<PAGE>
As filed with the Securities and Exchange Commission on January 23, 1998
Registration No. 333-
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM SB-2
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
----------------------
BCSB BANKCORP, INC.
(Name of small business issuer in its charter)
<TABLE>
United States 6035 Requested
------------------------------- ---------------------------- ----------------------
<S> <C> <C>
(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
--------------------------------------------------------------------------
(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. [_]
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.
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. [_]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
- -----------------------------------------------------------------------------------------------------------------
Dollar Proposed Proposed
Title of Each Class Amount Maximum Maximum Amount of
of Securities to be Offering Price Aggregate Registration
to be Registered Registered Per Unit Offering Price (1) Fee
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value
$.01 per share............... $21,763,060 $10.00 $21,763,060 $ 6,420.10
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
<PAGE>
PROSPECTUS
[LOGO]
BCSB BANKCORP, INC.
(HOLDING COMPANY FOR
BALTIMORE COUNTY SAVINGS BANK, F.S.B.)
Up to 2,052,750 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 between 1,517,250 and 2,052,750 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 OFCOMMON 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>
Minimum Per Share................. $ 10.00 $ .43 $ 9.57
------------------------------------------------------------------------------------------------------
Midpoint Per Share................ $ 10.00 $ .38 $ 9.62
------------------------------------------------------------------------------------------------------
Maximum Per Share................. $ 10.00 $ .35 $ 9.65
------------------------------------------------------------------------------------------------------
Minimum Total..................... $ 15,172,500 $ 647,930 $ 14,524,570
------------------------------------------------------------------------------------------------------
Midpoint Total.................... $ 17,850,000 $ 684,880 $ 17,165,120
------------------------------------------------------------------------------------------------------
Maximum Total..................... $ 20,527,500 $ 721,830 $ 19,805,670
======================================================================================================
</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, 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 $36,762,500 to $49,737,500 (the "Estimated Valuation Range"),
with a midpoint of $43,250,000, based upon the assumption, among others,
that a contribution would be made to the Baltimore County Savings Bank
Foundation (the "Foundation") of $750,000 of the common stock sold in a
full stock conversion of the Bank. The Board of Directors has established
a public offering range such that the public ownership of the Company will
constitute a 42.0% ownership interest prior to the issuance of shares to
the Foundation. Accordingly, the offering range to the public of the
minority stock will be $15,172,500 at the minimum, $17,850,000 at the
midpoint and $20,527,500 at the maximum. Based on the public offering
range, exclusive of the shares to be issued to the Foundation, the public
ownership of the shares will represent 41.3% of the shares of Common Stock
to be outstanding following consummation of the Reorganization and Stock
Issuance and establishment of the Foundation. See "The Reorganization and
Stock Issuance -- Stock Pricing and Number of Shares to be Issued."
(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 $228,000 assuming the sale of 1,785,000 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.
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 2,052,750 shares 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 ________ __,
1997 ("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 midpoint 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 -- Offering of Common Stock." 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 -- Offering of Common Stock,"
" -- Subscription Rights," " -- Community Offering," and " -- Syndicated
Community Offering."
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 1.0% of the total
number of shares of Common Stock to be issued in the Offering; no Person,
together with Associates of or Persons Acting in Concert with such Person, may
purchase in the Community Offering in the aggregate more than 1.0% of the total
number of shares of Common Stock to be issued in the Offering; and no Person,
together with Associates of or Persons Acting in Concert with such Person, may
purchase in the Offering more than the overall maximum purchase limitation of
2.0% of the total number of shares of 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
2
<PAGE>
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 ____% and ___% at the maximum 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 ____ 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,"
"Pro Forma Data," and "The Reorganization and Stock Issuance -- Establishment of
the Foundation."
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 -- Purchases 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.
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.
3
<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.
4
<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
BANK, F.S.B. 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
September 30, 1997, the Bank had total
assets of $251.7 million, total deposits of
$224.7 million and retained earnings of
$23.9 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.
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
5
<PAGE>
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 Home Owners' Loan Act of 1933, as
amended ("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 1,517,250 and
a maximum of 2,052,750 shares of Common
Stock in the Offering, which will represent
41.3% of the Company's Common Stock to be
outstanding upon completion of the
Reorganization and Stock Issuance and the
establishment of the Foundation.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
ORGANIZATIONAL STRUCTURE ------------------------------- -------------- -----------------------
AFTER THE REORGANIZATION Baltimore County Public
AND THE STOCK ISSUANCE Savings Bank, M.H.C. Stockholders Foundation
------------------------------- -------------- -----------------------
57.0% (1) of 41.3% (1) of 1.7% (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 1,785,000 shares of
Common Stock to public stockholders and
the issuance of 2,465,000 shares to the
MHC at the midpoint of the Estimated
Valuation Range and the subsequent
issuance of 75,000 shares to the
Foundation.
THE 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."
6
<PAGE>
PURCHASE PRICE The Company is offering between 1,517,250
AND STOCK PRICING and 2,052,750 shares of Common Stock 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 $43,250,000 as of
January 2, 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 42% of the updated
Independent Valuation to be delivered by RP
Financial prior to consummation of the
Reorganization and Stock Issuance. See "The
Reorganization and Stock Issuance -- Stock
Pricing and Number of Shares to be Offered."
THE SUBSCRIPTION, The shares of Common Stock to be issued and
COMMUNITY AND sold in the Offering are being offered at
SYNDICATED COMMUNITY the Purchase Price of $10.00 per share in
OFFERINGS the Subscription Offering pursuant to
nontransferable Subscription Rights in the
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
___________, 199_, 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 midpoint 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."
7
<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 In furtherance of the Bank's long-standing
SAVINGS BANK, commitment to its local community, the
F.S.B. FOUNDATION 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 Foundation be voted in
the same ratio as all other shares of the
Company's Common
8
<PAGE>
Stock on all proposals considered by
stockholders of the Company. See "The
Reorganization and Stock Issuance--
Establishment of the Foundation --Regulatory
Conditions Imposed on the Foundation."
The 75,000 shares of Common Stock proposed
to be contributed to the Foundation will
equal between 3.7% and 4.9% of the Common
Stock to be sold in the Offering at the
maximum 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
$43,250,000 at the midpoint of the Estimated
Valuation Range, the Company will have
4,325,000 shares issued and outstanding, of
which the Foundation will own 1.7%. 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 1.5% AND 2.0%.
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," "Comparison
of Valuation and Pro Forma Information with
No Foundation," and "The Reorganization and
Stock Issuance -- Establishment of the
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 1.0% of
the total number of shares of Common Stock
to be sold in the Offering; no Person,
together with Associates of or Persons
Acting in Concert with such Person, may
purchase in the Community Offering in the
aggregate more than 1.0% of the total number
of shares of Common Stock to be issued in
the Offering; and no Person, together with
Associates of or Persons Acting in Concert
with such Person, may purchase in the
Offering more than the overall maximum
purchase limitation of 2.0% of the total
number of shares of Common Stock to be
issued 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 (122,492 shares, or
8.1%, 6.9% and 6.0% of the shares to be
issued in the Offering at the minimum,
midpoint and maximum, 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."
9
<PAGE>
POTENTIAL BENEFITS OF ESOP. The ESOP intends to purchase an
REORGANIZATION AND aggregate of 8% of the shares of Common
STOCK ISSUANCE TO Stock issued in the Offering (between
MANAGEMENT AND 121,380 shares and 164,220 shares of Common
DIRECTORS Stock). 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 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 September 30, 1997 would have been
approximately $1.2 million. See "Management
of the Bank --Certain Benefit Plans and
Agreements -- Change-in-Control Protective
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
(between 151,725 and 205,275 shares of
Common Stock), 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.
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.
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
10
<PAGE>
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 Applicable federal regulations provide that
OF SUBSCRIPTION prior to the completion of the Offering, no
RIGHTS 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 $14.5
million and $19.8 million. 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 1,785,000
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 $7.2 million in cash,
and the Company would retain approximately
$7.2 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 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
11
<PAGE>
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 the construction costs,
which are estimated to be $750,000.
MARKET FOR THE The Company, as a newly organized company,
COMMON STOCK has 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 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 It has been the recent practice of the OTS
DIVIDENDS BY to permit mutual holding companies to waive
WAIVER OF the receipt of cash dividends declared by
THE MHC 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 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 Minority Ownership Interest.
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."
12
<PAGE>
CONVERSION OF THE Although the MHC may convert to the stock
MHC TO STOCK FORM form of organization in the future (a
"Conversion Transaction") 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.
13
<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.
<TABLE>
<CAPTION>
SELECTED FINANCIAL CONDITION DATA
At September 30,
-------------------------------------------------------------
1997 1996 1995 1994 1993
-------- --------- --------- --------- ----------
(In thousands)
<S> <C> <C> <C> <C> <C>
Total assets................................. $251,738 $ 258,854 $ 240,683 $ 216,786 $ 217,666
Loans receivable, net........................ 158,676 154,560 145,795 129,210 135,397
Cash......................................... 3,909 4,786 4,425 3,780 3,197
Interest-bearing deposits in other banks..... 8,206 9,065 15,347 17,199 28,457
Federal funds sold........................... 7,102 6,225 4,871 2,101 800
Investment securities:
Available for sale....................... -- 101 2,088 1,270 4,599
Held to maturity......................... 30,323 36,298 25,900 15,499 3,500
Mortgage-backed securities:
Available for sale....................... -- -- -- -- --
Held to maturity......................... 37,189 39,771 35,047 39,697 31,305
FHLB stock................................... 1,433 1,301 1,292 1,280 1,483
Deposits..................................... 224,656 233,311 217,868 195,813 198,873
FHLB advances................................ -- -- -- -- --
Retained earnings - substantially restricted 23,858 21,913 20,697 19,082 17,074
- -------------------------------------------------------------------------------------------------------------
Number of:
Real estate loans outstanding............. 2,109 1,882 1,734 1,614 1,795
Savings accounts.......................... 27,199 30,326 27,973 21,122 21,344
Offices open.............................. 7 (1) 8 8 8 8
<CAPTION>
SELECTED OPERATIONS DATA
Year Ended September 30,
-------------------------------------------------------------
1997 1996 1995 1994 1993
-------- --------- --------- --------- ----------
(In thousands)
<S> <C> <C> <C> <C> <C>
Interest income.............................. $19,458 $19,064 $17,126 $15,822 $ 17,529
Interest expense............................. 10,323 10,636 8,974 6,968 7,881
------- ------- ------- ------- --------
Net interest income before
provision for loan losses.................. 9,135 8,428 8,152 8,854 9,648
Provision for (reduction of) loan losses..... 286 434 255 (137) (465)
------- ------- ------- ------- --------
Net interest income.......................... 8,849 7,994 7,897 8,991 10,113
Other income (loss).......................... 686 1,075 (2) 613 383 (959)
Non-interest expense......................... 6,257 7,153 (3) 5,821 5,351 5,147
------- ------- ------- ------- --------
Income before income taxes................... 3,278 1,916 2,689 4,023 4,007
Income tax provision......................... 1,301 712 1,112 1,603 1,483
Cumulative effect of a change in
accounting for income taxes............... -- -- -- (394) --
------- ------- ------- ------- --------
Net Income................................... $ 1,977 $ 1,204 $ 1,577 $ 2,026 $ 2,524
======= ======= ======= ======= ========
</TABLE>
- ---------------
(1) Includes the Saverna Park branch; in October 1997, the Bank sold the
deposits from its Saverna Park branch. See "Recent Developments."
(2) 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."
(3) 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."
14
<PAGE>
SELECTED FINANCIAL RATIOS AND OTHER DATA
<TABLE>
<CAPTION>
At or for the
Year Ended September 30,
----------------------------------------------------------
1997 1996 1995 1994 1993
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
PERFORMANCE RATIOS:
Return on average assets (net income divided
by average total assets)...................... .76% .47% .68% .91% 1.12%
Return on average retained earnings (net
income divided by average retained
earnings)..................................... 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).......... 3.41 3.26 3.52 4.12 4.47
Net interest margin (net interest income
divided by average interest-earning assets)... 3.67 3.49 3.74 4.24 4.57
Ratio of average interest-earning assets to
average interest-bearing liabilities.......... 106.20 104.99 105.20 103.48 102.51
Ratio of non-interest expense to average
total assets.................................. 2.39 2.81 2.53 2.40 2.29
ASSET QUALITY RATIOS:
Nonperforming assets to total assets at
end of period................................. .76 1.07 .96 1.41 2.10
Nonperforming loans to gross loans at
end of period................................. 1.11 1.38 .58 .76 1.88
Allowance for loan losses to gross loans
at end of period.............................. .59 .56 .50 .39 .43
Allowance for loan losses to nonperforming
loans at end of period........................ 53.07 40.49 87.07 51.77 23.13
Provision for loan losses to gross loans ........ .17 .26 .16 (.10) (.33)
Net charge-offs to average loans outstanding..... .15 .20 .01 (.05) (.17)
CAPITAL RATIOS:
Retained earnings to total assets at end
of period..................................... 9.48 8.47 8.60 8.80 7.84
Average retained earnings to average assets...... 8.75 8.36 8.62 8.09 7.02
</TABLE>
15
<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 funding of the Foundation with 75,000 newly issued shares of Common Stock,
the MHC will own between 56.8% and 57.1% 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 "The Reorganization and Stock Issuance" and
"Restrictions on Acquisitions of the Company."
ANTICIPATED LOW RETURN ON EQUITY FOLLOWING STOCK ISSUANCE
For the year ended September 30, 1997, the Bank's ratio of average retained
earnings to average assets was 8.75%. On a pro forma basis at September 30,
1997, assuming the sale of the midpoint of 1,785,000 shares of Common Stock in
the Offering, on a consolidated basis, the Company's ratio of stockholders'
equity to total assets would have been 14.6%. With such a high capital position,
it is doubtful that the Company will be able to quickly leverage the
16
<PAGE>
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 subpart return on equity.
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 September 30, 1997,
the Bank's automobile loans totaled $32.6 million, or 19.6% of the Bank's gross
loan portfolio, and acquisition and development loans, which are considered to
be construction loans, totaled $2.1 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 years ended
September 30, 1997 and 1996, the Bank had consumer loan charge-offs, net of
recoveries, of $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 and Other 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
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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 requires
collateral or other security to support financial instruments with off-balance
sheet credit risk. At September 30, 1997, the Bank had commitments under standby
letters of credit and lines of credit of $2.7 million and $8.2 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 (which represents between 3.7% and 4.9%
of the number of shares to be sold in the Offering) 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 3.7% and
4.9% of the Common Stock to be sold in the Offering. 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
4,325,000 shares of Common Stock issued and outstanding, of which the Foundation
will own 75,000 shares, or 1.7%. As a result, persons purchasing shares of
Common Stock in the Offering will have their ownership and voting interests in
the Company diluted by 1.7%. See "Pro Forma Data."
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.
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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. See
"The Reorganization and Stock Issuance -- Establishment of the Foundation --
Regulatory Conditions Imposed on the Foundation." 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 have received 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 $36.8 million and
$49.7 million, with a midpoint of $43.3 million. The pro forma price to book
ratio and the pro forma price to annualized earnings ratio, at and for the year
ended September 30, 1997, are 111.11% and 18.52x, 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 $44.0 million at the midpoint, resulting in a pro forma price
to book ratio and a pro forma price to earnings ratio of 111.11% and 18.87x,
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 $48.9 million or less than $36.1 million or if the OTS
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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."
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 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 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. 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" and "Certain
Anti-Takeover Provisions in the Charter and Bylaws."
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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. The service bureau of
the Bank has advised the Bank that it expects to resolve this potential problem
before the year 2000. However, if the service bureau is unable to resolve this
potential problem in time, the Bank 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.
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 to Stock Form 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
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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 4,325,000 to 4,574,900,
the pro forma stockholders' equity per share of the outstanding Common Stock at
September 30, 1997 would have been $9.05, compared with $9.60 without such
plans, and the pro forma net income per share of the outstanding Common Stock
for the year ended September 30, 1997 would have been $.53, compared with $.56
without such plans. See "Pro Forma Data" and "Management of the Bank -- Certain
Benefit Plans and Agreements -- Management Recognition Plan" and "-- Stock
Option and Incentive Plan."
POTENTIAL COST OF ESOP AND MRP
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 and $1.6 million at the minimum,
midpoint and maximum, 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 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 and maximum 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
$607,000, $714,000 and $821,000, respectively.
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 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."
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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
September 30, 1997, the Bank had total assets of $251.7 million, total deposits
of $224.7 million and retained earnings of $23.9 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:
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.
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Capital Strength. At September 30, 1997, the Bank had $23.9 million of
retained earnings, representing 9.5% of total assets. At such date, the Bank
exceeded all of its minimum regulatory capital requirements with tangible and
core capital of 9.1% of adjusted total assets and risk-based capital of 17.4% of
total risk-weighted assets. See "Regulation -- Depository Institution Regulation
- -- 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 September 30, 1997, the Bank would have had
pro forma stockholders' equity of approximately $30.0 million, or 11.6% of total
assets, and the Company would have had pro forma consolidated stockholders'
equity of $38.9 million, or 14.6% 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 years ended September 30, 1997, 1996, 1995,
1994 and 1993 of $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 .76% and .47% (.83% after
adjusting for the one-time special assessment to recapitalize the SAIF) for the
years ended September 30, 1997 and 1996, respectively, and the Bank's return on
average retained earnings was 8.6% and 5.7% (9.4% after adjusting for the
one-time special assessment to recapitalize the SAIF) for the years ended
September 30, 1997 and 1996, respectively.
Asset Quality. At September 30, 1997, loans accounted for on a nonaccrual
basis plus accruing loans 90 days past due totaled $1.8 million and represented
1.1% of gross loans outstanding at that date. At that date, the Bank had $61,000
of other nonperforming assets, which consisted of repossessed automobiles. At
September 30, 1997, the Bank had no real estate owned. The Bank's allowance for
loan losses at September 30, 1997 totaled $1.0 million, which represented 53.1%
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 September 30, 1997, such deposits
totaled $94.9 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
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.
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 years ended September 30, 1996 and 1997.
Nevertheless, such loans continue to constitute a significant portion of the
Bank's loan portfolio, totaling $32.6 million, or 19.6% of the Bank's gross loan
portfolio, at September 30, 1997. In addition, at September 30, 1997,
construction loans and commercial real estate loans totaled $8.6 million and
$10.2 million, respectively, or 5.2% and 6.1%, respectively, of the Bank's gross
loan portfolio at that date. Though such loans have 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."
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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 principal executive office is located at 4111 E. Joppa Road,
Suite 300, Baltimore, Maryland 21236, and its main telephone number is (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 $17.9 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 $17.2 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 $7.2
million in cash, and the Company would retain approximately $7.2 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. 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 Restrictions."
