 13.72 229.77 15.25 229.77 14.11 0.00 0.00 0.00
SSFC South Street Fin. Corp. of NC* 28.79 170.05 25.34 170.05 28.14 0.40 3.23 NM
SCBS Southern Commun. Bncshrs of AL 28.40 156.17 31.89 156.17 28.40 0.30 1.51 42.86
SMBC Southern Missouri Bncrp of MO 26.47 136.61 22.68 136.61 27.78 0.50 2.22 58.82
SWBI Southwest Bancshares of IL(8) 21.77 202.71 24.24 202.71 21.63 0.80 2.43 52.98
SVRN Sovereign Bancorp, Inc. of PA NM 311.51 14.81 NM 27.06 0.08 0.42 15.69
STFR St. Francis Cap. Corp. of WI 19.15 178.78 14.79 200.53 19.91 0.56 1.24 23.83
SPBC St. Paul Bancorp, Inc. of IL 17.92 209.74 19.24 210.43 17.80 0.40 1.56 27.97
SFFC StateFed Financial Corp. of IA 20.00 139.30 24.60 139.30 20.00 0.20 1.43 28.57
SFIN Statewide Fin. Corp. of NJ 19.54 162.13 15.18 162.47 19.54 0.44 1.89 36.97
STSA Sterling Financial Corp. of WA 22.61 191.32 10.49 207.01 25.00 0.00 0.00 0.00
SFSB SuburbFed Fin. Corp. of IL(8) 21.59 203.78 13.71 204.39 26.69 0.32 0.67 14.55
ROSE T R Financial Corp. of NY* 18.02 259.31 16.26 259.31 20.17 0.68 1.92 34.52
THRD TF Financial Corp. of PA 18.55 180.53 15.15 216.31 21.83 0.48 1.69 31.37
TPNZ Tappan Zee Fin., Inc. of NY(8) 28.76 139.21 23.88 139.21 29.17 0.28 1.39 40.00
TSBK Timberland Bancorp of WA 23.92 144.91 44.13 144.91 23.92 0.00 0.00 0.00
TRIC Tri-County Bancorp of WY 17.86 116.03 17.83 116.03 17.41 0.40 2.91 51.95
TWIN Twin City Bancorp, Inc. of TN 17.21 132.52 17.08 132.52 20.90 0.40 2.73 47.06
USAB USABancshares, Inc of PA* NM 165.54 13.95 168.04 NM 0.00 0.00 0.00
UCBC Union Community Bancorp of IN 27.26 117.99 43.04 117.99 27.26 0.30 1.90 51.72
UFRM United FSB of Rocky Mount NC(8) NM 266.57 19.27 266.57 NM 0.24 1.30 42.11
UBMT United Fin. Corp. of MT 22.13 133.40 32.03 133.40 22.31 1.00 3.70 NM
UTBI United Tenn. Bancshares of TN 23.48 119.69 29.31 119.69 23.48 0.00 0.00 0.00
VABF Va. Beach Fed. Fin. Corp of VA 24.70 228.56 16.37 228.56 NM 0.24 1.19 29.27
WHGB WHG Bancshares of MD NM 124.69 24.51 124.69 NM 0.32 1.79 59.26
WSFS WSFS Financial Corp. of DE* 16.39 310.78 17.79 312.57 16.64 0.00 0.00 0.00
WVFC WVS Financial Corp. of PA 17.87 214.30 22.85 214.30 17.70 1.20 3.15 56.34
WRNB Warren Bancorp of Peabody MA* 12.70 230.51 24.88 230.51 14.26 0.52 2.14 27.23
WSBI Warwick Community Bncrp of NY* NM 140.87 33.48 140.87 NM 0.00 0.00 0.00
WFSL Washington Federal, Inc. of WA 13.65 200.50 25.85 217.31 13.85 0.87 3.08 42.03
WAMU Washington Mutual, Inc. of WA* NM NM 19.79 NM NM 1.16 1.56 NM
WYNE Wayne Bancorp, Inc. of NJ NM 178.04 22.37 178.04 NM 0.20 0.67 20.62
WAYN Wayne Svgs Bks MHC of OH (47.8) NM 279.85 26.54 279.85 NM 0.62 2.07 73.81
WCFB Wbstr Cty FSB MHC of IA (45.2) NM 186.32 43.79 186.32 NM 0.80 4.05 NM
WBST Webster Financial Corp. of CT NM 248.30 13.52 284.72 19.74 0.80 1.15 34.63
WEFC Wells Fin. Corp. of Wells MN 17.04 127.23 18.72 127.23 17.50 0.48 2.49 42.48
WCBI WestCo Bancorp, Inc. of IL 15.38 148.99 22.91 148.99 16.51 0.68 2.31 35.60
WSTR WesterFed Fin. Corp. of MT 19.95 134.33 13.98 165.33 20.59 0.48 1.85 36.92
WOFC Western Ohio Fin. Corp. of OH NM 111.16 15.41 119.10 NM 1.00 3.85 NM
WEHO Westwood Hmstd Fin Corp of OH NM 136.79 30.71 136.79 29.59 0.36 2.48 NM
FFWD Wood Bancorp of OH 23.03 254.98 32.63 254.98 25.63 0.34 1.66 38.20
YFCB Yonkers Fin. Corp. of NY 19.36 132.82 17.98 132.82 19.55 0.28 1.42 27.45
YFED York Financial Corp. of PA 20.14 214.36 19.00 214.36 24.17 0.52 2.05 41.27
</TABLE>
<PAGE>
EXHIBIT 2
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 December 31, 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) 5,356 -612 208 0 4,952 5,095 0.97
FFFL Fidelity Bcsh MHC of FL (47.7)(1) 6,313 -1,464 498 0 5,347 6,783 0.79
SKBO First Carnegie MHC of PA(45.0) 937 184 -63 0 1,058 2,300 0.46
FFSX First FSB MHC Sxld of IA(46.1) 3,383 -179 61 0 3,265 2,834 1.15
GDVS Greater DV SB, MHC of PA (19.9) 2,037 0 0 0 2,037 3,273 0.62
HARS Harris Fin. MHC of PA (24.3) 17,771 -3,697 1,257 0 15,331 33,790 0.45
JXSB Jcksnville SB, MHC of IL (45.6) 976 -299 102 0 779 1,908 0.41
LFED Leeds FSB, MHC of MD (36.3) 3,429 0 0 0 3,429 5,182 0.66
NWSB Northwest SB, MHC of PA (30.7) 19,410 433 -147 0 19,696 46,798 0.42
PBHC Pathfinder BC MHC of NY (46.1) 1,851 -268 91 0 1,674 2,875 0.58
PBCT Peoples Bank, MHC of CT (40.1) 92,400 -59,700 20,298 0 52,998 61,162 0.87
PHSB Ppls Home SB, MHC of PA (45.0) 1,637 -144 49 0 1,542 2,760 0.56
PLSK Pulaski SB, MHC of NJ (46.0) 1,120 0 0 0 1,120 2,108 0.53
SBFL SB Fngr Lakes MHC of NY (33.1) 847 -158 54 0 743 3,570 0.21
WAYN Wayne Svgs Bks MHC of OH (47.8) 1,889 -207 70 0 1,752 2,257 0.78
WCFB Wbstr Cty FSB MHC of IA (45.2) 1,364 0 0 0 1,364 2,109 0.65
</TABLE>
(1) Financial information is for the quarter ending September 30, 1997.