25
<PAGE>
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 the
construction costs, which are estimated to be $750,000.
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 of
regulations, with the greatest flexibility being afforded to so-called Tier 1
institutions (such as the Bank). See Regulation -- Dividend Restrictions."
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
26
<PAGE>
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 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
("Conversion Transaction"), 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
27
<PAGE>
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' 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 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.
28
<PAGE>
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.
29
<PAGE>
CAPITALIZATION
The following table sets forth information regarding the historical
capitalization, including deposits, of the Bank at September 30, 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 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 September 30, 1997 Based on the Sale of
Bank's Historical ------------------------------------------------------
Capitalization at 1,517,250 Shares 1,785,000 Shares 2,052,750 Shares
September 30, at $10.00 at $10.00 at $10.00
1997 Per Share Per Share Per Share
----------------- ------------- ------------- -------------
(In thousands)
<S> <C> <C> <C> <C>
Deposits (1)............................................. $224,656 $ 224,656 $ 224,656 $ 224,656
Other borrowings......................................... -- -- -- --
-------- --------- --------- ---------
Total deposits and borrowed funds...................... $224,656 $ 224,656 $ 224,656 $ 224,656
======== ========= ========= =========
Capital stock:
Common Stock, $.01 par value per share
authorized - 13,500,000 shares; shares
to be outstanding - as shown (2)(3)................... -- 37 43 50
Paid-in capital (2)(3)................................. -- 15,238 17,872 20,506
Shares issued to Foundation (4) .......................
Less: Expense of contribution to Foundation, net (5).. -- (750) (750) (750)
Plus: Tax benefit of contribution to Foundation...... -- 293 293 293
Net unrealized gain............................. -- -- -- --
Less: Common Stock acquired by ESOP (6)............... -- (1,214) (1,428) (1,642)
Common stock acquired by MRP (3)................ -- (607) (714) (821)
Retained earnings (7).................................. 23,858 23,608 23,608 23,608
-------- --------- --------- ---------
Total stockholders' equity (8)........................ $ 23,858 $ 36,605 $ 38,924 $ 41,244
======== ========= ========= =========
</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 and Incentive 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 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, assuming the final
Independent
30
<PAGE>
Valuation is the midpoint of the Estimated Valuation Range, the number of
outstanding shares would be 4,396,400 and total stockholders' equity would
be $39,639,000. As a result of the MRP acquiring authorized but unissued
shares from the Company, stockholders' ownership in the Company would be
diluted by approximately 1.6%. 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) Net of 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.
31
<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 September 30, 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>
Bank's
Historical Capital at
September 30, 1997
---------------------
Percent of
Amount Assets (2)
------ ----------
<S> <C> <C>
Capital under general accepted
accounting principles....... $ 23,858 9.48%
========= ====
Tangible capital............... $ 22,901 9.10%
Tangible capital requirement... 3,775 1.50
--------- -----
Excess...................... $ 19,126 7.60%
========= ====
Core capital................... $ 22,901 9.10%
Core capital requirement....... 7,550 3.00
--------- -----
Excess...................... $ 15,351 6.10%
========= ====
Total capital.................. $ 23,878 17.43%
Risk-based capital requirement. 10,959 8.00
--------- -----
Excess...................... $ 12,919 9.43%
========= =====
<CAPTION>
Pro Forma Capital of the Bank as of September 30, 1997 Based on the Sale of (1):
--------------------------------------------------------------------------------
1,517,250 Shares 1,785,000 Shares 2,052,750 Shares
at $10.00 at $10.00 at $10.00
Per Share Per Share Per Share
----------------------- ----------------------- -----------------------
Percent of Percent of Percent of
Amount Assets (2) Amount Assets (2) Amount Assets (2)
------ ---------- ------ ---------- ------ ----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Capital under general accepted
accounting principles....... $ 29,050 11.25% $ 30,049 11.59% $ 31,047 11.92%
======== ===== ========= ===== ======== ======
Tangible capital............... $ 28,093 10.89% $ 29,092 11.22% $ 30,090 11.55%
Tangible capital requirement... 3,871 1.50 3,889 1.50 3,907 1.50
-------- ----- --------- ----- -------- ------
Excess...................... $ 24,222 9.39% $ 25,202 9.72% $ 26,183 10.05%
======== ===== ========= ===== ======== ======
Core capital................... $ 28,093 10.89% $ 29,092 11.22% $ 30,090 11.55%
Core capital requirement....... 7,742 3.00 7,778 3.00 7,815 3.00
-------- ----- --------- ----- -------- ------
Excess...................... $ 20,351 7.89% $ 21,313 8.22% $ 22,276 8.55%
======== ===== ========= ===== ======== ======
Total capital.................. $ 29,070 21.02% $ 30,069 21.71% $ 31,067 22.39%
Risk-based capital requirement. 11,062 8.00 11,081 8.00 11,101 8.00
-------- ------ --------- ----- -------- ------
Excess...................... $ 18,007 13.02% $ 18,987 13.71% $ 19,967 14.39%
======== ===== ========= ===== ======== ======
</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.
32
<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 period and at the date 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 year ended September 30, 1997, as if the Common Stock had
been sold at the beginning of such year, and the estimated net proceeds had been
invested at 5.44% at the beginning of the year. The foregoing yield approximates
the yield on the one-year U.S. Treasury bill at September 30, 1997. (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 yield for the
Company and the Bank is assumed to be 3.32% for the year ended September 30,
1997, based on the effective tax rate of 39.0% for the year. 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 122,492 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. 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.
33
<PAGE>
<TABLE>
<CAPTION>
At or for the Year Ended September 30, 1997
--------------------------------------------------------------
1,517,250 1,785,000 2,052,750
Shares at Shares at Shares at
$10.00 Per Share $10.00 Per Share $10.00 Per Share
---------------- ---------------- -----------------
(Dollars in thousands, except per share amounts)
<S> <C> <C> <C>
Gross offering proceeds................................. $ 15,173 $ 17,850 $ 20,528
Plus: Shares issued to Foundation ..................... 750 750 750
---------- ---------- ----------
Pro forma market capitalization ..................... $ 15,923 $ 18,600 $ 21,278
========== ========== ==========
Gross Offering proceeds................................. $ 15,173 $ 17,850 $ 20,528
Less: Estimated Offering expenses:...................... 648 685 722
---------- ---------- ----------
Estimated net Offering proceeds...................... 14,525 17,165 19,806
Less: Common stock purchased by ESOP.................... 1,214 1,428 1,642
MRP............................................ 607 714 821
Funds to capitalize MHC........................ 250 250 250
Investment in fixed assets (1)................. $ 1,250 $ 1,250 $ 1,250
---------- ---------- ----------
Estimated investable net proceeds.................... $ 11,204 $ 13,523 $ 15,843
========== ========== ==========
Net income (2):
Historical net income................................ $ 1,977 $ 1,977 $ 1,977
Pro forma income on investable net proceeds.......... 372 449 526
Pro forma ESOP adjustment (3)........................ (74) (87) (100)
Pro forma MRP adjustment (4)......................... (74) (87) (100)
---------- ---------- ----------
Total............................................ $ 2,201 $ 2,252 $ 2,303
========== ========== ==========
Net income per share: (2)(5)
Historical net income................................ $ 0.56 $ 0.47 $ 0.41
Pro forma income on investable net proceeds.......... 0.10 0.11 0.11
Pro forma ESOP adjustment (3)........................ (0.02) (0.02) (0.02)
Pro forma MRP adjustment (4)......................... (0.02) (0.02) (0.02)
---------- ---------- ----------
Total............................................ $ 0.62 $ 0.54 $ 0.48
========== ========== ==========
Weighted average number of shares outstanding
for earnings per share calculations (3).............. 3,560,939 4,189,340 4,817,741
Stockholders' equity:
Historical (6)...................................... $ 23,608 $ 23,608 $ 23,608
Estimated net proceeds.............................. 14,525 17,165 19,806
Plus: Shares issued to Foundation.................. 750 750 750
Less: Contribution to Foundation.................... (750) (750) (750)
Plus: Tax Benefit of the contribution to
the Foundation............................. 293 293 293
Less: Common stock acquired by the ESOP (3)......... (1,214) (1,428) (1,642)
Common Stock acquired by MRP (4).............. (607) (714) (821)
--------- --------- ----------
Total............................................ $ 36,605 $ 38,924 $ 41,244
========= ========= ==========
Stockholders' equity per share: (5)
Historical (6)....................................... $ 6.42 $ 5.46 $ 4.75
Estimated net offering proceeds (4).................. 3.95 3.97 3.98
Plus: Shares issued to Foundation................... 0.20 0.17 0.15
Less: Contribution to Foundation..................... (0.20) (0.17) (0.15)
Plus: Tax Benefit of the contribution to
the Foundation.............................. 0.08 0.07 0.06
Less: Common Stock acquired by ESOP (3).............. (0.33) (0.33) (0.33)
Common Stock acquired by MRP (4)............... (0.17) (0.17) (0.17)
---------- ---------- ----------
Total............................................ $ 9.95 $ 9.00 $ 8.29
========== ========== ==========
Number of shares outstanding for stockholders' equity
per share calculations............................... 3,676,250 4,325,000 4,973,750
========== ========== ==========
Offering price as a percentage of pro forma stockholders'
equity per share..................................... 100.50% 111.11% 120.63%
========== ========== ==========
Ratio of offering price to pro forma net income per share 16.13x 18.52x 20.83x
========== ========== ==========
</TABLE>
(Footnotes on succeeding page)
34
<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 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 $0.49, $0.43 and $0.38 at the minimum, midpoint and
maximum, respectively. Per share net income data is based on 3,560,939,
4,189,340 and 4,817,741 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 and maximum of the Estimated
Valuation Range, the offering price as a percentage of pro forma
stockholders' equity per share would be 100.30%, 110.74% and 120.05%,
respectively, and pro forma net income per share would have been $0.62,
$0.53 and $0.47, 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
1.6%. 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
3,827,975, 4,503,500 and 5,179,025, respectively, net income per share
would be $0.59, $0.52 and $0.46, respectively, and stockholders' equity
per share would be $9.96, $9.04 and $8.36, respectively. See
"Management of the Bank -- Certain Benefit Plans and Agreements -- 1998
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.
35
<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 $18.9 million, at the
midpoint, which is approximately $324,000 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 $1.1 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 $9.00 and $9.00, respectively, and
$0.54 and $0.53, respectively, with the Foundation or without the Foundation.
The pro forma price to book ratio and the pro forma price to earnings ratio are
111.11% and 18.87x, respectively, at the midpoint of the estimate, assuming no
Foundation and 111.11% and 18.52x, 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 and maximum of
the Estimated Valuation Range, assuming the Stock Issuance was completed at
September 30, 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................. $ 15,173 $ 16,086 $ 17,850 $ 18,924 $ 20,528 $ 21,763
Pro forma market capitalization........... 15,923 16,086 18,600 18,924 21,278 21,763
Total assets.............................. 264,485 264,982 266,804 267,441 269,124 269,900
Total liabilities......................... 227,880 227,880 227,880 227,880 227,880 227,880
Pro forma stockholders' equity............ 36,605 37,102 38,924 39,561 41,244 42,020
Pro forma consolidated net earnings....... 2,201 2,219 2,252 2,273 2,303 2,326
Pro forma stockholders' equity per share.. 9.96 9.92 9.00 9.00 8.29 8.30
Pro forma consolidated net income per
share................................... 0.62 0.62 0.54 0.53 0.48 0.47
Pro forma pricing ratios:
Offering price as a percentage of pro
forma stockholders' equity per share 100.50% 100.10% 111.11% 111.11% 120.63% 121.07%
Offering price to pro forma net earnings
per share......................... 16.13x 16.13x 18.52x 18.87x 20.83x 21.28x
Offering price to assets per share..... 6.02% 6.07% 6.97% 7.08% 7.91% 8.06%
Pro forma financial ratios:
Return on assets...................... 0.83 0.84 0.84 0.85 0.86 0.86
Return on stockholders' equity........ 6.01 5.98 5.79 5.75 5.58 5.54
Stockholders' equity to assets........ 13.84 14.00 14.59 14.79 15.32 15.57
</TABLE>
36
<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 1,785,000 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 20,000 1.1% $ 200,000
William M. Loughran, Vice President
and Director 7,500 .4 75,000
Gary C. Loraditch, Vice President, Secretary,
Treasurer and Director 15,000 .8 150,000
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
George S. Magsamen, Director 8,000 .4 80,000
Martin F. Meyers, Director 8,000 .4 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 1.0 183,590
-------- ----- -----------
All directors and executive officers , as a group
(10 persons) and their associates 122,492 6.9 1,224,920
ESOP (2) 142,800 8.0 1,428,000
MRP (3) 71,400 4.0 714,000
-------- ------- -----------
Total (4) 336,692 18.9% $ 3,366,920
======== ====== ===========
</TABLE>
- ---------------
(1) Percentages are based on the sale of 1,785,000 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 and maximum 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 9.2%, 7.8% and 6.8%, 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
(71,400 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 (178,500 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 and Incentive Plan.
37
<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.
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.
38
<PAGE>
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 September 30, 1997, the Bank held
approximately $18.6 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
September 30, 1997.
<TABLE>
<CAPTION>
Change Net Portfolio Value NPV as % of PV of Assets
----------------------------------------------- --------------------------------
in Rates $ Amount $ Change (1) % Change (2) NPV Ratio (3) Change (4)
- -------- -------- ------------ ------------ ------------- ----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
+400 bp $ 15,539 $ (12,779) (45.0)% 6.43% (455) bp
+300 bp 18,839 (9,478) (33.0) 7.67 (332) bp
+200 bp 22,202 (6,115) (22.0) 8.88 (210) bp
+100 bp 25,474 (2,843) (10.0) 10.03 (96) bp
0 bp 28,317 -- -- 10.98 --
- -100 bp 30,214 1,897 7.0 11.59 +61 bp
- -200 bp 32,211 3,893 14.0 12.22 +123 bp
- -300 bp 34,496 6,178 22.0 12.92 +193 bp
- -400 bp 37,750 9,433 33.0 13.91 +293 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.
39
<PAGE>
<TABLE>
<CAPTION>
***Risk Measures: 200 bp rate shock*** At September 30,
-----------------------
1997 1996
-------- ------
<S> <C> <C>
Pre-Shock NPV Ratio: NPV as % of PV of Assets............... 10.98% 10.57%
Exposure Measure: Post Shock NPV Ratio...................... 8.88% 7.19%
Sensitivity Measure: Change in NPV Ratio................... -210 bp -338 bp
</TABLE>
The above table indicates that at September 30, 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
September 30, 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 June 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.
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."
40
<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>
Year Ended September 30,
-----------------------------------------------------------
At September 30, 1997 1997 1996
--------------------- -------------------------------- -------------------------
Average
Yield/ Average Yield/ Average
Balance Cost Balance Interest Cost Balance Interest
----------- -------- ----------- ---------- -------- ----------- ------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans receivable (1).................... $ 158,676 8.48% $ 156,227 $ 13,240 8.47% $ 149,571 $ 13,094
Mortgage backed securities.............. 37,189 6.78 37,440 2,428 6.49 36,936 2,309
Investment securities (2) and FHLB stock 31,756 6.64 39,177 2,877 7.34 34,966 2,439
Other interest-earning assets........... 15,308 6.00 16,150 912 5.65 20,349 1,222
---------- ---------- --------- ---------- ---------
Total interest-earning assets ...... 242,929 7.87 248,994 19,457 7.81 241,822 19,064
Non-interest-earning assets............... 8,809 12,317 12,636
---------- ---------- ----------
Total assets........................ $ 251,738 $ 261,311 $ 254,458
========== ==========
Interest-bearing liabilities:
Deposits................................ $ 224,656 4.37 $ 232,929 10,312 4.43 $ 228,913 10,621
Other liabilities....................... 727 0.52 1,523 10 0.66 1,406 15
---------- ---------- --------- ---------- ---------
Total interest-bearing liabilities.. 225,383 4.36 234,452 10,322 4.40 230,319 10,636
--------- ---------
Non-interest-bearing liabilities.......... 2,497 3,989 2,861
---------- ---------- ----------
Total liabilities................... 227,880 238,441 233,180
Retained earnings......................... 23,858 22,870 21,278
---------- ---------- ----------
Total liabilities and retained
earnings............................ $ 251,738 $ 261,311 $ 254,458
========== ========== ==========
Net interest income....................... $ 9,135 $ 8,428
========== ========== ==========
Interest rate spread...................... 3.51% 3.41%
==== ========
Net interest margin (3)................... 3.67%
========
Ratio of average interest-earning assets
to average interest-bearing liabilities. 106.20%
========
<CAPTION>
Year Ended September 30,
--------------------------------------------
1996 1995
-------- ---------------------------------
Average Average
Yield/ Average Yield/
Cost Balance Interest Cost
------ ----------- ------------- ------
<S> <C> <C> <C> <C>
Interest-earning assets:
Loans receivable (1).................... 8.75% $ 137,845 $ 12,017 8.72%
Mortgage backed securities.............. 6.25 37,220 2,381 6.40
Investment securities (2) and FHLB stock 6.98 22,344 1,548 6.93
Other interest-earning assets........... 6.01 20,803 1,180 5.67
---------- -------------
Total interest-earning assets ...... 7.88 218,212 17,126 7.85
Non-interest-earning assets............... 12,305
----------
Total assets........................ $ 230,517
==========
Interest-bearing liabilities:
Deposits................................ 4.64 $ 204,097 8,833 4.33
Other liabilities....................... 1.07 3,330 141 4.23
---------- ------------
Total interest-bearing liabilities.. 4.62 207,427 8,974 4.33
------------
Non-interest-bearing liabilities.......... 3,213
----------
Total liabilities................... 210,640
Retained earnings......................... 19,877
----------
Total liabilities and retained earnings $ 230,517
==========
Net interest income....................... $ 8,152
============
Interest rate spread...................... 3.26% 3.52%
====== =======
Net interest margin (3)................... 3.49% 3.74%
====== =======
Ratio of average interest-earning assets
to average interest-bearing liabilities. 104.99% 105.20%
====== =======
</TABLE>
- ---------------
(1) Includes nonaccrual loans.
(2) Consists of U.S. Government and agency securities and, for the years
ended September 30, 1996 and 1995, investments in mutual funds.
(3) Represents net interest income divided by the average balance of
interest-earning assets.