Source: Audited and unaudited financial statements, corporate reports and
offering circulars, and RP Financial, LC. calculations. The information
provided in this table has been obtained from sources we believe are
reliable, but we cannot guarantee the accuracy or completeness of such
information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
EXHIBIT 3
Pro Forma Analysis Sheet: Fully Converted Basis
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 3
PRO FORMA ANALYSIS SHEET
Baltimore County Savings Bank, FSB
Prices as of March 27, 1998
All Savings
Peer Group Maryland Companies Institutions
------------------------ ------------------------ -----------------
Price Multiple Symbol Subject (1) Mean Median Mean Median Mean
-------------- ------ ----------- ---- ------ ---- ------ ----
<S> <C> <C> <C> <C> <C> <C> <C>
Price--earnings ratio P/E 16.23x 23.49x 23.81x 18.85x 15.92x 20.36x
Price--book ratio = P/B 72.34% 108.17% 104.43% 160.53% 148.49% 167.77%
Price--assets ratio = P/A 15.95% 26.04% 24.50% 16.71% 15.44% 21.34%
</TABLE>
<TABLE>
<CAPTION>
Valuation Parameters
--------------------
<S> <C> <C> <C>
Pre-Conversion Earnings (Y) $2,027,000 ESOP Stock Purchases (E) 8.00% (5)
Pre-Conversion Book Value (B) $24,516,000 Cost of ESOP Borrowings (S) 0.00% (4)
Pre-Conv. Tang. Book Value (B) $24,471,000 ESOP Amortization (T) 10.00 years
Pre-Conversion Assets (A) $250,582,000 RRP Amount (M) 4.00%
Reinvestment Rate (2)(R) 3.34% RRP Vesting (N) 5.00 years (5)
Est. Conversion Expenses (3)(X) 2.00% Foundation (F) 1.65%
Tax rate (TAX) 39.00% Tax Benefit (Z) 292,500
Percentage Sold (PCT) 100.00%
</TABLE>
<TABLE>
<CAPTION>
Calculation of Pro Forma Value After Conversion
-----------------------------------------------
<S> <C> <C>
1. V= P/E * (Y) V= $46,250,000
-------------------------------------------------------------
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= $46,250,000
--------------------------
1 - P/B * PCT * (1-X-E-M-F)
3. V= P/A * (A+Z) V= $46,250,000
-------------------------------------------
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 3,867,500 10.00 $38,675,000 63,750 3,931,250 39,312,500
Midpoint 4,550,000 10.00 45,500,000 75,000 4,625,000 46,250,000
Maximum 5,232,500 10.00 52,325,000 86,250 5,318,750 53,187,500
Supermaximum 6,017,375 10.00 60,173,750 99,187 6,116,562 61,165,620
</TABLE>
-------------------------------------------------------------------
(1) Pricing ratios shown reflect the midpoint value.
(2) Net return reflects a reinvestment rate of 5.48 percent, and a tax rate
of 39.00 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 10 years and 5 years, respectively;
amortization expenses tax effected at 39.00 percent.
<PAGE>
EXHIBIT 4
Pro Forma Effect of Conversion Proceeds: Fully Converted Basis
<PAGE>
Exhibit 4
PRO FORMA EFFECT OF CONVERSION PROCEEDS
Baltimore County Savings Bank, FSB
At the Minimum
<TABLE>
<S> <C>
1. Offering Proceeds $38,675,000
Less: Estimated Offering Expenses 773,500
-------
Net Conversion Proceeds $37,901,500
2. Estimated Additional Income from Conversion Proceeds
Net Conversion Proceeds $37,901,500
Less: Capital Expenditures 1,250,000
Less: Non-Cash Stock Purchases (1) 4,641,000
---------
Net Proceeds Reinvested $32,010,500
Estimated net incremental rate of return 3.34%
-----
Earnings Increase $1,070,047
Less: Estimated cost of ESOP borrowings (2) 0
Less: Amortization of ESOP borrowings (3) 188,734
Less: Recognition Plan Vesting (4) 188,734
-------
Net Earnings Increase $692,579
<CAPTION>
Net
Before Earnings After
3. Pro Forma Earnings Conversion Increase Conversion
---------- -------- ----------
<S> <C> <C> <C>
12 Months ended December 31, 1997 (reported) $2,027,000 $692,579 $2,719,579
12 Months ended December 31, 1997 (core) $1,798,000 $692,579 $2,490,579
<CAPTION>
Before Net Cash Tax Benefit (5) After
4. Pro Forma Net Worth Conversion Proceeds Of Contribution Conversion
---------- -------- --------------- ----------
<S> <C> <C> <C> <C>
December 31, 1997, $24,516,000 $33,260,500 $248,625 $58,025,125
December 31, 1997 (Tangible) $24,471,000 $33,260,500 $248,625 $57,980,125
<CAPTION>
Before Net Cash Tax Benefit (5) After
5. Pro Forma Assets Conversion Proceeds Of Contribution Conversion
---------- -------- ----------------- ----------
<S> <C> <C> <C> <C>
December 31, 1997, $250,582,000 $33,260,500 $248,625 $284,091,125
</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 10 years, amortization expense is tax-
effected at a 39.00 percent rate.
(4) MRP is amortized over 5 years, and amortization expense is tax effected at
39.00 percent.
(5) Reflects tax benefit of stock contribution to the Foundation.