41
<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>
Year Ended September 30,
--------------------------------------------------------------------------------------------
1997 vs. 1996 1996 vs. 1995
------------------------------------------- ----------------------------------------------
Increase (Decrease) Increase (Decrease)
Due to Due to
------------------------------------------- ----------------------------------------------
Rate/ Rate/
Volume Rate Volume Total Volume Rate Volume Total
------- ------- -------- ------- -------- -------- -------- --------
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest income:
Loans receivable............... $ 583 $ (418) $ (19) $ 146 $ 1,022 $ 51 $ 4 $ 1,077
Mortgage-backed securities..... 32 86 1 119 (18) (54) -- (72)
Investment securities (1)
and FHLB Stock............... 293 129 16 438 872 13 6 891
Other interest-earning assets.. (237) (72) (1) (310) 2 42 (2) 42
-------- -------- ------- -------- ------- ------- -------- -------
Total interest-earning assets 671 (275) (3) 393 1,878 52 8 1,938
Interest expense:
Deposits....................... 186 (487) (8) (309) 1,074 637 77 1,788
Other liabilities.............. (2) (6) 3 (5) (123) (27) 24 (126)
-------- -------- ------- -------- ------- ------- -------- -------
Total interest-bearing
liabilities............... 184 (493) (5) (314) 951 610 101 1,662
-------- -------- ------- -------- ------- ------- -------- -------
Change in net interest income.... $ 487 $ 218 $ 2 $ 707 $ 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.
42
<PAGE>
COMPARISON OF FINANCIAL CONDITION AT 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. The decrease in
assets occurred as the Bank used cash from maturing investment securities to pay
for reductions in certificates of deposit.
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. 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. 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. 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 and $32.6 million at September 30, 1995, 1996, and
1997, respectively, which comprised 26.0%, 24.0% and 19.6%, 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,
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, 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 $857,000, 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.
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. The
Bank utilized minimal amounts of FHLB advances during the years ended September
30, 1997 and 1996.
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
43
<PAGE>
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 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.
44
<PAGE>
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 " -- Asset
Classification 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 $434,000 and $286,000 for the years ended September 30, 1996 and 1997,
respectively. 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.
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 December 31, 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 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, 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."
45
<PAGE>
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 Restrictions." 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 September 30, 1997, the Bank exceeded all regulatory minimum capital
requirements. For a discussion of regulatory capital requirements, and see
"Regulation -- Depository Institution Regulation -- Capital Requirements." For
information reconciling the Bank's retained earnings as reported in its
financial statements at September 30, 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 September 30, 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 years ended September 30, 1997 and 1996, the Bank had $51.8 million and
$61.4 million, respectively, of loan originations. During the years ended
September 30, 1997 and 1996, the Bank purchased investment securities in the
amounts of $44.0 million and $41.0 million, respectively, and mortgage-backed
securities in the amounts of $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.
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 September 1997 was approximately 20.6%, and its short-term
liquidity for such month was approximately 9.9%, which levels exceeded required
levels 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
46
<PAGE>
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 September 30, 1997, cash, interest-bearing deposits in other banks
and federal funds sold totaled $3.9 million, $8.2 million and $7.1 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 September 30, 1997 totaled $92.8 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 September 30, 1997,
the Bank had commitments under standby letters of credit and lines of credit and
commitments to originate mortgage loans of $2.7 million, $8.2 million and $1.7
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.
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.
47
<PAGE>
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.
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.
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 September 30,
1997, management estimates that more than 95% of deposits and 90% of all lending
came from its market area.
48
<PAGE>
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 $166.4 million at
September 30, 1997, representing 66.1% of total assets at that date. At
September 30, 1997, $103.7 million, or 62.3% 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 $8.6 million, $6.4 million and
$10.2 million, respectively, or 5.2%, 3.9% and 6.1%, respectively, of the Bank's
gross loan portfolio at September 30, 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 $32.6 million, $4.0 million and
$825,000, respectively, or 19.6%, 2.4% 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 September 30, 1997, such loans
amounted to $60,000, which was less than .1% of the Bank's gross loan portfolio.
49
<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 September 30, 1997, the Bank had no concentrations of
loans exceeding 10% of gross loans other than as disclosed below.
<TABLE>
<CAPTION>
At September 30,
-------------------------------------------------------
1997 1996
------------------- --------------------
Amount % Amount %
------ ----- ------ -----
<S> <C> <C> <C> <C>
Real estate loans:
Single-family residential (1)........... $ 103,677 62.30% $ 94,275 56.74%
Single-family rental property loans..... 6,409 3.85 7,065 4.25
Commercial (2).......................... 10,169 6.11 10,316 6.21
Construction............................ 8,645 5.19 11,427 6.87
Commercial lines of credit................ 60 .04 262 .16
Consumer loans:
Automobile.............................. 32,633 19.61 39,925 24.03
Home equity lines of credit............. 3,986 2.40 1,855 1.12
Savings account......................... 825 .50 1,029 .62
--------- ------ --------- ------
166,404 100.00% 166,154 100.00%
====== ======
Less:
Undisbursed portion of loans in process. 2,807 5,088
Deferred loan origination fees.......... 567 823
Unearned interest....................... 3,376 4,757
Allowance for loan losses............... 978 926
--------- ---------
Total................................. $ 158,676 $ 154,560
========= =========
<CAPTION>
At September 30,
-------------------------------------------------------------------------------
1995 1994 1993
--------------------- -------------------- --------------------
Amount % Amount % Amount %
------ ------ ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
(Dollars in thousands)
Real estate loans:
Single-family residential (1)........... $ 87,575 55.87% $ 82,594 59.86% $ 95,546 67.69%
Single-family rental property loans..... 8,045 5.13 8,593 6.23 9,456 6.70
Commercial (2).......................... 11,174 7.13 10,921 7.91 12,060 8.54
Construction............................ 7,065 4.51 9,853 7.14 9,707 6.87
Commercial lines of credit................ 234 .15 110 .08 65 .05
Consumer loans:
Automobile.............................. 40,793 26.02 24,797 17.97 13,395 9.48
Home equity lines of credit............. 842 .54 125 .09 -- --
Savings account......................... 1,022 .65 995 .72 1,019 .72
-------- ------ -------- ------ -------- ------
156,750 100.00% 137,988 100.00% 141,248 100.00%
====== ====== ======
Less:
Undisbursed portion of loans in process. 3,425 3,509 1,612
Deferred loan origination fees.......... 1,166 1,539 2,180
Unearned interest....................... 5,576 3,188 1,446
Allowance for loan losses............... 788 542 613
-------- -------- --------
Total................................. $145,795 $129,210 $135,397
======== ======== ========
</TABLE>
--------------
(1) Includes fixed-rate second mortgage loans.
(2) Includes acquisition and development loans.
50
<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 During the Year Ending Due After Due After Due After
September 30, 3 Through 5 Through 10 Through
------------------------------ 5 Years After 10 Years After 15 Years After
1998 1999 2000 September 30, 1997 September 30, 1997 September 30, 1997
------ ------ ------- ------------------ ------------------ ------------------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Real estate loans:
Single-family residential.... $ 7,500 $ 7,886 $ 7,770 $ 12,871 $ 25,166 $ 18,627
Single-family rental property 274 290 292 573 1,455 1,563
Commercial................... 641 700 735 1,470 2,859 2,269
Construction................. 4,144 54 97 133 435 632
Commercial lines of credit..... 60 -- -- -- -- --
Consumer:
Automobiles.................. 9,354 8,635 6,694 6,295 1,634 21
Home equity.................. -- -- -- -- -- --
Savings accounts............. 468 233 124 -- -- --
-------- -------- -------- --------- --------- ----------
Total..................... $ 22,441 $ 17,798 $ 15,712 $ 21,342 $ 31,549 $ 23,112
======== ======== ======== ========= ========= ==========
<CAPTION>
Due After 15
Years After
September 30, 1997 Total
------------------ -------
<S> <C> <C>
Real estate loans:
Single-family residential.... $ 23,857 $ 103,677
Single-family rental property 1,962 6,409
Commercial................... 1,495 10,169
Construction................. 3,150 8,645
Commercial lines of credit..... -- 60
Consumer:
Automobiles.................. -- 32,633
Home equity.................. 3,986 3,986
Savings accounts............. -- 825
---------- ----------
Total..................... $ 34,450 $ 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>
51
<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>
Year Ended September 30,
-----------------------------------------------
1997 1996 1995
--------- -------- --------
(In thousands)
<S> <C> <C> <C>
Loans originated:
Real estate loans:
Single-family residential.................................. $ 22,507 $ 27,594 $ 13,727
Single-family rental property loans........................ 135 157 249
Commercial................................................. 1,650 91 282
Construction............................................... 1,228 2,969 3,045
Commercial lines of credit................................... -- 68 132
Consumer loans:
Automobiles................................................ 14,070 21,677 33,334
Home equity................................................ 11,871 8,347 4,092
Savings account............................................ 319 495 488
--------- --------- --------
Total loans originated.................................. $ 51,780 $ 61,398 $ 55,349
========= ========== ========
Loans purchased:
Real estate loans............................................ $ -- $ -- $ --
Other loans.................................................. -- -- --
--------- --------- ----------
Total loans purchased................................... $ -- $ -- $ --
========= ========= ==========
Loans sold:
Whole loans.................................................. $ -- $ -- $ --
Participation loans.......................................... 225 4,914 94
--------- --------- ----------
Total loans sold........................................ $ 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.
52
<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
$225,000, $4.9 million and $94,000 during 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 $3.6 million at
September 30, 1997. Applicable law additionally authorizes savings institutions
to make loans to one borrower, for any purpose, in an amount
53
<PAGE>
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
September 30, 1997, the Bank had no lending relationships in excess of the
loans-to-one-borrower limit. At September 30, 1997, the Bank's largest lending
relationship was a $2.9 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 September 30, 1997, 10
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
September 30, 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 September 30, 1997, single-family,
residential mortgage loans, excluding single-family rental property loans and
home equity loans, totaled $103.7 million, or 62.3% of the Bank's gross loan
portfolio.
The Bank originates fixed-rate mortgage loans at competitive interest
rates. At September 30, 1997, the Bank had $95.8 million of fixed-rate single-
family mortgage loans, which amounted to 92.4% 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 September 30, 1997, $7.9 million, or 7.6%, 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 and the lifetime interest
rate adjustment limitations. Accordingly, there can be no assurance that yields
on the Bank's
54
<PAGE>
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 September 30, 1997, single-family rental property loans
totaled $6.4 million, or 3.9%, of the Bank's gross loan portfolio. Originations
of single-family rental property loans were $135,000, $157,000 and $249,000 for
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 September 30, 1997, $8.6 million, or 5.2%, 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 $8.6
million, $11.4 million, $7.1 million, $9.5 million and $9.7 million at September
30, 1997, 1996, 1995, 1994 and 1993, respectively, and construction loan
originations were $1.2 million, $3.0 million and $3.0 million during 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." At September 30,
1997, the Bank had two such loans outstanding totaling $2.1 million. All
acquisition and development loans were performing in accordance with their terms
at such date.
55
<PAGE>
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 $1.4
million at September 30, 1997. At September 30, 1997, the Bank had $10.2 million
of commercial real estate loans, which amounted to 6.1% 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 September 30, 1997, the Bank had $60,000 of outstanding loans and commitments
to fund $265,000 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. Nevertheless, such loans continue to constitute a
significant portion of the Bank's loan portfolio, totaling $32.6 million, or
19.6% of the Bank's gross loan portfolio, at September 30, 1997.
56
<PAGE>
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 -- Indirect Originations of Automobile Loans." 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 September 30,
1997, home equity lines of credit totaled $4.0 million, or 2.4% 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 $12.1 million, or 7.3% of the Bank's gross
loans at September 30, 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 September
30, 1997, savings account loans accounts totaled $825,000, 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.
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
57
<PAGE>
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.
The following table sets forth information with respect to the Bank's
nonperforming assets at the dates indicated.
<TABLE>
<CAPTION>
Year Ended September 30,
----------------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Loans accounted for on a nonaccrual basis: (1)
Real estate:
Single-family residential................ $ 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.................................... $ 1,843 $ 2,287 $ 905 $ 1,047 $ 2,650
========== ========= ========= ========= ==========
<CAPTION>
Accruing loans which are contractually past due
90 days or more:
<S> <C> <C> <C> <C> <C>
Real estate:
Single-family residential................ $ -- $ -- $ -- $ -- $ --
Single-family rental property............ -- -- -- -- --
Commercial............................... -- -- -- -- --
Construction............................. -- -- -- -- --
Commercial lines of credit................. -- -- -- -- --
Consumer................................... -- -- -- -- --
---------- --------- --------- --------- ---------
Total.................................... $ -- $ -- $ -- $ -- $ --
========== ========= ========= ========= =========
Total non-performing loans............... $ 1,843 $ 2,287 $ 905 $ 1,047 $ 2,650
========== ========= ========= ========= =========
Percentage of gross loans.................... 1.11% 1.38% 0.58% 0.76% 1.88%
========== ========= ========= ========= =========
Percentage of total assets................... 0.73% 0.88% 0.38% 0.48% 1.22%
========== ========= ========= ========= =========
Other non-performing assets (2).............. $ 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.
58
<PAGE>
During the year ended September 30, 1997, gross interest income of
$97,000 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 year ended September 30, 1997 amounted to $30,000.
At September 30, 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 September 30, 1997, nonaccrual loans consisted of 19 single-family
residential mortgage loans aggregating $1.8 million and one commercial real
estate loan aggregating $86,000.
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 September 30,
1997, the Bank had no real estate owned but had $61,000 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 September 30, 1997, the Bank had $3.7 million in
classified assets, $1.8 million in assets classified as special mention, $1.8
million in assets classified as substandard, no assets classified as doubtful
and $56,000 in assets classified as loss. Special mention assets consisted of 24
single-family residential mortgage loans 60 to 89 days delinquent at September
30, 1997, and substandard assets consisted of the $1.8 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 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 possible
loan losses against the Bank's income.
59
<PAGE>
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.
60
<PAGE>
The following table sets forth an analysis of the Bank's allowance for
loan losses for the periods indicated.
<TABLE>
<CAPTION>
Year Ended September 30,
-----------------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- ------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Balance at beginning of period............... $ 926 $ 788 $ 542 $ 613 $ 836
-------- --------- -------- -------- ---------
Loans charged-off:
Real estate mortgage:
Single-family residential................ -- -- -- -- --
Multi-family residential................. -- -- -- -- --
Commercial............................... -- (4) -- -- --
Construction............................. -- -- -- -- --
Consumer................................... (392) (394) (178) (71) (67)
-------- --------- -------- -------- ---------
Total charge-offs............................ (392) (398) (178) (71) (67)
Recoveries:
Real estate mortgage:
Single-family residential................ -- -- -- -- --
Multi-family residential................. -- -- -- -- --
Commercial............................... -- -- -- -- --
Construction............................. -- -- -- -- --
Consumer................................... 158 102 169 137 309
-------- --------- -------- -------- ---------
Total recoveries............................. 158 102 169 137 309
Net loans charged off........................ (234) (296) (9) 66 242
Provision for (reduction of) loan losses..... 286 434 255 (137) (465)
-------- --------- -------- -------- ---------
Balance at end of period..................... $ 978 $ 926 $ 788 $ 542 $ 613
======== ========= ======== ======== =========
Ratio of net charge-offs to average
loans outstanding during the period........ (.15)% (.20)% (.01)% .05% .17%
======== ========= ======== ======== =========
</TABLE>
61
<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,
-------------------------------------------------------------------------
1997 1996 1995
--------------------- ---------------------- ---------------------
Percent of Percent of Percent of
Loans in Loans in Loans in
Category to Category to Category to
Amount Total Loans Amount Total Loans Amount Total Loans
------ ----------- ------ ----------- ------ -----------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Real estate:
Single-family residential............. $ 432 62.30% $ 276 56.74% $ 141 55.87%
Single-family rental property......... 13 3.85 4 4.25 4 5.13
Commercial............................ 79 6.11 120 6.21 158 7.13
Construction.......................... 28 5.19 36 6.87 40 4.51
Commercial lines of credit.............. -- .04 -- .16 -- .15
Consumer................................ 426 22.51 490 25.77 445 27.21
------- ------ -------- ------ ------- ------
Total allowance for loan losses..... $ 978 100.00% $ 926 100.00% $ 788 100.00%
======= ====== ======== ====== ======= ======
<CAPTION>
At September 30,
------------------------------------------------
1994 1993
--------------------- ----------------------
Percent of Percent of
Loans in Loans in
Category to Category to
Amount Total Loans Amount Total Loans
------ ----------- ------ -----------
(Dollars in Thousands)
<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>
62
<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 September 30, 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 collaterize 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.
63
<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 September 30, 1997, mortgage-backed securities with an amortized
cost of $37.2 million were classified as held to maturity. At September 30,
1997, the Bank's mortgage-backed securities had a weighted average yield of
6.78%.
At September 30, 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").
64
<PAGE>
The following table sets forth the carrying value of the Bank's
investments at the dates indicated.
<TABLE>
<CAPTION>
At September 30,
-------------------------------------------
1997 1996 1995
----- ---- ----
(In thousands)
<S> <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....................... 30,323 36,298 25,900
Mortgage-backed securities.................................. 37,189 39,771 35,047
FHLB stock.................................................. 1,433 1,301 1,292
-------- -------- --------
Total.................................................... $ 68,945 $ 77,471 $ 64,327
======== ======== ========
</TABLE>
65
<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 September 30, 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................. $ 10,981 5.40% $ 4,250 6.43% $ 14,343 7.53% $ 749 7.75%
Mortgage-backed securities..... 1,262 7.20 19,250 6.35 12,212 6.95 4,465 8.08
FHLB stock..................... -- -- -- -- -- -- 1,433 7.21
--------- ---------- --------- ---------
Total....................... $ 12,243 5.59 $ 23,500 6.36 $ 26,555 7.26 $ 6,647 7.86
========= ========== ========= =========
<CAPTION>
Total Investment Portfolio
-------------------------------
Carrying Market Average
Value Value Yield
-------- ------ -------
(Dollars in thousands)
<S> <C> <C> <C>
Securities held to maturity:
U.S. government and agency
obligations................. $ 30,323 $ 30,382 6.61%
Mortgage-backed securities..... 37,189 36,752 6.78
FHLB stock..................... 1,433 1,433 7.21
--------- ---------
Total....................... $ 68,945 $ 68,567 6.71
========= =========
</TABLE>
66
<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.