<PAGE>
Exhibit 4
PRO FORMA EFFECT OF CONVERSION PROCEEDS
Baltimore County Savings Bank, FSB
At the Midpoint
<TABLE>
<S> <C>
1. Offering Proceeds $45,500,000
Less: Estimated Offering Expenses 910,000
-------
Net Conversion Proceeds $44,590,000
2. Estimated Additional Income from Conversion Proceeds
Net Conversion Proceeds $44,590,000
Less: Capital Expenditures 1,250,000
Less: Non-Cash Stock Purchases (1) 5,460,000
---------
Net Proceeds Reinvested $37,880,000
Estimated net incremental rate of return 3.34%
-----
Earnings Increase $1,266,253
Less: Estimated cost of ESOP borrowings (2) 0
Less: Amortization of ESOP borrowings (3) 222,040
Less: Recognition Plan Vesting (4) 222,040
-------
Net Earnings Increase $822,173
<CAPTION>
Net
Before Earnings After
3. Pro Forma Earnings Conversion Increase Conversion
---------- -------- ----------
<S> <C> <C> <C>
12 Months ended December 31, 1997 (reported) $2,027,000 $822,173 $2,849,173
12 Months ended December 31, 1997 (core) $1,798,000 $822,173 $2,620,173
<CAPTION>
Before Net Cash Tax Benefit (5) After
4. Pro Forma Net Worth Conversion Proceeds Of Contribution Conversion
---------- --------- --------------- ----------
<S> <C> <C> <C> <C>
December 31, 1997, $24,516,000 $39,130,000 $292,500 $63,938,500
December 31, 1997 (Tangible) $24,471,000 $39,130,000 $292,500 $63,893,500
<CAPTION>
Before Net Cash Tax Benefit (5) After
5. Pro Forma Assets Conversion Proceeds Of Contribution Conversion
---------- -------- --------------- ----------
<S> <C> <C> <C> <C>
December 31, 1997, $250,582,000 $39,130,000 $292,500 $290,004,500
</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 10 years, amortization expense is tax-
effected at a 39.00 percent rate.
(4) MRP is amortized over 5 years, and amortization expense is tax effected at
39.00 percent.
(5) Reflects tax benefit of stock contribution to the Foundation.
<PAGE>
Exhibit 4
PRO FORMA EFFECT OF CONVERSION PROCEEDS
Baltimore County Savings Bank, FSB
At the Maximum
<TABLE>
<S> <C> <C>
1. Offering Proceeds $52,325,000
Less: Estimated Offering Expenses 1,046,500
---------
Net Conversion Proceeds $51,278,500
2. Estimated Additional Income from Conversion Proceeds
Net Conversion Proceeds $51,278,500
Less: Capital Expenditures 1,250,000
Less: Non-Cash Stock Purchases (1) 6,279,000
---------
Net Proceeds Reinvested $43,749,500
Estimated net incremental rate of return 3.34%
-----
Earnings Increase $1,462,458
Less: Estimated cost of ESOP borrowings (2) 0
Less: Amortization of ESOP borrowings (3) 255,346
Less: Recognition Plan Vesting (4) 255,346
-------
Net Earnings Increase $951,766
<CAPTION>
Net
Before Earnings After
3. Pro Forma Earnings Conversion Increase Conversion
---------- -------- ----------
<S> <C> <C> <C>
12 Months ended December 31, 1997 (reported) $2,027,000 $951,766 $2,978,766
12 Months ended December 31, 1997 (core) $1,798,000 $951,766 $2,749,766
<CAPTION>
Before Net Cash Tax Benefit (5) After
4. Pro Forma Net Worth Conversion Proceeds Of Contribution Conversion
---------- -------- --------------- ----------
<S> <C> <C> <C> <C>
December 31, 1997, $24,516,000 $44,999,500 $336,375 $69,851,875
December 31, 1997 (Tangible) $24,471,000 $44,999,500 $336,375 $69,806,875
<CAPTION>
Before Net Cash Tax Benefit (5) After
5. Pro Forma Assets Conversion Proceeds Of Contribution Conversion
---------- -------- --------------- ----------
<S> <C> <C> <C> <C>
December 31, 1997, $250,582,000 $44,999,500 $336,375 $295,917,875
</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 10 years, amortization expense is
tax-effected at a 39.00 percent rate.
(4) MRP is amortized over 5 years, and amortization expense is tax effected at
39.00 percent.
(5) Reflects tax benefit of stock contribution to the Foundation.
<PAGE>
Exhibit 4
PRO FORMA EFFECT OF CONVERSION PROCEEDS
Baltimore County Savings Bank, FSB
At the Supermaximum Value
<TABLE>
<S> <C> <C>
1. Offering Proceeds $60,173,750
Less: Estimated Offering Expenses 1,203,475
---------
Net Conversion Proceeds $58,970,275
2. Estimated Additional Income from Conversion Proceeds
Net Conversion Proceeds $58,970,275
Less: Capital Expenditures 1,250,000
Less: Non-Cash Stock Purchases (1) 7,220,850
---------
Net Proceeds Reinvested $50,499,425
Estimated net incremental rate of return 3.34%
-----
Earnings Increase $1,688,095
Less: Estimated cost of ESOP borrowings (2) 0
Less: Amortization of ESOP borrowings (3) 293,648
Less: Recognition Plan Vesting (4) 293,648
-------
Net Earnings Increase $1,100,799
<CAPTION>
Net
Before Earnings After
3. Pro Forma Earnings Conversion Increase Conversion
---------- -------- ----------
<S> <C> <C> <C>
12 Months ended December 31, 1997 (reported) $2,027,000 $1,100,799 $3,127,799
12 Months ended December 31, 1997 (core) $1,798,000 $1,100,799 $2,898,799
<CAPTION>
Before Net Cash Tax Benefit (5) After
4. Pro Forma Net Worth Conversion Proceeds Of Contribution Conversion
---------- -------- --------------- ----------
<S> <C> <C> <C> <C>
December 31, 1997, $24,516,000 $51,749,425 $386,831 $76,652,256
December 31, 1997 (Tangible) $24,471,000 $51,749,425 $386,831 $76,607,256
<CAPTION>
Before Net Cash Tax Benefit (5) After
5. Pro Forma Assets Conversion Proceeds Of Contribution Conversion
---------- -------- --------------- ----------
<S> <C> <C> <C> <C>
December 31, 1997, $250,582,000 $51,749,425 $386,831 $302,718,256
</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 10 years, amortization expense is tax-
effected at a 39.00 percent rate.
(4) MRP is amortized over 5 years, and amortization expense is tax effected at
39.00 percent.
(5) Reflects tax benefit of stock contribution to the Foundation.
<PAGE>
EXHIBIT 5
Pro Forma Analysis Sheet: Minority Stock Offering
<PAGE>
EXHIBIT 5
PRO FORMA ANALYSIS SHEET
Baltimore County Savings Bank, FSB
Prices as of March 27, 1998
<TABLE>
<CAPTION>
All Savings
Peer Group Maryland Companies Institutions
------------------------ ------------------------- ------------
Price Multiple Symbol Subject (1) Mean Median Mean Median Mean
-------------- ------ ----------- ---- ------ ---- ------ ----
<S> <C> <C> <C> <C> <C> <C> <C>
Price-earnings ratio P/E 20.16 x 26.66x 26.66x 18.85x 15.92x 20.36x
Price-book ratio = P/B 118.30% 243.14% 254.09% 160.53% 148.89% 167.77%
Price-assets ratio = P/A 17.44% 30.68% 28.25% 16.71% 15.44% 21.34%
</TABLE>
<TABLE>
<CAPTION>
Valuation Parameters
--------------------
<S> <C> <C> <C>
Pre-Conversion Earnings (2)(Y) $2,019,000 ESOP Stock Purchases (E) 8.00% (6)
Pre-Conversion Book Value (2)(B) $24,266,000 Cost of ESOP Borrowings (S) 0.00% (5)
Pre-Conv. Tang. Book Value (2)(B) $24,221,000 ESOP Amortization (T) 10.00 years
Pre-Conversion Assets (2)(A) $250,332,000 RRP Amount (M) 4.00%
Reinvestment Rate (3)(R) 3.34% RRP Vesting (N) 5.00 years (6)
Est. Conversion Expenses (4)(X) 3.84% Foundation (F) 4.34%
Tax rate (TAX) 39.00% Tax Benefit (Z) 292,500
Percentage Sold (PCT) 39.01%
</TABLE>
Calculation of Pro Forma Value After Conversion
-----------------------------------------------
<TABLE>
<S> <C> <C>
1. V= P/E * (Y) V= $46,250,000
-------------------------------------------------------------
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= $46,250,000
-------------------------
1 - P/B * PCT * (1-X-E-M-F)
3. V= P/A * (A+Z) V= $46,250,000
-------------------------
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 2,386,600 1,469,650 10.00 $14,696,500 75,000 1,544,650 15,446,500
Midpoint 2,821,000 1,729,000 10.00 17,290,000 75,000 1,804,000 18,040,000
Maximum 3,255,400 1,988,350 10.00 19,883,500 75,000 2,063,350 20,633,500
Supermaximum 3,754,960 2,286,602 10.00 22,866,020 75,000 2,361,602 23,616,020
</TABLE>
- -------------------------------------------------------------------
(1) Pricing ratios shown reflect the midpoint value.