67
<PAGE>
Savings deposits in the Bank at September 30, 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:
1.63% None NOW and Super NOW accounts $ 250 $ 24,203 10.77%
3.44 None Money market 250 10,055 4.48
---------- ------
Total demand deposits 34,258 15.25
Passbook savings deposits:
3.20 None Regular passbook 25 31,169 13.87
3.63 None Money market passbook 10,000 29,488 13.13
---------- ------
Total passbook savings deposits 60,657 27.00
Certificates of Deposit
-----------------------
4.77 3 months or less Fixed-term, fixed-rate 1,000 13,165 5.86
5.24 6 months Fixed-term, fixed-rate 1,000 10,285 4.58
5.32 12 months Fixed-term, fixed-rate 100 49,867 22.20
5.24 18 months Fixed-term, fixed-rate 100 6,095 2.71
5.44 24 months Fixed-term, fixed-rate 100 13,288 5.91
5.69 30 months Fixed-term, fixed-rate 100 2,870 1.28
6.12 36 months Fixed-term, fixed-rate 100 1,853 0.82
6.33 42 months Fixed-term, fixed-rate 100 1,348 0.60
5.69 48 months Fixed-term, fixed-rate 100 209 0.10
6.12 60 months Fixed-term, fixed-rate 100 19,529 8.69
5.63 $100,000 and over Fixed-term, fixed-rate N/A 10,485 4.67
---------- ------
Total certificates of deposit $ 128,994 57.42
Accrued interest payable 747 .33
---------- ------
Total deposits $ 224,656 100.00%
========== ======
</TABLE>
- ---------------
* Represents weighted average interest rate.
68
<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 at Balance at
September 30, % of Increase September 30, % of
1997 Deposits (Decrease) 1996 Deposits
------------- -------- ---------- ------------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
NOW ............................................. $ 24,203 10.77% $ 207 $ 23,996 10.28%
Money market deposit............................. 10,055 4.48 (516) 10,571 4.54
Passbook savings deposits........................ 60,657 27.00 (3,841) 64,498 27.64
Certificates of deposit.......................... 118,509 52.75 (8,669) 127,178 54.51
Certificates of deposit $100,000 and over........ 10,485 4.67 3,959 6,526 2.80
Accrued interests payable........................ 747 .33 205 542 .23
--------- ------ ---------- ---------- ------
$ 224,656 100.00% $ (8,655) $ 233,311 100.00%
========= ====== ========== ========== ======
</TABLE>
<TABLE>
<CAPTION>
Balance at
Increase September 30, % of
(Decrease) 1995 Deposits
---------- ------------- --------
<S> <C> <C> <C>
NOW .................................................. $ 1,035 $ 22,961 10.54%
Money market deposit.................................. 137 10,434 4.79
Passbook savings deposits............................. 240 64,258 29.49
Certificates of deposit............................... 12,508 114,670 52.64
Certificates of deposit $100,000 and over............. 1,377 5,149 2.36
Accrued interests payable............................. 146 396 .18
---------- ---------- ------
$ 15,443 $ 217,868 100.00%
========== ========== ======
</TABLE>
69
<PAGE>
The following tables set forth the average balances and interest rates
based on month-end balances for various types of deposits as of the dates
indicated.
<TABLE>
<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 $228,913 $ 204,097
========= ======== =========
</TABLE>
The following table sets forth the time deposits in the Bank classified by
rates at the dates indicated.
<TABLE>
<CAPTION>
At September 30,
----------------------------------------------
1997 1996 1995
---- ---- ----
(In thousands)
<S> <C> <C> <C>
2.01 - 4%.................................................. $ -- $ -- $ 821
4.01 - 6%.................................................. 116,029 89,543 65,590
6.01 - 8%.................................................. 12,838 44,045 52,919
8.01 - 10%.................................................. 127 116 489
---------- ---------- ----------
$ 128,994 $ 133,704 $ 119,819
========== ========== ==========
</TABLE>
The following table sets forth the amount and maturities of time deposits
at September 30, 1997.
<TABLE>
<CAPTION>
Amount Due
------------------------------------------------------------------------
Less Than After
Rate One Year 1-2 Years 2-3 Years 3 Years Total
- ---- -------- --------- --------- ------- -----
(In thousands)
<S> <C> <C> <C> <C> <C>
4.01 - 6%.................... $ 91,899 $ 17,482 $ 1,469 $ 5,179 $ 116,029
6.01 - 8%.................... 936 889 10,139 874 12,838
8.01 10%.................... 9 -- 118 -- 127
-------- --------- --------- -------- ----------
$ 92,844 $ 18,371 $ 11,726 $ 6,053 $ 128,994
======== ========= ========= ======== ==========
</TABLE>
70
<PAGE>
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 September 30,
1997. At such date, such deposits represented 4.7% of total deposits and had a
weighted average rate of 5.63%.
<TABLE>
<CAPTION>
Certificates
Maturity Period of Deposit
--------------- --------------
(In thousands)
<S> <C>
Three months or less......................... $ 3,678
Over three through six months................ 2,304
Over six through 12 months................... 1,631
Over 12 months............................... 2,872
---------
Total.................................... $ 10,485
=========
</TABLE>
The following table sets forth the savings activities of the Bank for the
periods indicated.
<TABLE>
<CAPTION>
Year Ended September 30,
----------------------------------------------
1997 1996 1995
---- ---- ----
(In thousands)
<S> <C> <C> <C>
Deposits...................................................... $ 417,685 $ 420,336 $ 455,185
Withdrawals................................................... 436,652 415,514 441,963
---------- ---------- ----------
Net increase (decrease) before interest credited.............. (18,967) 4,822 13,222
Interest credited............................................. 10,312 10,621 8,833
---------- ---------- ----------
Net increase (decrease) in savings deposits............... $ (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.
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 years
ended September 30, 1997, 1996 and 1995, the Bank had no borrowings other than
FHLB advances. At September 30, 1997, the Bank had no outstanding FHLB advances.
71
<PAGE>
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 September 30,
1997, the Bank was authorized to invest up to approximately $7.5 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 Ebeneezer Road, Inc. ("Ebeneezer 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 September 30, 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 September
30, 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. Ebeneezer 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 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.
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 September 30, 1997, it had approximately 2% of deposits held
by all banks and savings institutions in each of Baltimore County and Harford
County.
72
<PAGE>
OFFICES AND OTHER MATERIAL PROPERTIES
The following table sets forth the location and certain additional
information regarding the Bank's offices at September 30, 1997.
<TABLE>
<CAPTION>
Book Value at Deposits at
Year Owned or Expiration Date September 30, Approximate September 30,
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) $ 416,856 8,000 $ 94,417
BRANCH OFFICES:
Bell Air 1975 Leased June 2000 -- 2,000 26,120
Dundalk (3) 1976 Leased June 2001 -- 1,700 30,943
York Road 1977 Leased September 1998 -- 1,155 13,770
Timonium 1978 Leased July 2003 -- 1,250 29,450
Catonsville 1981 Leased February 2001 -- 1,750 21,654
Severna Park (4) 1980 Leased -- 1,237 8,302
ADMINISTRATIVE OFFICE:
4111 E. Joppa Road 1994 Owned 1,373,934 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
$2.9 million at September 30, 1997. See Note 7 of Notes to Financial Statements.
EMPLOYEES
As of September 30, 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 September 30, 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.
73
<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 September 30, 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 September 30, 1997, the Bank's
adjusted total assets for purposes of core and tangible capital requirements
were $251.7 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
74
<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
September 30, 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 September 30, 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 September 30, 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
75
<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 is required to maintain average daily
balances of liquid assets (cash, deposits maintained pursuant to Federal Reserve
Board requirements, time and savings deposits in certain institutions,
obligations of the United States and political subdivisions thereof, shares in
mutual funds with certain restricted investment policies, highly rated corporate
debt, and mortgage loans and mortgage-related securities with less than five
years to maturity equal to the monthly average of not less than a specified
percentage (currently 5%) of its net withdrawable savings deposits plus short
term borrowings. Savings and loan institutions also are required to maintain
average daily balances of short-term liquid assets at a specified percentage
(currently 1%) of the total of their net withdrawable savings accounts and
borrowings payable in one year or less. Monetary penalties may be imposed for
failure to meet liquidity requirements. The average regulatory liquidity ratio
of the Bank for the month of September 1997 was approximately 20.6% with respect
to liquid assets and 9.9% with respect to short-term liquid assets.
On November 24, 1997, the OTS amended its issued liquidity regulation.
Under the amendment, the burden of compliance with the liquidity regulation was
decreased by reducing the liquidity base, streamlining the calculations used to
measure compliance with the liquidity requirement, reducing the liquidity
requirement from 5% of net withdrawable accounts and short-term borrowings to
4%, removing the 1% percent short-term liquidity requirement and expanding the
categories of liquid assets that may count toward satisfying the savings
association's liquidity requirement. In addition, a general requirement that
thrifts maintain a safe and sound level of liquidity was added to the
regulation.
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.
76
<PAGE>
At September 30, 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 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."
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
September
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30, 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
for residential housing finance. At September 30, 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 September 30, 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
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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 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 September 30, 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. Management believes that the
Bank already meets substantially all the standards adopted in the interagency
guidelines, and therefore does not believe that implementation of these
regulatory standards will materially affect the Bank's operations.
Additionally under FDICIA, as amended by the CDRI Act, the federal
banking agencies are required to establish standards relating to the asset
quality and earnings that the agencies determine to be appropriate. On July 10,
1995, the Federal banking agencies, including the OTS, issued proposed
guidelines relating to asset quality and earnings. Under the proposed
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 the asset quality and earnings standards,
in the form proposed by the banking agencies, would not have a material effect
on the Bank's operations.
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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
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 September 30, 1997, the maximum amount that the Bank could have
loaned to any one borrower without prior OTS approval was $3.6 million. At such
date, the largest aggregate amount of loans that the Bank had outstanding to any
one borrower was $2.9 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,
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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 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
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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.
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,
is being considered by the Commerce Committee of the House of Representatives,
but a vote on the bill has been indefinitely postponed. It is unknown whether
legislation will be enacted that alters the financial services industry, or if
enacted, what form such legislation might take.
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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 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.
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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 -- General" and " --
Activities Limitations."
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
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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.
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, Magsamen and Meyers will be
nominated for election for terms of office expiring at the 1999 annual meeting,
Messrs. Dietz, Dunton, Loughran and Rohe will be nominated for election for
terms of office expiring at the 2000 annual meeting and Messrs. Kahl, Cox and
Panzer will be nominated for election for terms of office expiring at the 2001
annual meeting.
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The following individuals will hold the offices in the Company set
forth below opposite their names.
<TABLE>
<CAPTION>
Name Title
---- -----
<S> <C>
Michael J. Dietz President
William M. Loughran Vice President
Gary C. Loraditch Vice President, Secretary and Treasurer
</TABLE>
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.
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. Rohe and Mr. Magsamen are cousins and Mr.
Cox is the son-in-law of Mr. Rohe.
<TABLE>
<CAPTION>
AGE AT
SEPTEMBER 30,
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
George Magsamen 77 1978 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 1991. He rejoined the Board in 1994.
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<PAGE>
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 1988. 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.
GEORGE S. MAGSAMEN has been retired for approximately 10 years. Prior
to his retirement, Mr. Magsamen was the owner of Magsamen Bus Company.
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.
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.
The Board of Directors' Audit Committee consists of Directors Meyers,
Magsamen 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
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<PAGE>
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.
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."
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<PAGE>
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 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.
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<PAGE>
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.
1998 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 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
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<PAGE>
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 MHC 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.
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
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<PAGE>
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 MHC 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. 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.
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. 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 $3,000. A participant who, after the Plan's effective
date, completes five years of service as a director, will have his account
credited with $17,500 on the September 30 following completion of five 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
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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 Protective Agreements. The Bank's severance
agreements (the "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 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 September 30, 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 Anti-Takeover Provisions in the Charter and Bylaws -- Additional
Anti-Takeover Provisions." 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.
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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 September 30, 1997, the Bank had $509,375 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.
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:
------------------------- -------------- -------------------
Baltimore County Public
Savings Bank, M.H.C. Stockholders Foundation
------------------------- -------------- -------------------
57.0% (1) of 41.3% (1) of 1.7% (1) of
Common Stock Common Stock Common Stock
--------------------------------------------------------------------
BCSB Bankcorp, Inc.
--------------------------------------------------------------------
100% of common stock
--------------------------------------------------------------------
Baltimore County Savings Bank, F.S.B.
--------------------------------------------------------------------
---------------
(1) Assumes the sale of 1,785,000 shares of Common Stock to public
stockholders and the issuance of 2,465,000 shares to the MHC
at the midpoint of the Estimated Valuation Range and the
subsequent issuance of 75,000 shares to the Foundation.
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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 midpoint 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.
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 of 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
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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 stockholders of the Company. No assurance
can be given that the Company will not take action adverse to the interests of
the minority stockholders. For example, the Company could revise the dividend
policy or defeat a candidate for the Board of Directors of the Bank or other
proposals put forth by the minority stockholders.
The Reorganization does not preclude the 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 CONVERSION TO STOCK FORM 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.
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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.
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.
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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.
In the following discussion, "Stock Bank" refers to the Bank after the
Reorganization and Stock Issuance.
The opinion provides that, among other things, (1) the Bank's exchange
of its charter to stock form (the "Bank Conversion") will qualify as a tax-free
reorganization under Internal Revenue Code of 1986, as amended (the "Code"),
Section 368(a)(1)(F); (2) the conversion of the Bank's wholly owned subsidiary
("Interim 1") into the MHC will qualify as a tax-free reorganization under Code
Section 368(a)(1)(F); (3) the merger of the wholly owned subsidiary of Interim 1
("Interim 2") into the Stock Bank with the Stock Bank as the survivor will
qualify as a tax-free reorganization under Code Section 368(a)(1)(A); (4) no
gain or loss will be recognized by the Bank in the Bank Conversion; (5) neither
the Stock Bank nor the MHC will recognize gain or loss upon the receipt by the
Stock Bank of substantially all of the assets of the Bank in exchange for equity
interests in the MHC and the Stock Bank's assumption of the Bank's liabilities;
(6) the MHC's basis in the stock of the Stock Bank will increase by an amount
equal to the Bank's net basis in the property transferred to the Stock Bank; (7)
the Stock Bank's basis in the property received from the Bank will be the same
as the basis of such property in the hands of the Bank immediately prior to the
Reorganization and Stock Issuance; (8) the Stock Bank's holding period for the
property received from the Bank will include the period during which such
property was held by the Bank; (9) subject to the conditions and limitations set
forth in Code Sections 381, 382, 383, and 384 and the Treasury regulations
promulgated thereunder, the Stock Bank will succeed to and take into account the
items of the Bank described in Code Section 381(c); (10) no gain or loss will be
recognized by the depositors of the Bank on the receipt of equity interests with
respect to the MHC in exchange for their equity interests surrendered therefor;
(11) the exchange of stock by depositors in exchange for equity interests in the
MHC will constitute a tax-free exchange of property solely for voting "stock"
pursuant to Code Section 351; (12) each Bank depositor's aggregate basis, if
any, in the MHC equity interest received in the exchange will equal the
aggregate basis, if any, of each depositor's equity interest in the Bank; (13)
the holding period of the MHC equity interests received by the depositors of
Bank will include the period during which the Bank equity interests surrendered
in exchange therefor were held; (14) the MHC will recognize no gain or loss upon
the transfer of the Stock Bank stock to the Company in exchange for Common Stock
pursuant to Code Section 351; (15) the Company will recognize no gain or loss
upon its receipt of Stock Bank stock from the MHC in exchange for Common Stock;
(16) the MHC will increase its basis in its shares of the Common Stock by the
MHC's basis in its Stock Bank stock; (17) the Company will recognize no gain or
loss upon the receipt of money in exchange for shares of Common Stock; (18) 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 stock form immediately after the
Reorganization and Stock Issuance, in the same dollar amounts and on the same
terms and conditions as their accounts at the Bank immediately prior to the
Reorganization and Stock Issuance; (19) the tax basis of the Common Stock
purchased in the Reorganization and Stock Issuance will be equal to the amount
paid therefor increased, in the case of the Common Stock acquired to the
exercise of Subscription Rights, by the fair market value, if any, of the
Subscription Rights exercised; (20) the holding period for the Common Stock
purchased in the Reorganization and Stock Issuance will commence upon the
exercise of such holder's Subscription Rights and otherwise on the day following
the date of such purchase; (21) gain or loss will be recognized to account
holders upon the receipt or exercise of Subscription Rights in the
Reorganization and Stock Issuance, but only to the extent such Subscription
Rights are deemed to have value, as discussed below.
The opinion of Housley Kantarian & Bronstein, P.C. is based in part
upon, and subject to the 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
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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 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,
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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.
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 Purchases 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 (___________, 199_)
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 Purchases of Shares." If the exercise of
Subscription Rights in this category results in an
oversubscription, shares shall be allocated among subscribing
Supplemental Eligible
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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 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 ____________, 199_.
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
____________, 199_ 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
Purchases 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
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__________, 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" 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
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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 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
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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 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 an Association 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
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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 office, an investment in the Common
Stock is not a deposit, and the Common Stock is not federally insured.
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 ___% 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 Reorganization 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 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.
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The Independent Valuation states that as of January 2, 1998, the
estimated pro forma market value of the Common Stock ranged from a minimum of
$36,762,500 to a maximum of $49,737,500 with a midpoint of $43,250,000 (the
Estimated Valuation Range). The Board determined to offer the shares in the
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 3,676,250 shares to
4,973,750 shares, with a midpoint of 4,325,000 shares. The Board has established
a public offering range such that the public ownership of the Company will
constitute a 42.0% ownership interest prior to the issuance of shares to the
Foundation, or between 1,517,250 shares and 2,052,750 shares with a midpoint of
1,785,000 shares. 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 41.3% 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.
The Board reviewed the Independent Valuation and, in particular,
considered (i) the Bank's financial condition and results of operations for 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 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 Common Stock Purchases" as to the method of
distribution and allocation of additional shares that may be issued in the event
of an increase in the Offering Range to fill unfilled orders in the Subscription
and Community Offerings.
The Independent Valuation, however, is not intended, and must not be
construed, as a recommendation of any kind as to the advisability of purchasing
such shares. RP Financial did not independently verify the Consolidated
Financial Statements and other information provided by the Bank, nor did RP
Financial value independently the assets or liabilities of the Bank. The
Independent Valuation considers the Bank 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 $49,737,500 and a corresponding increase in the shares being
offering in the Offering to more than 2,052,750 shares, or a decrease in the
minimum of the Estimated Valuation Range to less than $36,762,500 and a
corresponding decrease in the shares being offered to fewer than 1,517,250
shares, then the Company, after 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.
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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 1.0% of the total number of shares of Common Stock to be issued in the
Offering; no Person, together with associates of or persons acting in concert
with such person, may purchase in the Community Offering in the aggregate more
than 1.0% of the total number of shares of Common Stock to be issued in the
Offering; and no person, together with associates of or persons acting in
concert with such person, may purchase in the Stock Issuance more than the
overall maximum purchase limitation of 2.0% of the total number of shares of
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
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.
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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.