(2) Reflects $250,000 retained by the MHC, assumed to earn the reinvestment
rate of 5.48 percent and a tax rate of 39.0 percent.
(3) Net return reflects a reinvestment rate of 5.48 percent, and a tax rate of
39.00 percent.
(4) Offering expenses shown at estimated midpoint value.
(5) No cost is applicable since holding company will fund the ESOP loan.
(6) ESOP and MRP amortize over 10 years and 5 years, respectively; amortization
expenses tax effected at 39.00 percent.
<PAGE>
EXHIBIT 6
Pro Forma Effects: Minority Stock Offering
<PAGE>
Exhibit 6
PRO FORMA EFFECT OF CONVERSION PROCEEDS
Baltimore County Savings Bank, FSB
At the Minimum
<TABLE>
<S> <C>
1. Offering Proceeds $14,696,500
Less: Estimated Offering Expenses 641,000
-------
Net Conversion Proceeds $14,055,500
2. Estimated Additional Income from Conversion Proceeds
Net Conversion Proceeds $14,055,500
Less: Planned Capital Expenditures 1,250,000
Less: Non-Cash Stock Purchases (1) 1,763,580
---------
Net Proceeds Reinvested $11,041,920
Estimated net incremental rate of return 3.34%
-----
Earnings Increase $369,109
Less: Estimated cost of ESOP borrowings (2) 0
Less: Amortization of ESOP borrowings (3) 71,719
Less: Recognition Plan Vesting (4) 71,719
------
Net Earnings Increase $225,671
<CAPTION>
Net
Before Earnings After
3. Pro Forma Earnings Conversion Increase Conversion
---------- -------- ----------
<S> <C> <C> <C>
12 Months ended December 31, 1997 (reported) $2,019,000 $225,671 $2,244,671
12 Months ended December 31, 1997 (core) $1,790,000 $225,671 $2,015,671
<CAPTION>
Before Net Cash Tax Benefit (5) After
4. Pro Forma Net Worth Conversion Proceeds Of Contribution Conversion
---------- -------- --------------- ----------
<S> <C> <C> <C> <C>
December 31, 1997 $24,266,000 $12,291,920 $248,625 $36,806,545
December 31, 1997 (Tangible) $24,221,000 $12,291,920 $248,625 $36,761,545
<CAPTION>
Before Net Cash Tax Benefit (5) After
5. Pro Forma Assets Conversion Proceeds Of Contribution Conversion
---------- -------- --------------- ----------
<S> <C> <C> <C> <C>
December 31, 1997 $250,332,000 $12,291,920 $248,625 $262,872,545
</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 10 years, amortization expense is
tax-effected at a 39.00 percent rate.
(4) MRP is amortized over 5 years, and amortization expense is tax effected at
39.00 percent.
(5) Reflects tax benefit of stock contribution to the Foundation.
<PAGE>
Exhibit 6
PRO FORMA EFFECT OF CONVERSION PROCEEDS
Baltimore County Savings Bank, FSB
At the Midpoint
<TABLE>
<S> <C>
1. Offering Proceeds $17,290,000
Less: Estimated Offering Expenses 677,000
-------
Net Conversion Proceeds $16,613,000
2. Estimated Additional Income from Conversion Proceeds
Net Conversion Proceeds $16,613,000
Less: Planned Capital Expenditures 1,250,000
Less: Non-Cash Stock Purchases (1) 2,074,800
---------
Net Proceeds Reinvested $13,288,200
Estimated net incremental rate of return 3.34%
-----
Earnings Increase $444,198
Less: Estimated cost of ESOP borrowings (2) 0
Less: Amortization of ESOP borrowings (3) 84,375
Less: Recognition Plan Vesting (4) 84,375
------
Net Earnings Increase $275,448
</TABLE>
<TABLE>
<CAPTION>
Net
Before Earnings After
3. Pro Forma Earnings Conversion Increase Conversion
---------- -------- ----------
<S> <C> <C> <C>
12 Months ended December 31, 1997 (reported) $2,019,000 $275,448 $2,294,448
12 Months ended December 31, 1997 (core) $1,790,000 $275,448 $2,065,448
<CAPTION>
Before Net Cash Tax Benefit (5) After
4. Pro Forma Net Worth Conversion Proceeds Of Contribution Conversion
---------- -------- --------------- ----------
<S> <C> <C> <C> <C>
December 31, 1997 $24,266,000 $14,538,200 $292,500 $39,096,700
December 31, 1997 (Tangible) $24,221,000 $14,538,200 $292,500 $39,051,700
<CAPTION>
Before Net Cash Tax Benefit (5) After
5. Pro Forma Assets Conversion Proceeds Of Contribution Conversion
---------- -------- --------------- ----------
<S> <C> <C> <C> <C>
December 31, 1997 $250,332,000 $14,538,200 $292,500 $265,162,700
</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 10 years, amortization expense is
tax-effected at a 39.00 percent rate.
(4) MRP is amortized over 5 years, and amortization expense is tax effected at
39.00 percent.
(5) Reflects tax benefit of stock contribution to the Foundation.
<PAGE>
Exhibit 6
PRO FORMA EFFECT OF CONVERSION PROCEEDS
Baltimore County Savings Bank, FSB
At the Maximum
<TABLE>
<S> <C>
1. Offering Proceeds $19,883,500
Less: Estimated Offering Expenses 750,000
-------
Net Conversion Proceeds $19,133,500
2. Estimated Additional Income from Conversion Proceeds
Net Conversion Proceeds $19,133,500
Less: Planned Capital Expenditures 1,250,000
Less: Non-Cash Stock Purchases (1) 2,386,020
---------
Net Proceeds Reinvested $15,497,480
Estimated net incremental rate of return 3.34%
-----
Earnings Increase $518,050
Less: Estimated cost of ESOP borrowings (2) 0
Less: Amortization of ESOP borrowings (3) 97,031
Less: Recognition Plan Vesting (4) 97,031
------
Net Earnings Increase $323,987
</TABLE>
<TABLE>
<CAPTION>
Before Earnings After
3. Pro Forma Earnings Conversion Increase Conversion
---------- -------- ----------
<S> <C> <C> <C>
12 Months ended December 31, 1997 (reported) $2,019,000 $323,987 $2,342,987
12 Months ended December 31, 1997 (core) $1,790,000 $323,987 $2,113,987
<CAPTION>
Before Net Cash Tax Benefit (5) After
4. Pro Forma Net Worth Conversion Proceeds Of Contribution Conversion
---------- -------- --------------- ----------
<S> <C> <C> <C> <C>
December 31, 1997 $24,266,000 $16,747,480 $292,500 $41,305,980
December 31, 1997 (Tangible) $24,221,000 $16,747,480 $292,500 $41,260,980
<CAPTION>
Before Net Cash Tax Benefit (5) After
5. Pro Forma Assets Conversion Proceeds Of Contribution Conversion
---------- -------- --------------- ----------
<S> <C> <C> <C> <C>
December 31, 1997 $250,332,000 $16,747,480 $292,500 $267,371,980
</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 10 years, amortization expense is
tax-effected at a 39.00 percent rate.
(4) MRP is amortized over 5 years, and amortization expense is tax effected at
39.00 percent.
(5) Reflects tax benefit of stock contribution to the Foundation.
<PAGE>
Exhibit 6
PRO FORMA EFFECT OF CONVERSION PROCEEDS
Lockport Savings Bank
At the Supermaximum Value
<TABLE>
<S> <C>
1. Offering Proceeds $22,866,020
Less: Estimated Offering Expenses 754,000
-------
Net Conversion Proceeds $22,112,020
2. Estimated Additional Income from Conversion Proceeds
Net Conversion Proceeds $22,112,020
Less: Cash Contribution to Foundation 457,320
Less: Non-Cash Stock Purchases (1) 2,743,922
---------
Net Proceeds Reinvested $18,910,777
Estimated net incremental rate of return 3.34%
-----
Earnings Increase $632,149
Less: Estimated cost of ESOP borrowings (2) 0
Less: Amortization of ESOP borrowings (3) 111,586
Less: Recognition Plan Vesting (4) 111,586
-------
Net Earnings Increase $408,977
</TABLE>
<TABLE>
<CAPTION>
Net
Before Earnings After
3. Pro Forma Earnings Conversion Increase Conversion
---------- -------- ----------
<S> <C> <C> <C>
12 Months ended December 31, 1997 (reported) $2,019,000 $408,977 $2,427,977
12 Months ended December 31, 1997 (core) $1,790,000 $408,977 $2,198,977
<CAPTION>
Before Net Cash Tax Benefit (5) After
4. Pro Forma Net Worth Conversion Proceeds Of Contribution Conversion
---------- -------- --------------- ----------
<S> <C> <C> <C> <C>
December 31, 1997 $24,266,000 $18,910,777 $386,831 $43,563,608
December 31, 1997 (Tangible) $24,221,000 $18,910,777 $386,831 $43,518,608
<CAPTION>
Before Net Cash Tax Benefit (5) After
5. Pro Forma Assets Conversion Proceeds Of Contribution Conversion
---------- -------- --------------- ----------
<S> <C> <C> <C> <C>
December 31, 1997 $250,332,000 $18,910,777 $386,831 $269,629,608
</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 10 years, amortization expense is
tax-effected at a 39.00 percent rate.