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
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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 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, 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,
(iii) is purchased in the open market by a tax-qualified or non-tax-qualified
employee benefit plan of the Bank or the Company in an amount reasonable and
appropriate to fund the plan, or (iv) 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.
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."
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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 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
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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.
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.
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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 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 PLAN OF REORGANIZATIONS
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
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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 3,676,250 and 4,973,750 shares,
subject to adjustment, 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
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 Restrictions", 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 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.
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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.
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 opinion 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.
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ADDITIONAL INFORMATION
The Company has filed with the SEC a Registration Statement on Form
SB-2 (File No. 333-_____) 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, and
Application on Form MHC-2 and 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.
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<TABLE>
<CAPTION>
INDEX TO FINANCIAL STATEMENTS
Page
----
<S> <C>
Independent Auditors' Report F-1
Consolidated Statements of Financial Condition as of F-2
September 30, 1997 and 1996
Consolidated Statements of Operations for the Years Ended F-3
September 30, 1997 and 1996
Consolidated Statements of Retained Earnings for the Years F-4
Ended September 30, 1997 and 1996
Consolidated Statements of Cash Flows for the Years Ended F-5
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.
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[LETTERHEAD OF ANDERSON ASSOCIATES, LLP APPEARS HERE]
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>
September 30,
-------------
1997 1996
---- ----
Assets
------
<S> <C> <C>
Cash $ 3,909,276 $ 4,785,532
Interest bearing deposits in other banks 8,206,119 9,064,700
Federal funds sold 7,102,231 6,224,501
Investment securities, available for sale (Note 2) - 101,376
Investment securities, held to maturity (Note 2) 30,323,460 36,298,266
Loans receivable (Note 3) 158,676,168 154,560,174
Mortgage backed securities, held to maturity (Note 4) 37,189,081 39,771,008
Foreclosed real estate (Note 5) - 133,981
Investment in real estate development and loans
to joint ventures (Note 6) 12,732 365,566
Premises and equipment (Note 7) 2,856,988 2,691,109
Federal Home Loan Bank of Atlanta stock 1,433,200 1,301,200
Accrued interest receivable - loans 738,906 733,971
- investments 456,687 761,159
- mortgage backed
securities 218,686 238,682
Prepaid income taxes 314,384 533,453
Deferred income taxes (Note 13) - 528,249
Intangible assets acquired, net 51,209 77,921
Other assets 249,097 714,419
------------ ------------
Total assets $251,738,224 $258,885,267
============ ============
<CAPTION>
Liabilities and Retained Earnings
---------------------------------
Liabilities
- -----------
<S> <C> <C>
Deposits (Note 8) $224,656,081 $233,310,599
Advance payments by borrowers for taxes and
insurance 727,272 690,591
Income taxes payable (Note 13) 1,909 2,843
Deferred income taxes (Note 13) 83,538 -
Payables to disbursing agents 120,459 224,244
Other liabilities 2,290,516 2,743,999
------------ ------------
Total liabilities 227,879,775 236,972,276
Commitments and contingencies (Notes 3, 7 and 11)
Retained earnings (substantially restricted)
(Notes 12 and 13) 23,858,449 21,881,456
Net unrealized gain on investment securities - 31,535
------------ ------------
23,858,449 21,912,991
------------ ------------
Total liabilities and retained earnings $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>
For Years Ended
September 30,
--------------------------
1997 1996
---- ----
<S> <C> <C>
Interest and fees on loans (Note 3) $13,239,659 $13,094,010
Interest on mortgage backed securities 2,427,932 2,309,012
Interest and dividends on investment securities 2,877,840 2,439,000
Other interest income 912,078 1,222,199
----------- -----------
Total interest income 19,457,509 19,064,221
Interest on deposits (Note 8) 10,312,464 10,620,571
Interest on borrowings - short term 10,474 15,346
----------- -----------
Total interest expense 10,322,938 10,635,917
----------- -----------
Net interest income 9,134,571 8,428,304
Provision for losses on loans (Note 3) 285,942 433,742
----------- -----------
Net interest income after provision for losses on loans 8,848,629 7,994,562
Other Income (Loss)
- -------------------
Gain (loss) on sale of foreclosed real estate (694) 112,018
Servicing fee income 17,928 23,624
Fees and charges on loans 191,596 160,914
Fees on transaction accounts 167,888 155,906
Rental income 144,395 118,905
Gain from real estate development and joint venture 34,900 651,867
Gain (loss) on sale of investment securities 51,376 (194,390)
Miscellaneous income 79,128 44,962
----------- -----------
Net other income 686,517 1,073,806
Non-Interest Expenses
- ---------------------
Salaries and related expense 3,746,128 3,269,172
Provision for losses on foreclosed real estate - 12,593
Occupancy expense 570,539 491,413
Deposit insurance premiums 289,038 1,877,761
Data processing expense 407,501 394,767
Property and equipment expense 338,764 327,180
Professional fees 78,203 73,348
Advertising 197,642 75,701
Telephone, postage and office supplies 288,975 300,319
Amortization of excess of cost over fair value
of net assets acquired 27,259 26,712
Other expenses 313,191 303,873
----------- -----------
Total non-interest expenses 6,257,240 7,152,839
----------- -----------
Income before tax provision 3,277,906 1,915,529
Income tax provision (Note 13) 1,300,913 711,709
----------- -----------
Net income $ 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
-----------------------------------------------
<TABLE>
<CAPTION>
Net Unrealized
Gains/Losses
Retained on Investment
Earnings Securities Total
-------- --------------- ------
<S> <C> <C> <C>
Balance - September 30, 1995 - as previously stated $20,677,636 $ (2,471) $20,675,165
Correction of an error, net of tax (Note 15) - 21,974 21,974
----------- ----------- -----------
Balance - September 30, 1995 - restated 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
=========== =========== ===========
</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>
Years Ended September 30,
---------------------------
1997 1996
------------- ------------
<S> <C> <C>
Operating Activities
- --------------------
Net income $1,976,993 $1,203,820
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities
------------------------------------------
Accretion of discount on investments (162,705) (721)
(Gain) loss on sale of investment securities (51,376) 194,390
Dividends on investment securities
reinvested - (574,169)
Loan fees deferred 118,796 289,738
Amortization of deferred loan fees (374,439) (572,916)
Provision for losses on loans 285,942 433,742
Amortization of premium on mortgage backed
securities 48,313 106,994
Gain (loss) on sale of foreclosed real
estate 694 (112,018)
Provision for losses on foreclosed real
estate - 12,593
Gain from real estate development and joint
venture (34,900) (651,867)
Provision for depreciation 269,711 215,737
Increase in accrued interest receivable on
loans (4,935) (46,113)
(Increase) decrease in accrued interest
receivable on investments 304,472 (129,785)
(Increase) decrease in accrued interest
receivable on mortgage backed securities 19,996 (21,888)
(Increase) decrease in prepaid income taxes 219,069 (340,357)
(Increase) decrease in deferred income taxes 631,628 (94,661)
Amortization of excess of cost over fair
value of net assets acquired 26,712 26,713
(Increase) decrease in other assets 465,322 (112,600)
Increase in accrued interest payable on
deposits 205,738 145,228
Decrease in income taxes payable (934) (38,382)
Increase (decrease) in other liabilities and
payables to disbursing agents (557,268) 1,560,846
---------- ----------
Net cash provided by operating activities 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>
Years Ended September 30,
----------------------------
1997 1996
------------- -------------
<S> <C> <C>
Cash Flows from Investing Activities
- ------------------------------------
Proceeds from maturing interest bearing deposits $ 1,882,000 $ 4,305,000
Purchases of investment securities (44,022,489) (41,048,253)
Proceeds from maturities of investment
securities - held to maturity 50,160,000 16,650,708
Proceeds from sale of investment securities -
available for sale 101,376 16,385,705
Longer term loans originated (25,519,948) (30,810,827)
Principal collected on longer term loans 17,212,666 23,122,077
Net (increase) decrease in short-term loans 4,185,132 (998,482)
Principal collected on mortgage backed securities 6,554,445 6,781,039
Purchase of mortgage backed securities (4,020,831) (11,612,298)
Proceeds from sales of foreclosed real estate 139,477 386,762
Net investment and loans to joint ventures 357,401 -
Investment in premises and equipment (435,590) (229,775)
Purchase of Federal Home Loan Bank of Atlanta
stock (132,000) (8,900)
------------ ------------
Net cash provided (used) by investing
activities 6,461,639 (17,077,244)
Cash Flows from Financing Activities
- ------------------------------------
Net (decrease) increase in demand deposits, money
market, passbook accounts and advances by
borrowers for taxes and insurance (4,113,692) 1,433,421
Net (decrease) increase in certificates of
deposit (4,709,883) 13,885,513
------------ ------------
Net cash provided (used) by financing
activities (8,823,575) 15,318,934
------------ ------------
Increase (decrease) in cash and cash equivalents 1,024,893 (263,986)
Cash and cash equivalents at beginning of period 11,111,733 11,375,719
------------ ------------
Cash and cash equivalents at end of period $ 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>
Years Ended September 30,
-------------------------
1997 1996
------------ -----------
<S> <C> <C>
The following is a summary of cash and cash
equivalents:
Cash $ 3,909,276 $ 4,785,532
Interest bearing deposits in other banks 8,206,119 9,064,700
Federal funds sold 7,102,231 6,224,501
----------- -----------
Balance of cash items reflected on Statement
of Financial Condition 19,217,626 20,074,733
Less - certificate of deposit with a maturity
of more than three months 7,081,000 8,963,000
----------- -----------
Cash and cash equivalents reflected on the
Statement of Cash Flows $12,136,626 $11,111,733
=========== ===========
Supplemental Disclosures of Cash Flows Information:
Cash paid during the period for:
Interest $10,117,200 $10,492,271
=========== ===========
Income taxes $ 574,491 $ 1,184,208
=========== ===========
Transfer from loans to real estate acquired
through foreclosure $ - $ 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
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 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 $82,363 and $55,561 at 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. 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 with
an original maturity date less than ninety days.
N. Reclassification and Restatement - Certain prior years' amounts
have been reclassified to conform to the current year's
presentation. Retained earnings for the year ended September 30,
1995 and the statement of operations for the year ended September
30, 1996 have been restated for the correction of an error. (Note
15)
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 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:
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>
September 30, 1997 September 30, 1996
------------------------- ------------------------
Amortized Fair Amortized Fair
Cost Value Cost Value
------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
Available for Sale:
Equity security $ - $ - $ 101,376 $ 101,376
Held to Maturity:
</TABLE>
<TABLE>
<CAPTION>
U.S. Government and Agency Obligations
- --------------------------------------
<S> <C> <C> <C> <C>
Due within 12 months $10,981,268 $10,961,904 $ 250,000 $ 251,325
Due beyond 12 months but
within five years 4,250,000 4,244,197 2,250,000 2,221,350
Due beyond five years
but within ten years 14,343,038 14,429,664 30,548,266 30,553,803
Due beyond ten years 749,154 746,025 3,250,000 3,218,368
------------ ----------- ----------- -----------
$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
$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 $16,385,805 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 September 30, 1997 and 1996 consist of the
following:
<TABLE>
<CAPTION>
September 30,
----------------------------
1997 1996
------------- -------------
<S> <C> <C>
Single-family residential mortgages $103,677,278 $ 94,275,041
Single-family rental property loans 6,408,729 7,065,488
Commercial loans 10,169,090 10,315,794
Construction loans 8,644,642 11,427,073
Commercial lines of credit 60,000 262,000
Automobile loans 32,632,981 39,924,708
Home equity loans 3,985,840 1,855,345
Savings account loans 825,154 1,028,727
------------ ------------
166,403,714 166,154,176
Less - undisbursed portion of
loans in process 2,807,231 5,087,519
- unearned interest 3,375,711 4,757,384
- deferred loan origination fees 566,965 822,608
- allowance for loan losses 977,639 926,491
------------ ------------
$158,676,168 $154,560,174
============ ============
</TABLE>
The following is a summary of the allowance for loan losses:
<TABLE>
<CAPTION>
September 30,
---------------------------
1997 1996
------------ ------------
<S> <C> <C>
Balance - beginning of year $ 926,491 $ 787,959
Provision for losses on loans 285,942 433,742
Charge-offs, net of recoveries (234,794) (295,210)
------------ ------------
Balance - end of year $ 977,639 $ 926,491
============ ============
</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
----------------
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 $1,843,000 and $2,287,000 at September 30, 1997 and 1996.
There were no impaired loans as defined by SFAS No. 114 at 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.
Interest income that would have been recorded under the original
terms of non-accrual loans and the interest actually recognized for the
years ended September 30, are summarized below:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Interest income that would have
been recognized $96,732 $91,584
Interest income recognized 29,727 38,535
------- -------
Interest income not recognized $67,005 $53,049
======= =======
</TABLE>
The following table set forth the amount and activity of the loans
out standing to officers and directors at September 30, 1997 and 1996.
<TABLE>
<CAPTION>
1997 1996
---------- ---------
<S> <C> <C>
Beginning balance $ 468,331 $503,071
Newloans 144,390 18,000
Loan repayments (103,346) (52,740)
--------- --------
Ending balance $ 509,375 $468,331
========= ========
</TABLE>
F-14
<PAGE>
BALTIMORE COUNTY SAVINGS BANK, F.S.B.
- -------------------------------------
AND SUBSIDIARIES
----------------
Baltimore, Maryland
- -------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
Note 3 - Loans Receivable - Continued
----------------
The Bank services loans for others. The amount of such loans
serviced at September 30, 1997 and 1996 was $8,155,940 and $9,830,194,
respectively. At September 30, 1997 and 1996, the balance of loans sold
by the Bank with recourse amounted to $1,082,187 and $1,284,074,
respectively.
Custodial escrow balances maintained in connection with the
foregoing loan servicings were approximately $54,466 and $70,326 at
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.
Unless noted otherwise, the Bank does not require collateral or
other security to support financial instruments with off-balance-sheet
credit risk.
<TABLE>
<CAPTION>
Contract Amount At
Financial Instruments Whose Contract ---------------------------------------
Amounts Represent Credit Risk September 30, 1997 September 30, 1996
-------------------------------------- ------------------ ------------------
<S> <C> <C>
Standby letters of credit $2,744,487 $1,311,632
Lines of credit $8,240,400 $3,771,500
Mortgage loan commitments $1,710,600 $5,669,700
</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.
No amount was recognized in the statement of financial position at
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-15
<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 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>
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 years ended September
30, 1997 and 1996, respectively.
Note 5 - Foreclosed Real Estate
----------------------
Foreclosed real estate at September 30, 1997 and 1996 is
summarized by major classification as follows:
<TABLE>
<CAPTION>
September 30,
------------------------
1997 1996
---------- ----------
<S> <C> <C>
EPIC loans $ 55,903 $ 65,314
Residential real estate lots - 156,632
Allowance for losses (55,903) (87,965)
-------- --------
$ - $133,981
======== ========
</TABLE>
The following is a summary of the allowances for losses on
foreclosed real estate:
<TABLE>
<CAPTION>
September September
30, 1997 30, 1996
--------- ---------
<S> <C> <C>
Balance - beginning of year $ 87,965 $ 94,699
Provision for losses - 12,593
Recoveries (32,062) (19,327)
--------- ---------
Balance - end of year $ 55,903 $ 87,965
========= =========
</TABLE>
F-16
<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
-----------------------------------------------------------------
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 $12,733 and
$51,466 at the periods ended September 30, 1997 and 1996, respectively.
During the periods ended 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>
September 30,
--------------------------
1997 1996
---- ----
<S> <C> <C>
Loans outstanding $ - $ 349,000
Allowance for losses - (34,900)
--------- ---------
$ - $ 314,100
========= =========
The following is a summary of the allowance for losses on loans to the joint
venture:
Balance - beginning of year $ (34,900) $(809,750)
Reduction of provision for losses, net
of recoveries 34,900 774,850
--------- ---------
Balance - end of year $ - $ (34,900)
========= =========
Gain from real estate development and joint venture consists of the following
at September 30.
1997 1996
---- ----
Reduction of provision for loss on real
estate development and joint venture $ 34,900 $ 774,850
Loss from real estate development
and joint venture - (122,983)
--------- ---------
$ 34,900 $ 651,867
========= =========
</TABLE>
F-17
<PAGE>
BALTIMORE COUNTY SAVINGS BANK, F.S.B.
- -------------------------------------
AND SUBSIDIARIES
----------------
Baltimore, Maryland
- -------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
Note 7 - Premises and Equipment
----------------------
Premises and equipment at September 30, 1997 and 1996 are summarized by major
classification as follows:
<TABLE>
<CAPTION>
1997 1996 Life
---------- ---------- ----------
<S> <C> <C> <C>
Office building $2,440,860 $2,286,489 50 Years
Leasehold improvements 88,703 89,703 7-31 Years
Furniture, fixtures and equipment 2,800,592 2,552,663 10 Years
--------- ---------
5,330,155 4,928,855
Accumulated depreciation 2,473,167 2,237,746
--------- ---------
$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 years ended September 30, 1997 and 1996
was $191,945 and $187,434, respectively. At September 30, 1997, minimum rental
commitments under noncancellable leases are as follows:
<TABLE>
<CAPTION>
Years Ended September 30, Amount
- ------------------------- ------
<S> <C>
1998 $186,327
1999 102,874
2000 103,817
2001 70,593
After 2001 34,562
-------
$498,173
=======
</TABLE>
Note 8 - Deposits
--------
Deposits are summarized as follows at September 30, 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
--------------------- ---------------------
Amount % Amount %
------ - ------ -
<S> <C> <C> <C> <C>
Type of Account
- ---------------
Deposits
--------
NOW $ 20,528,412 9.14% $ 20,415,577 8.75%
Non-interest bearing
NOW 3,674,511 1.63 3,580,090 1.53
Money market 10,054,713 4.48 10,571,478 4.54
Passbook savings 60,657,069 27.00 64,497,932 27.64
Certificates 128,994,405 57.42 133,704,288 57.31
----------- ------ ----------- ------
223,909,110 99.67 232,769,365 99.77
Accrued interest
payable 746,971 .33 541,234 .23
----------- ------ ----------- ------
$224,656,081 100.00% $233,310,599 100.00%
=========== ====== =========== ======
</TABLE>
F-18
<PAGE>
BALTIMORE COUNTY SAVINGS BANK, F.S.B.
- -------------------------------------
AND SUBSIDIARIES
----------------
Baltimore, Maryland
- -------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
Note 8 - Deposits - Continued
--------
The aggregate amount of jumbo certificates of deposit with a minimum
denomination of $100,000 was approximately $10,485,518 and $6,526,251 at
September 30, 1997 and 1996, respectively. Deposits in excess of $100,000 are
not insured by the Savings Association Insurance Fund.