(4) MRP is amortized over 5 years, and amortization expense is tax effected at
39.00 percent.
(5) Reflects tax benefit of stock contribution to the Foundation.
<PAGE>
EXHIBIT 7
Firm Qualifications Statement
<PAGE>
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants FIRM QUALIFICATION STATEMENT
RP Financial provides financial and management consulting and valuation services
to the financial services industry nationwide, particularly federally-insured
financial institutions. RP Financial establishes long-term client relationships
through its wide array of services, emphasis on quality and timeliness, hands-on
involvement by our principals and senior consulting staff, and careful
structuring of strategic plans and transactions. RP Financial's staff draws
from backgrounds in consulting, regulatory agencies and investment banking,
thereby providing our clients with considerable resources.
STRATEGIC AND CAPITAL PLANNING
RP Financial's strategic and capital planning services are designed to provide
effective workable plans with quantifiable results. Through a program known as
SAFE (Strategic Alternatives Financial Evaluations), RP Financial analyzes
strategic options to enhance shareholder value or other established objectives.
Our planning services involve conducting situation analyses; establishing
mission statements, strategic goals and objectives; and identifying strategies
for enhancement of franchise value, capital management and planning, earnings
improvement and operational issues. Strategy development typically includes the
following areas: capital formation and management, asset/liability targets,
profitability, return on equity and market value of stock. Our proprietary
financial simulation model provides the basis for evaluating the financial
impact of alternative strategies and assessing the feasibility/compatibility of
such strategies with regulations and/or other guidelines.
MERGER AND ACQUISITION SERVICES
RP Financial's merger and acquisition (M&A) services include targeting
candidates and potential acquirors, assessing acquisition merit, conducting
detailed due diligence, negotiating and structuring transactions, preparing
merger business plans and financial simulations, rendering fairness opinions and
assisting in implementing post-acquisition strategies. Through our financial
simulations, comprehensive in-house data bases, valuation expertise and
regulatory knowledge, RP Financial's M&A consulting focuses on structuring
transactions to enhance shareholder returns.
VALUATION SERVICES
RP Financial's extensive valuation practice includes valuations for a variety of
purposes including mergers and acquisitions, mutual-to-stock conversions, ESOPs,
subsidiary companies, mark-to-market transactions, loan and servicing
portfolios, non-traded securities, core deposits, FAS 107 (fair market value
disclosure), FAS 122 (loan servicing rights) and FAS 123 (stock options). Our
principals and staff are highly experienced in performing valuation appraisals
which conform with regulatory guidelines and appraisal industry standards. RP
Financial is the nation's leading valuation firm for mutual-to-stock conversions
of thrift institutions.
OTHER CONSULTING SERVICES AND DATA BASES
RP Financial offers a variety of other services including branching strategies,
feasibility studies and special research studies, which are complemented by our
quantitative and computer skills. RP Financial's consulting services are aided
by its in-house data base resources for commercial banks and savings
institutions and proprietary valuation and financial simulation models.
YEAR 2000 SERVICES
RP Financial, through a relationship with a computer research and development
company with a proprietary methodology, offers Year 2000 advisory and conversion
services to financial institutions which are more cost effective and less
disruptive than most other providers of such service.
RP Financial's Key Personnel (Years of Relevant Experience)
Ronald S. Riggins, Managing Director (18)
William E. Pommerening, Managing Director (14)
Gregory E. Dunn, Senior Vice President (16)
James P. Hennessey, Senior Vice President (13)
James J. Oren, Senior Vice President (11)