At September 30, 1997, scheduled maturities of certificates of deposit are as
follows:
<TABLE>
<CAPTION>
<S> <C>
1997 $ 92,843,797
1998 18,371,169
1999 11,726,465
2000 and thereafter 6,052,974
-----------
$128,994,405
===========
</TABLE>
Interest expense on deposits for the twelve month period ending September 30,
1997 and 1996 is as follows:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
NOW $ 476,519 $ 439,045
Money market 346,331 368,247
Passbooks savings 1,874,961 2,448,547
Certificates 7,614,653 7,364,732
---------- -----------
$10,312,464 $ 10,620,571
========== ===========
</TABLE>
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.
F-19
<PAGE>
BALTIMORE COUNTY SAVINGS BANK, F.S.B.
- -------------------------------------
AND SUBSIDIARIES
----------------
Baltimore, Maryland
- -------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
Note 9 - Borrowings
----------
At September 30, 1997 and 1996 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 $227,197 and $255,352 for the
periods 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 during the years ended September 30, 1997 and 1996 was $412,859
and $39,866, respectively.
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).
F-20
<PAGE>
BALTIMORE COUNTY SAVINGS BANK, F.S.B.
- -------------------------------------
AND SUBSIDIARIES
----------------
Baltimore, Maryland
- -------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
Note 12- Retained Earnings - Continued
-----------------
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 September 30, 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.
The following table presents the Bank's capital position based on the
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
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
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.
F-21
<PAGE>
BALTIMORE COUNTY SAVINGS BANK, F.S.B.
- -------------------------------------
AND SUBSIDIARIES
----------------
Baltimore, Maryland
- -------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
Note 12- Retained Earnings - Continued
-----------------
<TABLE>
<CAPTION>
Current
Requirements
------------
<S> <C>
Total Retained Earnings $ 23,858,449
Less: Non-allowable items
Intangible assets acquired, net (51,209)
Investment in and advances to
non-includable subsidiaries (906,647)
-----------
Tangible and core capital 22,900,593
General valuation allowance 977,639
-----------
Risk-based capital $ 23,878,232
===========
Total Assets $251,738,224
Less: Non-allowable items
Intangible assets acquired, net (51,209)
Assets of non-includable subsidiaries not
eliminated for regulatory capital purposes (12,727)
-----------
Tangible and adjusted tangible assets $251,674,288
===========
Risk-weighted assets $136,982,924
===========
</TABLE>
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 September 30, 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 year ended
September 30:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Current expense $ 669,285 $806,370
Deferred expense (benefit) 631,628 (94,661)
--------- -------
Total tax expense $1,300,913 $711,709
========= =======
</TABLE>
F-22
<PAGE>
BALTIMORE COUNTY SAVINGS BANK, F.S.B.
- -------------------------------------
AND SUBSIDIARIES
----------------
Baltimore, Maryland
- -------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
Note 13- Income Taxes - Continued
------------
The tax effects to temporary differences that give rise to
significant portions of the deferred tax assets and deferred tax
liabilities at September 30 are as follows:
<TABLE>
<CAPTION>
1997 1996
---------- -----------
<S> <C> <C>
Deferred Tax Assets:
SAIF one-time assessment $ - $ 504,339
Deferred loan origination fees 140,348 280,696
Allowance for loan losses 376,792 380,190
Allowance for uncollected interest 25,877 20,488
--------- ----------
Total gross deferred tax assets 543,017 1,185,713
Deferred Tax Liabilities:
Federal Home Loan Bank of Atlanta
stock dividends (151,928) (151,928)
Depreciation (93,820) (107,142)
Bad debt deduction in excess of base
year reserves (380,807) (378,553)
Net unrealized gains on investment
securities - (19,841)
--------- ----------
Total gross deferred tax
liabilities (626,555) (657,464)
--------- ----------
Net Deferred Tax Assets (Liabilities) $ (83,538) $ 528,249
========= ==========
</TABLE>
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 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>
F-23
<PAGE>
BALTIMORE COUNTY SAVINGS BANK, F.S.B.
- -------------------------------------
AND SUBSIDIARIES
----------------
Baltimore, Maryland
- -------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
Note 13- Income Taxes - Continued
------------
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.
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 September 30, 1997 and 1996 was $4,227,000.
The unrecorded deferred tax liability on the above amount is
approximately $1,633,000 at September 30, 1997 and 1996.
Note 14- Disclosure 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-24
<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>
September 30, 1997 September 30, 1996
------------------------- ------------------------
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
-------- --------------- -------- --------------
(Amounts in Thousands)
<S> <C> <C> <C> <C>
Financial Assets
- ----------------
Cash $ 3,909 $ 3,909 $ 4,786 $ 4,786
Interest bearing deposits in
other banks 8,206 8,206 9,065 9,065
Federal funds sold 7,102 7,102 6,225 6,225
Investment securities - available
for sale - - 101 101
Investment securities - held to
maturity 30,323 30,382 36,298 36,245
Loans Receivable
----------------
Mortgage loans 125,034 127,858 117,001 117,890
Share loans 825 825 1,028 1,028
Consumer loans 32,818 33,280 36,531 36,851
Mortgage backed securities 37,189 36,752 39,771 39,288
Federal Home Loan Bank of Atlanta
stock 1,433 1,433 1,301 1,301
Financial Liabilities
- ---------------------
Deposits 224,656 224,765 $233,311 $233,863
Mortgage loan commitments - 1,711 - 5,670
</TABLE>
Note 15- Restatement
-----------
The statements of financial condition originially issued by the
Bank at September 30, 1995 and 1996 have been restated for correction
of an error. An equity security originally carried at cost in other
assets since it was believed to not be marketable was determined to
have a readily available market value and was corrected to reflect that
value. In addition, the statement of financial condition and statement
of operations issued by the Bank for the year ended September 30, 1996
have been restated to reflect the correction of the accrual of the one-
time assessment of deposit insurance described in Note 8 that was
calculated using the incorrect basis.
F-25
<PAGE>
BALTIMORE COUNTY SAVINGS BANK, F.S.B.
- -------------------------------------
AND SUBSIDIARIES
----------------
Baltimore, Maryland
- -------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
Note 15- Restatement - Continued
-----------
<TABLE>
<CAPTION>
As Originally As
Stated Correction Restated
-------------- ----------- -----------
<S> <C> <C> <C>
1995
----
Retained earnings $20,677,636 $ - $20,677,636
Net unrealized gain/loss
on investment securities (2,471) 21,974 19,503
----------- --------- -----------
$20,675,165 $ 21,974 $20,697,139
=========== ========= ===========
1996
----
Statement of Financial Condition
- --------------------------------
Investment securities
available for sale $ - $ 101,376 $ 101,376
Deferred taxes 628,502 (100,253) 528,249
Other assets 764,419 (50,000) 714,419
Other liabilities 3,003,999 (260,000) 2,743,999
Retained earnings 21,721,868 159,588 21,881,456
Net unrealized gain/loss on
investment security - 31,535 31,535
Statement of Operations
- -----------------------
Deposit premiums expense 2,137,761 (260,000) 1,877,761
Income tax expense 611,297 100,412 711,709
Net income 1,044,232 159,588 1,203,820
</TABLE>
Note 16- 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.
F-26
<PAGE>
BALTIMORE COUNTY SAVINGS BANK, F.S.B.
- -------------------------------------
AND SUBSIDIARIES
----------------
Baltimore, Maryland
- -------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
Note 16- Plan of Reorganization - Continued
----------------------
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 aforementioned Liquidation Account or
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 September 30, 1997,
the Bank has not been notified that it requires more than normal
supervision.
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. No costs were incurred through September 30, 1997.
Note 17- 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 financial statements.
F-27
<PAGE>
BALTIMORE COUNTY SAVINGS BANK, F.S.B.
- -------------------------------------
AND SUBSIDIARIES
----------------
Baltimore, Maryland
- -------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
Note 17- Recent Accounting Pronouncements - Continued
--------------------------------
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 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 financial statements
of the Bank.
F-28
<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>
<CAPTION>
Table of Contents
Page
----
<S> <C>
Prospectus Summary.................................... 5
Selected Consolidated Financial Information and
Other Data......................................... 14
Risk Factors.......................................... 16
BCSB Bankcorp, Inc.................................... 23
Baltimore County Savings Bank, F.S.B.................. 23
Baltimore County Savings Bank, M.H.C.................. 25
Use of Proceeds....................................... 25
Dividend Policy....................................... 26
Waiver of Dividends by the MHC........................ 26
MHC Conversion to Stock Form.......................... 27
Market for the Common Stock........................... 29
Capitalization........................................ 30
Historical and Pro Forma Regulatory Capital
Compliance......................................... 32
Pro Forma Data........................................ 33
Comparison of Valuation and Pro Forma Information
with no Foundation................................. 36
Proposed Management Purchases......................... 37
Management's Discussion and Analysis of Financial
Condition and Results of Operations................ 38
Business of the Company............................... 48
Business of the Bank.................................. 48
Regulation............................................ 74
Taxation.............................................. 84
Management of the Company............................. 85
Management of the Bank................................ 86
The Reorganization and Stock Issuance................. 94
Certain Restrictions on Acquisition of the Company
and the Bank....................................... 110
Description of Capital Stock.......................... 113
Registration Requirements............................. 114
Legal Opinions........................................ 114
Tax Opinions.......................................... 114
Experts............................................... 114
Additional Information................................ 115
Index to Financial Statements......................... 116
</TABLE>
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 2,052,750 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.
The Office of Thrift Supervision has not yet issued final regulations
governing entities, such as BCSB Bankcorp, Inc. (the "small business issuer"),
that are subsidiary holding companies of mutual holding companies. However,
proposed regulations promulgated by the OTS, if adopted in the form proposed,
would 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>
<S> <C>
* Legal Fees and Expenses............................... $ 90,000
* Printing, Postage and Mailing......................... 110,000
* Accounting Fees and Expenses.......................... 70,000
* 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........................................ 53,000
----------
Total............................................ $ 457,000
==========
</TABLE>
- ---------
* Estimated.
** Does not include $228,000 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, 122,492
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 Plan of Reorganization
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 Form of Federal Tax Opinion
*8.2 Form of 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 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
23.3 Consent of RP Financial, LC.
24 Power of Attorney (reference is made to the signature page)
27 Financial Data Schedule
II-2
<PAGE>
99.1 Stock Order Form, Form of Certification and Form of Proxy Card
99.2 Miscellaneous Solicitation and Marketing Materials
99.3 Appraisal Report
*99.4 Form of Baltimore County Savings Bank Foundation Gift Instrument
- ---------------
* To be filed by amendment.
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 City of
Baltimore, State of Maryland, on January 20, 1998.
BCSB BANKCORP, INC.
By: /s/ Michael J. Dietz
-----------------------------------
Michael J. Dietz, President
(Duly Authorized Representative)
POWER OF ATTORNEY
We, the undersigned Directors of BCSB Bankcorp, Inc., a to-be-formed
Federal corporation, hereby severally constitute and appoint Gary C. Loraditch
with full power of substitution, our true and lawful attorney and agent, to do
any and all things in our names in the capacities indicated below which said
Gary C. Loraditch may deem necessary or advisable to enable BCSB Bankcorp, Inc.
to comply with the Securities Act of 1933, as amended, and any rules,
regulations and requirements of the Securities and Exchange Commission, in
connection with the registration of BCSB Bankcorp, Inc. common stock, including
specifically, but not limited to, power and authority to sign for us in our
names in the capacities indicated below, the registration statement and any and
all amendments (including post-effective amendments) thereto; and we hereby
ratify and confirm all that said Gary C. Loraditch shall do or cause to be done
by virtue thereof.
In accordance with the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates stated.
<TABLE>
<CAPTION>
Signatures Title Date
---------- ----- ----
<S> <C> <C>
/s/ Michael J. Dietz President January 20, 1998
- ------------------------------------ (Principal Executive Officer)
Michael J. Dietz
/s/ Gary C. Loraditch Vice President, Secretary and Treasurer January 20, 1998
- ------------------------------------ (Principal Financial and Accounting Officer)
Gary C. Loraditch
/s/ Henry V. Kahl Chairman of the Board of Directors January 20, 1998
- ------------------------------------
Henry V. Kahl
/s/ H. Adrian Cox Vice Chairman of the Board of Directors January 20, 1998
- ------------------------------------
H. Adrian Cox
/s/ William M. Loughran Vice President and Director January 20, 1998
- ------------------------------------
William M. Loughran
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
/s/ George S. Magsamen Director January 20, 1998
- ------------------------------------
George S. Magsamen
/s/ Martin F. Meyers Director January 20, 1998
- ------------------------------------
Martin F. Meyers
/s/ John J. Panzer, Jr. Director January 20, 1998
- ------------------------------------
John J. Panzer, Jr.
/s/ P. Louis Rohe, Jr. Director January 20, 1998
- ------------------------------------
P. Louis Rohe, Jr.
/s/ Frank W. Dunton Director January 20, 1998
- ------------------------------------
Frank W. Dunton
</TABLE>
<PAGE>
Exhibit Index
-------------
1.1 Engagement Letter with Trident Securities, Inc.
*1.2 Agency Agreement with Trident Securities, Inc.
2 Plan of Reorganization
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 Form of Federal Tax Opinion
*8.2 Form of 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 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
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, Form of Certification and Form of Proxy Card
99.2 Miscellaneous Solicitation and Marketing Materials
99.3 Appraisal Report
*99.4 Form of Baltimore County Savings Bank Foundation Gift Instrument
- ---------------
* To be filed by amendment.
<PAGE>
Exhibit 1.1
[LETTERHEAD OF TRIDENT SECURITIES, INC.]
September 10, 1997
Board of Directors
Baltimore County Savings Bank, F.S.B.
4111 E. Joppa Road
Suite 300
Perry Hall, Maryland 21128
RE: Mutual Holding Company Marketing Services
-----------------------------------------
Gentlemen:
This letter sets forth the terms of the proposed engagement between Trident
Securities, Inc. ("Trident") and Baltimore County Savings Bank, F.S.B. (the
"Bank") concerning Trident's investment banking services in connection with the
reorganization ("Reorganization") of the Bank into a mutual holding company
("MHC") and the issuance of shares of the stock savings bank subsidiary of the
MHC in a community offering (the "Offering").
Trident is prepared to assist the Bank in connection with the offering of shares
of common stock of the MHC's stock savings bank subsidiary during the Offering
as such term is defined in the Bank's Plan of Mutual Holding Company
Reorganization and Stock Issuance Plan (the "Plan"). It is expected that Trident
will assist the Bank in the Offering as follows: (1) as financial advisor to
Management, (2) targeting sales efforts in the Bank's local communities, (3)
conducting information meetings for prospective investors (as desired), (4)
training and educating the Bank's management and employees regarding the
mechanics and regulatory requirements of the process, (5) providing support for
the administration and processing of orders and establishing a Stock Information
Center on site in Baltimore, and (6) listing stock of the Bank on the NASDAQ
System and acting as a market maker for the shares. The specific terms of the
services contemplated hereunder shall be set forth in a definitive Sales Agency
Agreement (the "Agreement") between Trident and the Bank to be executed on the
date the Offering Circular is declared effective by the appropriate regulatory
authorities. The price of the shares during the Offering will be the price
established by the Bank's Board of Directors, based upon an independent
appraisal as approved by the appropriate regulatory authorities, provided such
price is mutually acceptable to Trident and the Bank.
At the appropriate time, Trident, in conjunction with its counsel will conduct
an examination of the relevant documents and records of the Bank as Trident and
its counsel deem necessary and appropriate. The Bank will make all documents,
records and other information deemed necessary by Trident or its counsel
available to them upon request.
For its services, Trident will receive the following compensation and
reimbursement from the Bank:
<PAGE>
Board of Directors
September 10, 1997
Page 2
1. A commission equal to one and one-half percent (1.5%) of the
aggregate dollar amount of capital stock sold in the subscription
and community offerings, excluding any shares of stock sold to
the Bank's directors, officers, employees and the employee
benefit plans. Additionally, commissions will be excluded on
those shares sold to "Associates" of the Bank's directors and
executive officers. The term "Associates" as used herein shall
have the same meaning as that found in the Bank's Plan of
Reorganization.
2. For stock sold by other NASD member firms under selected dealer's
agreements, the commission shall not exceed a fee to be agreed
upon jointly by Trident and the Bank to reflect market
requirements at the time of the stock allocation in a Syndicated
Community Offering.
3. The foregoing fees and commissions are to be payable to Trident
at closing as defined in the Agreement to be entered into between
the Bank and Trident.
4. Trident shall be reimbursed for out-of-pocket expenses incurred
by them and their counsel, whether or not the Agreement is
consummated. Trident's out-of-pocket expenses will not exceed
$9,000 and its legal fees will not exceed $27,500. The Bank will
forward to Trident a check in the amount of $9,000 as an advance
payment to defray the expenses of Trident.
It further is understood that the Bank will pay all other expenses of the
offering including but not limited to its attorneys' fees, National Association
of Securities Dealers ("NASD") filing fees, and fees of either Trident's
attorneys or other attorneys relating to any required state securities laws
filings, transfer agent charges, telephone charges, air freight, rental
equipment, supplies, fees relating to auditing and accounting and costs of
printing all documents necessary in connection with the foregoing. These
expenses are to be in addition to those enumerated in Paragraph (4) above.
For purposes of Trident's obligation to file certain documents and to make
certain representations to the NASD in connection with the reorganization, the
Bank warrants that: (a) the Bank has not privately placed any securities within
the last 18 months; (b) there have been no material dealings within the last 12
months between the Bank and any NASD member or any person related to or
associated with any such member; (c) none of the officers or directors of the
Bank has any affiliation with the NASD; (d) except as contemplated by this
engagement letter with Trident, the Bank has no financial or management
consulting contracts outstanding with any NASD member or any person related to
or associated with any such member; (e) the Bank has not granted Trident a right
of first refusal with respect to the underwriting of any future offering of the
Bank's stock; and, (f) there has been no intermediary between Trident and the
Bank in connection with the public offering of the Bank's shares, and no NASD
member or any person related to or associated with any such member is being
compensated in any manner for providing such service.
The Bank agrees to indemnify and hold harmless Trident and each person, if any,
who controls the firm against all losses, claims, damages or liabilities, joint
or several and all legal or other expenses reasonably incurred by them in
connection with the investigation or defense thereof (collectively,
<PAGE>
Board of Directors
September 10, 1997
Page 3
"Losses"), to which they may become subject under securities laws or under the
common law, that arise out of or are based upon the reorganization or the
engagement hereunder of Trident. If the foregoing indemnification is unavailable
for any reason, the Bank agrees to contribute to such Losses in the proportion
that its financial interest in the reorganization bears to that of the
indemnified parties. If the agreement is entered into with respect the common
stock to be issued in the reorganization, the Agreement will provide for
indemnification, which will be in addition to any rights that Trident or any
other indemnified party may have at common law or otherwise. The indemnification
provision of this paragraph will be superseded by the indemnification provisions
of the Agreement entered into by the Bank and Trident.
This letter is merely a statement of intent and is not a binding legal agreement
except as to paragraph (4) above with regard to the obligation to reimburse
Trident for allocable expenses to be incurred prior to the execution of the
Agreement and the indemnity described in the preceding paragraph. While Trident
and the Bank agree in principle to the contents hereof and propose to proceed
promptly, and in good faith, to work out the arrangements with respect to the
proposed offering, any legal obligations between Trident and the Bank shall be
only as set forth in the duly executed Agreement. Such Agreement shall be in
form and content satisfactory to Trident and among other things, there being in
Trident's opinion no material adverse change in the condition or obligations of
the Bank or no market conditions which might render the sale of the shares by
the Bank hereby contemplated inadvisable.
Please acknowledge your agreement to the foregoing by signing below and
returning to Trident one copy of this letter along with the advance payment of
$9,000. This proposal is open for your acceptance for a period of thirty (30)
days from the date hereof.
Yours very truly,
TRIDENT SECURITIES, INC.
By: /s/ R. Lee Burrows, Jr.
-----------------------
R. Lee Burrows, Jr.
Managing Director
RLB:cs
Agreed and accepted this
____ day of _________, 1997
BALTIMORE COUNTY SAVINGS BANK, F.S.B.
By: /s/ Michael J. Dietz
------------------------------
Michael J. Dietz
President
<PAGE>
Exhibit 2
PLAN OF REORGANIZATION
FROM MUTUAL SAVINGS BANK TO MUTUAL HOLDING COMPANY
AND SUBSIDIARY HOLDING COMPANY FORMATION
DATED AS OF
OCTOBER 22, 1997
--------------------------------
BALTIMORE COUNTY SAVINGS BANK, F.S.B.
Baltimore, Maryland
<PAGE>
BALTIMORE COUNTY SAVINGS BANK, F.S.B.
PLAN OF REORGANIZATION
FROM MUTUAL SAVINGS BANK TO MUTUAL HOLDING COMPANY
AND SUBSIDIARY HOLDING COMPANY FORMATION
I. GENERAL
The Board of Directors of Baltimore County Savings Bank, F.S.B., Baltimore,
Maryland (the "Bank"), after careful study and consideration, adopted by
unanimous vote this Plan of Reorganization from Mutual Savings Bank to Mutual
Holding Company and Subsidiary Holding Company Formation (the "Plan"), whereby
the Bank will reorganize into the mutual holding company form of organization as
a wholly owned subsidiary of a subsidiary holding company.
The MHC Reorganization will be effected as follows, or in any manner
approved by the Board of Directors of the Bank and the OTS that is consistent
with the purposes of this Plan and applicable laws and regulations:
(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");
(iii) Interim One will organize a Federal stock corporation (SHC) as a wholly
owned subsidiary of Interim One; (iv) the Bank will exchange its charter for a
federal stock savings bank charter (Stock Bank); (v) Interim One will cancel its
outstanding stock and exchange its charter for a federal mutual holding company
charter (MHC); (vi) Interim Two will merge with and into Stock Bank, with Stock
Bank surviving; (vii) former members of the Bank will become members of the MHC;
(viii) MHC will receive all of the stock of Stock Bank in exchange for its
shares of Interim Two stock; (ix) the MHC will transfer all of the outstanding
shares of Stock Bank to SHC.
Upon consummation of the MHC Reorganization, the legal existence of the
Bank will not terminate, but the converted Stock Bank will be a continuation of
the Bank, and all property of the Bank, including its right, title and interest
in and to all property of whatsoever kind and nature, interest and asset of
every conceivable value or benefit then existing or pertaining to the Bank, or
which would inure to the Bank immediately by operation of law and without the
necessity of any conveyance or transfer and without any further act or deed,
will vest in the Stock Bank. The Stock Bank will have, hold, and enjoy the same
in its right and fully to the same extent as the same was possessed, held, and
enjoyed by the Bank. The Stock Bank will continue to have, succeed to, and be
responsible for all rights, liabilities and obligations of the Bank and will
maintain its headquarters and operations at the Bank's present location.
In connection with MHC Reorganization, the MHC will be capitalized with
$250,000 or such greater amount as may be determined by the Board of Directors
of the Bank subject to the approval of the OTS, to the extent such assets are
not required to be transferred to or retained by the Stock Bank in order to
satisfy capital or reserve requirements of any applicable law or regulation.
All other assets of the Bank will become assets of the Stock Bank. The Bank
believes that capitalization of the MHC at this level will provide the MHC with
economic strength separate and apart from the Stock Bank and could facilitate
future activities by the MHC.
Simultaneously with the MHC Reorganization, the SHC will, subject to the
provisions of this Plan and a Plan of Stock Issuance to be adopted by SHC upon
its formation, conduct a stock offering and sale of up to 49.9% of the shares of
Common Stock of the SHC to be outstanding following consummation of the MHC
Reorganization to certain members of the Bank, employee benefit plans of the
Bank, the MHC or the SHC, and to other investors pursuant to this Plan of Stock
Issuance. The offer and sale of up to 49.9% of the Common Stock is referred to
herein as the "Stock Issuance." Following completion of the MHC Reorganization
and the Stock Issuance, Stock Bank will be a wholly owned subsidiary of SHC, and
SHC will be a majority-owned subsidiary of MHC, with up to 49.9% of the
outstanding Common Stock owned by the purchasers of Common Stock in the Stock
Issuance and the remaining outstanding Common Stock owned by MHC. The actual
issuance of shares of Common Stock of the SHC in a stock
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offering shall not be a condition to the MHC Reorganization, unless otherwise
required by the Board of Directors of the Bank. The MHC Reorganization shall be
accomplished in accordance with the procedures set forth in this Plan, the
requirements of applicable laws and regulations and the policies of the OTS.
The OTS has issued proposed regulations (the "Proposed Regulations")
regarding the formation and operations of subsidiary holding companies. The
terms and conditions of forming a subsidiary holding company and its subsequent
regulation, including the conditions of any minority stock offering, are subject
to the Proposed Regulations and Section 10(o) of the Home Owners Loan Act
("HOLA"). The OTS has not yet promulgated final regulations regarding
subsidiary holding companies. Any changes to the Proposed Regulations could
adversely affect the MHC Reorganization, the Stock Issuance or the operations of
the MHC, the SHC or the Stock Bank.
The Board of Directors of the Bank has determined that the MHC
Reorganization is in the best interests of the Bank and its members and has
therefore adopted the Plan. The Plan is subject to the prior written approval
of the OTS, and must be adopted by the affirmative vote of at least a majority
of the total votes eligible to be cast by members of the Bank at a special
meeting called for that purpose. Implementation of the Plan is also subject to
the approval of all other applicable regulatory authorities, as well as the
receipt of favorable rulings or opinions as to the tax consequences of the MHC
Reorganization.
The MHC Reorganization, together with the Stock Issuance, will result in
the Stock Bank raising new equity capital through the issuance and sale of
shares of SHC Common Stock. The Stock Bank will have access to new sources of
capital not historically available to mutual savings institutions, which will
provide opportunities for the Stock Bank to enhance its capital position, to
support future savings growth, to increase the amount of funds available for
lending and investment purposes, to provide greater resources for the expansion
of customer services and to facilitate other expansion.
II. DEFINITIONS
Bank: The term "Bank" means Baltimore County Savings Bank, F.S.B., in its
----
form as a federal mutual savings bank.
Common Stock: The term "Common Stock" means the common stock, par value
------------
$1.00 per share, of the SHC issued to the MHC, and in the case of a stock
offering, to other investors, pursuant to the Plan of Stock Issuance.
Deposit Account: The term "Deposit Account" means any deposit, investment
---------------
certificate, NOW account or other deposit account which is held by an account
holder or depositor.
Effective Date: The term "Effective Date: means the date upon which the MHC
--------------
Reorganization is completed pursuant to this Plan and applicable laws and
regulations.
FDIC: The term "FDIC" means the Federal Deposit Insurance Corporation or
----
any successor federal agency which insures deposit accounts held in savings
banks.
Insider: The term "Insider" means any Officer or director of a company or
-------
of any affiliate of such company, and any person Acting in Concert with any such
Officer or director.
Member: The term "Member" means any Person qualifying as a Member of the
------
Bank in accordance with its mutual charter and bylaws and entitled to vote on
the Reorganization Plan at the Special Meeting.
MHC: The term "MHC" means the mutual holding company resulting from the
---
MHC Reorganization, which mutual holding company shall be named "Baltimore
County Savings Bank, M.H.C." or such other name as may be selected by the Board
of Directors of the MHC.
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MHC Reorganization: The term "MHC Reorganization" collectively means all
------------------
steps which are necessary for the Bank to reorganize into the mutual holding
company form of organization as a subsidiary of a subsidiary holding company in
the manner specified herein.
Officer: The term "Officer" means an executive officer of the MHC, the SHC
-------
or the Bank (as applicable), including the Chairman of the Board, President,
Executive Vice Presidents, Senior Vice Presidents in charge of principal
business functions, Secretary and Treasurer.
OTS: The term "OTS" means the Office of Thrift Supervision of the United
---
States Department of the Treasury or any successor agency having jurisdiction
over the Bank, the MHC or the SHC.
Person: The term "Person" means any corporation, partnership, trust,
------
incorporated association or any other entity or a natural person.
Plan: The term "Plan" means this Plan of Reorganization from Mutual Savings
----
Bank to Mutual Holding Company and Subsidiary Holding Company Formation, whereby
the Bank will reorganize from a mutual savings bank to a mutual holding company
as a subsidiary of a subsidiary holding company, including all Exhibits hereto,
as adopted by the Board of Directors of the Bank and as may be amended from time
to time pursuant to the terms hereof.
Plan of Stock Issuance: The term "Plan of Stock Issuance" means the Plan of
----------------------
Stock Issuance to be adopted by the Board of Directors of the SHC upon its
formation pursuant to which the SHC proposes to offer and sell shares of Common
Stock to persons and investors other than the MHC, which is attached hereto as
Exhibit G and incorporated herein by reference.
SHC: The term "SHC" means the subsidiary holding company resulting from
---
the MHC Reorganization, which subsidiary holding company shall be called "BCSB
Bankcorp, Inc." or such other name as shall be selected by the Board of
Directors of SHC.
Special Meeting: The term "Special Meeting" means the Special Meeting of
---------------
Members of the Bank called for the sole purpose of submitting this Plan and
related documents to the Members for their approval or disapproval, including
any adjournment of such meeting.
Stock Bank: The term "Stock Bank" means Baltimore County Savings Bank,
----------
F.S.B., in its form as a federally chartered stock savings bank following the
conversion of the Bank from mutual to stock form. The Stock Bank shall have a
Charter and Bylaws in the form attached hereto as Exhibits A and B,
respectively, which are incorporated herein by reference.
Voting Record Date: The term "Voting Record Date" means the date fixed by
------------------
the Board of Directors of the Bank to determine Members entitled to vote at the
Special Meeting.
III. PROCEDURES FOR THE MHC REORGANIZATION
The Bank shall reorganize from a mutual savings bank to a mutual holding
company as a subsidiary of a subsidiary holding company pursuant to the
following procedures:
A. The Board of Directors of the Bank shall adopt this Plan by at least a
majority vote.
B. The Bank shall submit or cause to be submitted to the OTS a Notice of
MHC Reorganization on Form MHC-1 (the "Notice"), which shall include a copy of
this Plan, the proposed Charters and Bylaws for the MHC, the SHC and the Stock
Bank, a proxy statement and proxy card proposed to be circulated to Members, an
Application H-(e)1 and such other information as may be required by OTS rules
and regulations.
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C. Not earlier than three calendar days before and no later than three
calendar days after the submission of the Notice to the OTS, the Bank shall (i)
publish an "Announcement of Filing Notice of Mutual Savings and Loan Holding
Company Reorganization" in a newspaper of general circulation and (ii) post such
Announcement in the Bank's office, in the manner and for such period of time as
may be required by OTS regulations. A copy of this Plan shall be available for
inspection by Members at the office of the Bank.
D. Simultaneously with, or as soon as practicable after the Bank's
submission of the Notice to the OTS, the Bank shall file (or cause to be filed)
such applications or notices with the OTS, the FDIC or any other applicable
regulatory authority, publish such notices and take such other actions as may be
specified by applicable laws and regulations or as otherwise may be required to
consummate the MHC Reorganization.
E. The OTS shall provide written notice of its intent not to disapprove
the MHC Reorganization, or sixty days (or such period as may be extended by the
OTS) shall have passed since the Notice was filed and deemed sufficient under
OTS regulations, and the OTS shall not have given written notice that the MHC
Reorganization is disapproved.
F. Promptly after receipt of written notice of the intent not to
disapprove from the OTS, or the passage of sixty days (or such longer period, as
applicable) without written notice of disapproval of this Plan and the MHC
Reorganization from the OTS, a Special Meeting of Members to vote on the Plan
shall be scheduled in accordance with the Bank's Bylaws. Notice of the Special
Meeting will be given by means of a proxy statement (which may be in either long
form or summary form) authorized for use by the OTS (the "Proxy Statement"). At
least 20 days but not more than 45 days prior to the Special Meeting, the Bank
will distribute proxy solicitation materials to all Members as of the Voting
Record Date established for voting at the Special Meeting. The proxy
solicitation materials will include a copy of the Proxy Statement and other
documents authorized for use by the OTS. Pursuant to applicable regulations, an
affirmative vote of not less than a majority of the total votes of the Bank's
Members eligible to be cast at the Special Meeting will be required for approval
of the MHC Reorganization. Voting may be in person or by proxy. The OTS shall
be promptly notified of the actions of the Members at the Special Meeting.
G. Following the receipt of all required regulatory approvals, the
approval of the Members of the MHC Reorganization and the satisfaction of all
other conditions precedent to the MHC Reorganization, the following transactions
will be effected: (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"); (iii) Interim One will organize a Federal stock corporation
(SHC) as a wholly owned subsidiary of Interim One; (iv) the Bank will exchange
its charter for a federal stock savings bank charter (Stock Bank); (v) Interim
One will cancel its outstanding stock and exchange its charter for a federal
mutual holding company charter (MHC); (vi) Interim Two will merge with and into
Stock Bank, with Stock Bank surviving; (vii) former members of the Bank will
become members of the MHC; (viii) MHC will receive all of the stock of Stock
Bank in exchange for its shares of Interim Two stock; (ix) the MHC will transfer
all of the outstanding shares of Stock Bank to SHC. MHC will have a Charter and
Bylaws in the form attached hereto as Exhibits C and D, respectively, which are
incorporated herein. Additionally, SHC will have a Charter and Bylaws in the
form attached hereto as Exhibits E and F, respectively, which are incorporated
herein by reference.
H. Upon consummation of the MHC Reorganization, substantially all of the
assets and liabilities (including all savings accounts, demand accounts, tax and
loan accounts, United States Treasury General Accounts, or United States
Treasury Time Deposit Open Accounts, as defined in 12 C.F.R. Part 561) of the
Bank shall be vested in the Stock Bank as the survivor of the merger of Interim
Two into Stock Bank.
I. All assets, rights, obligations and liabilities of whatever nature of
the Bank that are not expressly retained by the MHC shall be deemed transferred
to the Stock Bank.
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J. The directors and officers of the Bank shall take all appropriate
actions to facilitate the MHC Reorganization, including obtaining insurance of
accounts from the FDIC and continuing membership in the Federal Home Loan Bank
of Atlanta for the Stock Bank promptly following its organization, taking all
appropriate actions to effect the vesting of substantially all of the Bank's
assets and liabilities in the Stock Bank and preparing, filing and pursuing such
applications, filings and notices as may be required under applicable laws and
regulations and policies of the OTS to effect the MHC Reorganization.
As a result of the MHC Reorganization and the Stock Issuance, Stock Bank
will be a wholly owned subsidiary of SHC, and SHC will be a majority-owned
subsidiary of MHC, with up to 49.9% of the outstanding Common Stock owned by the
purchasers of Common Stock in the Stock Issuance and the remaining outstanding
Common Stock owned by MHC.
IV. POWERS AND AUTHORITIES OF MHC, SHC AND THE STOCK BANK
The rights and powers of the MHC, the SHC and the Stock Bank upon
consummation of the MHC Reorganization will be as specified in their respective
Charters and Bylaws, applicable laws and regulations and policies of governing
regulatory authorities. The MHC and the SHC will be subject to the limitations
and restrictions imposed on savings and loan holding companies by Section
10(o)(5) of the HOLA. Without limiting the foregoing, either simultaneously
with, or following consummation of the MHC Reorganization, the SHC shall have
authority to issue to Persons other than the MHC an amount of Common Stock and
securities convertible into Common Stock which in the aggregate does not exceed
49.9% of the issued and outstanding Common Stock of the SHC. The SHC also shall
have authority to issue equity or debt securities other than Common Stock and
securities convertible into Common Stock either simultaneously with, or
following consummation of the MHC Reorganization, subject to the terms of its
Charter and Bylaws, including any amendments thereto. The SHC's ability to
issue debt or equity securities upon consummation of the MHC Reorganization
shall be subject to the approval of the Board of Directors of the SHC and the
requirements of applicable laws and regulations.
V. TAX CONSEQUENCES OF THE MHC REORGANIZATION
Consummation of the MHC Reorganization is expressly conditioned upon prior
receipt by the Bank and/or the SHC of (i) an opinion of counsel or a favorable
ruling from the United States Internal Revenue Service which shall state that
the MHC Reorganization will not result in any gain or loss for federal income
tax purposes to the Bank, the Stock Bank, the MHC, the SHC or Members, and (ii)
an opinion of counsel or an accounting firm which shall state that MHC
Reorganization will not result in any gain or loss for state tax purposes to the
Bank, the Stock Bank, the MHC, the SHC or Members.
VI. TRANSFER OF DEPOSIT ACCOUNTS
Each Deposit Account in the Bank at the time of the MHC Reorganization will
become, without further action by the holder, a Deposit Account in the Stock
Bank after the MHC Reorganization, identically equivalent in withdrawable amount
to the withdrawal value, and subject to the same terms and conditions (except as
to voting and liquidation rights), as such Deposit Account in the Bank at the
time of the MHC Reorganization.
VII. VOTING AND OTHER RIGHTS OF STOCKHOLDERS OF THE STOCK SAVINGS BANK
Following the Effective Date, voting rights with respect to the Stock Bank
will be held and exercised exclusively by the holder or holders of all the
Common Stock of the Stock Bank. Neither depositors nor borrowers of the Stock
Bank will have any voting rights with respect to the Stock Bank in their
capacities as such.
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<PAGE>
VIII. TRANSFER OF PREVIOUSLY EXECUTED PROXIES
Following the Effective Date, all proxies granted by Members of the Bank
to the Board of Directors of the Bank or a committee appointed by a majority of
the Bank or other representative of the Board of Directors of the Bank to vote
with respect to all matters or questions requiring action by the Members of the
Bank shall automatically be transferred to the Board of Directors of the MHC and
shall be deemed to grant to the Board of Directors of the MHC authority to vote
on behalf of such members with respect to all matters or questions requiring
action by the members of the MHC.
IX. VOTING AND LIQUIDATION RIGHTS
Following the Effective Date, all holders of a Deposit Account in the Bank
as of the Effective Date will continue to have voting and liquidation rights
solely with respect to the MHC. In addition, all Persons who become the holder
of a Deposit Account with the Stock Bank subsequent to the MHC Reorganization
also will have voting and liquidation rights with respect to the MHC. In each
case, a Person who ceases to be the holder of a Deposit Account with the Stock
Bank following the Effective Date shall have no voting or liquidation rights
with respect to the MHC. Borrowers of the Bank as of the Effective Date will
have the same voting rights in the MHC as they had in the Bank immediately prior
to the Effective Date for as long as their borrowings remain in existence.
Persons who borrow from the Stock Bank following the Effective Date will not
receive voting or liquidation rights in the MHC.
X. OFFERING OF COMMON STOCK OF THE SHC
If approved by the OTS, either simultaneously with, or following
consummation of the MHC Reorganization, the SHC may sell shares of its Common
Stock to third persons other than the MHC, subject to the requirements of
applicable laws and regulations. The SHC may conduct one or more offerings of
its Common Stock (which in the aggregate shall not exceed 49.9% of the total to-
be-outstanding Common Stock of the SHC). Each such offering shall be conducted
pursuant to a plan of stock issuance which meets the requirements of applicable
laws and regulations and policies of the OTS. The actual timing of any offering
of the SHC's Common Stock shall be within the discretion of the Board of
Directors of the SHC, although as noted above, it is currently expected that the
initial offering of Common Stock by the SHC shall be conducted simultaneously
with the consummation of the MHC Reorganization. The ability of the SHC to sell
its Common Stock to persons other than the MHC will be dependent on market
conditions, and there can be no assurance that the stock offering will be
successful.
Neither the MHC, the SHC, the Bank nor the Stock Bank shall loan funds or
otherwise extend credit to any Person for the purpose of purchasing Common Stock
of the SHC issued in connection with any of the transactions referred to in this
Section X.
Subject to the requirements of applicable laws and regulations and
policies of the OTS, and, if required, the approval of the stockholder(s) of the
SHC, the Board of Directors of the SHC may adopt one or more stock compensation
plans for directors, officers and employees of the MHC, the SHC or the Stock
Bank. Such plans may include, without limitation, an employee stock ownership
plan, a restricted stock plan, a management recognition plan and a stock option
plan.
If approved by the OTS, following consummation of the MHC Reorganization,
the MHC may convert from a mutual to a stock form holding company, subject to
the requirements of applicable laws and regulations.
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XI. DIRECTORS AND OFFICERS
Each Person serving as a director or officer of the Bank at the time of
the MHC Reorganization shall serve as a director or officer of the MHC, the SHC
and the Stock Bank thereafter for the terms respectively specified in the
Charter and Bylaws of the MHC, the SHC and the Stock Bank and until his or her
successor is elected and qualified.
XII. REORGANIZATION EXPENSES
The Bank, the MHC and the SHC will use their best efforts to assure that
the expenses incurred by them in connection with the MHC Reorganization shall be
reasonable.
XIII. AMENDMENT OR TERMINATION OF THE PLAN
If deemed necessary or desirable by the Board of Directors of the Bank,
this Plan may be substantively amended, as a result of comments from regulatory
authorities or otherwise, at any time prior to transmission of proxy
solicitation materials, pursuant to Section III.F of this Plan, to Members and
at any time thereafter with the concurrence of the OTS. This Plan may be
terminated by the Board of Directors of the Bank at any time prior to the
Special Meeting and at any time thereafter with the concurrence of the OTS.
This Plan shall terminate in the event that the MHC Reorganization is not
completed within 24 months after the date on which this Plan is approved by the
Members of the Bank or upon the earlier termination of the Plan in accordance
with its terms.
XVI. INTERPRETATION OF THE PLAN
References herein to provisions of law and the rules and regulations of
the OTS shall in all cases be deemed to refer to the provisions of the same
which were in effect at the time of adoption of this Plan by the Board of
Directors of the Bank.
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Exhibit A
BALTIMORE COUNTY SAVINGS BANK, F.S.B.
FEDERAL STOCK CHARTER
Section 1. Corporate title. The full corporate title of the savings bank is
Baltimore County Savings Bank, F.S.B. (the "savings bank").
Section 2. Office. The home office shall be located in the County of Baltimore,
State of Maryland.
Section 3. Duration. The duration of the savings bank is perpetual.
Section 4. Purpose and powers. The purpose of the savings bank is to pursue any
or all of the lawful objectives of a Federal savings bank chartered under
section 5 of the Home Owners' Loan Act and to exercise all of the express,
implied, and incidental powers conferred thereby and by all acts amendatory
thereof and supplemental thereto, subject to the Constitution and laws of the
United States as they are now in effect, or as they may hereafter be amended,
and subject to all lawful and applicable rules, regulations, and orders of the
Office of Thrift Supervision ("Office").
Section 5. Capital stock. The total number of shares of all classes of the
capital stock which the savings bank has authority to issue is 2,000,000, of
which 1,500,000 shares shall be common stock of par value of $.01 per share and
of which 500,000 shares shall be serial preferred stock of par value of $.01 per
share. The shares may be issued from time to time as authorized by the board of
directors without further approval of shareholders, except as otherwise provided
in this Section 5 or to the extent that such approval is required by governing
law, rule, or regulation. The consideration for the issuance of the shares shall
be paid in full before their issuance and shall not be less than the par value.
Neither promissory notes nor future services shall constitute payment or part
payment for the issuance of shares of the savings bank. The consideration for
the shares shall be cash, tangible or intangible property (to the extent direct
investment in such property would be permitted), labor or services actually
performed for the savings bank, or any combination of the foregoing. In the
absence of actual fraud in the transaction, the value of such property, labor,
or services, as determined by the board of directors of the savings bank, shall
be conclusive. Upon payment of such consideration, such shares shall be deemed
to be fully paid and nonassessable. In the case of a stock dividend, that part
of the retained earnings of the savings bank which is transferred to common
stock or paid-in capital accounts upon the issuance of shares as a stock
dividend shall be deemed to be the consideration for their issuance.
Except for shares issued in connection with the initial organization of
the savings bank or in connection with the conversion of the savings bank from
the mutual to the stock form of capitalization, no shares of capital stock
(including shares issuable upon conversion, exchange or exercise of other
securities) shall be issued, directly or indirectly, to officers, directors, or
controlling persons of the savings bank other than as part of a general public
offering or as qualifying shares to a director, unless the issuance or the plan
under which they would be issued has been approved by a majority of the total
votes eligible to be cast at a legal meeting.
Nothing contained in this Section 5 (or in any supplementary sections
hereto) shall entitle the holders of any class or series of capital stock to
vote as a separate class or series or to more than one vote per share, except as
to the cumulation of votes for the election of directors, unless the charter
otherwise provides that there shall be no such cumulative voting: Provided, that
this restriction on voting separately by class or series shall not apply:
(i) To any provision which would authorize the holders of preferred
stock, voting as a class or series, to elect some members of the board of
directors, less than a majority thereof, in the event of default in the payment
of dividends on any class or series of preferred stock;
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(ii) To any provision which would require the holders of preferred
stock, voting as a class or series, to approve the merger or consolidation of
the savings bank with another corporation or the sale, lease, or conveyance
(other than by mortgage or pledge) of properties or business in exchange for
securities of a corporation other than the savings bank if the preferred stock
is exchanged for securities of such other corporation: Provided, That no
provision may require such approval for transactions undertaken with the
assistance or pursuant to the direction of the Office or the Federal Deposit
Insurance Corporation;
(iii) To any amendment which would adversely change the specific terms
of any class or series of capital stock as set forth in this Section 5 (or in
any supplementary sections hereto), including any amendment which would create
or enlarge any class or series ranking prior thereto in rights and preferences.
An amendment which increases the number of authorized shares of any class or
series of capital stock, or substitutes the surviving savings bank in a merger
or consolidation for the savings bank, shall not be considered to be such an
adverse change.
A description of the different classes and series (if any) of the
savings bank's capital stock and a statement of the designations, and the
relative rights, preferences and limitations of the shares of each class of and
series (if any) of capital stock are as follows:
A. Common stock. Except as provided in this Section 5 (or in any
supplementary sections thereto), the holders of common stock shall exclusively
possess all voting power. Each holder of shares of common stock shall be
entitled to one vote for each share held by such holder, except as to the
cumulation of votes for the election of directors, unless the charter otherwise
provides that there shall be no cumulative voting.
Whenever there shall have been paid, or declared and set aside for
payment, to the holders of the outstanding shares of any class of stock having
preference over the common stock as to the payment of dividends, the full amount
of dividends and of sinking fund, retirement fund or other retirement payments,
if any, to which such holders are respectively entitled in preference to the
common stock, then dividends may be paid on the common stock and on any class or
series of stock entitled to participate therewith as to dividends out of any
assets legally available for the payment of dividends.
In the event of any liquidation, dissolution, or winding up of the
savings bank, the holders of the common stock (and the holders of any class or
series of stock entitled to participate with the common stock in the
distribution of assets) shall be entitled to receive, in cash or in kind, the
assets of the savings bank available for distribution remaining after: (i)
payment or provision for payment of the savings bank's debts and liabilities;
(ii) distributions or provision for distributions in settlement of its
liquidation account; and (iii) distributions or provisions for distributions to
holders of any class or series of stock having preference over the common stock
in the liquidation, dissolution, or winding up of the savings bank. Each share
of common stock shall have the same relative rights as and be identical in all
respects with all the other shares of common stock.
B. Preferred stock. The savings bank may provide in supplementary
sections to its charter for one or more classes of preferred stock, which shall
be separately identified. The shares of any class may be divided into and issued
in series, with each series separately designated so as to distinguish the
shares thereof from the shares of all other series and classes. The terms of
each series shall be set forth in a supplementary section to the charter. All
shares of the same class shall be identical except as to the following relative
rights and preferences, as to which there may be variations between different
series:
(a) The distinctive serial designation and the number of shares
constituting such series;
(b) The dividend rate or the amount of dividends to be paid on the
shares of such series, whether dividends shall be cumulative and, if so, from
which date(s) the payment date(s) for dividends, and the participating or other
special rights, if any, with respect to dividends;
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(c) The voting powers, full or limited, if any, of shares of such
series;
(d) Whether the shares of such series shall be redeemable and, if so,
the price(s) at which, and the terms and conditions on which, such shares may be
redeemed;
(e) The amount(s) payable upon the shares of such series in the event
of voluntary or involuntary liquidation, dissolution, or winding up of the
savings bank;
(f) Whether the shares of such series shall be entitled to the benefit
of a sinking or retirement fund to be applied to the purchase or redemption of
such shares, and if so entitled, the amount of such fund and the manner of its
application, including the price(s) at which such shares may be redeemed or
purchased through the application of such fund;
(g) Whether the shares of such series shall be convertible into, or
exchangeable for, shares of any other class or classes of stock of the savings
bank and, if so, the conversion price(s) or the rate(s) of exchange, and the
adjustments thereof, if any, at which such conversion or exchange may be made,
and any other terms and conditions of such conversion or exchange;
(h) The price or other consideration for which the shares of such
series shall be issued; and
(i) Whether the shares of such series which are redeemed or converted
shall have the status of authorized but unissued shares of serial preferred
stock and whether such shares may be reissued as shares of the same or any other
series of serial preferred stock.
Each share of each series of serial preferred stock shall have the same
relative rights as and be identical in all respects with all the other shares of
the same series.
The board of directors shall have authority to divide, by the adoption
of supplementary charter sections, any authorized class of preferred stock into
series, and, within the limitations set forth in this section and the remainder
of this charter, fix and determine the relative rights and preferences of the
shares of any series so established.
Prior to the issuance of any preferred shares of a series established
by a supplementary charter section adopted by the board of directors, the
savings bank shall file with the Secretary to the Office a dated copy of that
supplementary section of this charter establishing and designating the series
and fixing and determining the relative rights and preferences thereof.
Section 6. Preemptive rights. Holders of the capital stock of the savings bank
shall not be entitled to preemptive rights with respect to any shares of the
savings bank which may be issued.
Section 7. Directors. The savings bank shall be under the direction of a board
of directors. The authorized number of directors, as stated in the savings
bank's bylaws, shall not be fewer than five nor more than fifteen except when a
greater or lesser number is approved by the Director of the Office, or his or
her delegate. Each director of the savings bank shall be a member of Baltimore
County Savings Bank, M.H.C. Directors shall be elected for periods of three (3)
years, and until their successors are elected and qualified, but provision shall
be made for the election of approximately one-third of the Board each year.
Section 8. Deposit Accounts. In any situation in which the priority of the
accounts of the savings bank is in controversy, all such accounts shall, to the
extent of their withdrawable value, be debts of the savings bank having at least
as high a priority as the claims of general creditors of the savings bank not
having priority (other than any priority arising or resulting from consensual
subordination) over other general creditors of the savings bank.
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Section 9. Amendment of charter. Except as provided in Section 5, no amendment,
addition, alteration, change, or repeal of this charter shall be made, unless
such is first proposed by the board of directors of the savings bank, approved
by the shareholders by a majority of the votes eligible to be cast at a legal
meeting, unless a higher vote is otherwise required, and approved or preapproved
by the Office.
BALTIMORE COUNTY SAVINGS BANK, F.S.B.
Attest: By:
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Gary C. Loraditch Michael J. Dietz
Secretary President
OFFICE OF THRIFT SUPERVISION
Attest: By:
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Secretary of the Office Director of the Office
of Thrift Supervision of Thrift Supervision
Effective Date:
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Exhibit B
BYLAWS
BALTIMORE COUNTY SAVINGS BANK, F.S.B.
ARTICLE I - HOME OFFICE
The home office of Baltimore County Savings Bank, F.S.B. (the "savings
bank") shall be 4111 E. Joppa Road, in the County of Baltimore in the State of
Maryland.
ARTICLE II - SHAREHOLDERS
Section 1. Place of Meetings. All annual and special meetings of
shareholders shall be held at the home office of the savings bank or at such
other convenient place as the board of directors may determine.
Section 2. Annual Meeting. A meeting of the shareholders of the savings
bank for the election of directors and for the transaction of any other business
of the savings bank shall be held annually within 150 days after the end of the
savings bank's fiscal year on the second Wednesday of February, if not a legal
holiday, and, if a legal holiday, then on the next day following which is not a
legal holiday, at 5:00 p.m., or at such other date and time within such 150-day
period as the board of directors may determine.
Section 3. Special Meetings. Special meetings of the shareholders for any
purpose or purposes, unless otherwise prescribed by the regulations of the
Office of Thrift Supervision ("Office") may be called at any time by the
chairman of the board, the president, or a majority of the board of directors,
and shall be called by the chairman of the board, the president, or the
secretary upon the written request of the holders of not less than one-tenth of
all of the outstanding capital stock of the savings bank entitled to vote at the
meeting. Such written request shall state the purpose or purposes of the meeting
and shall be delivered to the home office of the savings bank addressed to the
chairman of the board, the president, or the secretary.
Section 4. Conduct of Meetings. Annual and special meetings shall be
conducted in accordance with the most current edition of Robert's Rules of Order
unless otherwise prescribed by regulations of the Office or these bylaws or the
board of directors adopts another written procedure for the conduct of meetings.
The board of directors shall designate, when present, either the chairman of the
board or president to preside at such meetings.
Section 5. Notice of Meetings. Written notice stating the place, day, and
hour of the meeting and the purpose(s) for which the meeting is called shall be
delivered not fewer than 20 nor more than 50 days before the date of the
meeting, either personally or by mail, by or at the direction of the chairman of
the board, the president, or the secretary, or the directors calling the
meeting, to each shareholder of record entitled to vote at such meeting. If
mailed, such notice shall be deemed to be delivered when deposited in the mail,
addressed to the shareholder at the address as it appears on the stock transfer
books or records of the savings bank as of the record date prescribed in Section
6 of this Article II with postage prepaid. When any shareholders' meeting,
either annual or special, is adjourned for 30 days or more, notice of the
adjourned meeting shall be given as in the case of an original meeting. It shall
not be necessary to give any notice of the time and place of any meeting
adjourned for less than 30 days or of the business to be transacted at the
meeting, other than an announcement at the meeting at which such adjournment is
taken.
Section 6. Fixing of Record Date. For the purpose of determining
shareholders entitled to notice of or to vote at any meeting of shareholders or
any adjournment, or shareholders entitled to receive payment of any dividend, or
in order to make a determination of shareholders for any other proper purpose,
the board of directors shall fix in advance a date as the record date for any
such determination of shareholders. Such date in any case shall be not more than
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days and, in case of a meeting of shareholders, not fewer than 10 days prior to
the date on which the particular action, requiring such determination of
shareholders is to be taken. When a determination of shareholders entitled to
vote at any meeting of shareholders has been made as provided in this Section 6,
such determination shall apply to any adjournment.
Section 7. Voting Lists. At least 20 days before each meeting of the
shareholders, the officer or agent having charge of the stock transfer books for
shares of the savings bank shall make a complete list of the shareholders of
record entitled to vote at such meeting, or any adjournment thereof, arranged in
alphabetical order, with address and the number of shares held by each. This
list of shareholders shall be kept on file at the home office of the savings
bank and shall be subject to inspection by any shareholder of record or the
shareholder's agent at any time during usual business hours for a period of 20
days prior to such meeting. Such list shall also be produced and kept open at
the time and place of the meeting and shall be subject to inspection by any
shareholder of record or the shareholder's agent during the entire time of the
meeting. The original stock transfer book shall constitute prima facie evidence
of the shareholders entitled to examine such list or transfer books or to vote
at any meeting of shareholders. In lieu of making the shareholder list available
for inspection by shareholders as provided in the preceding paragraph, the board
of directors may elect to follow procedures prescribed in (S)552.6(d) of the
Office's regulations as now or hereafter in effect.
Section 8. Quorum. A majority of the outstanding shares of the savings bank
entitled to vote, represented in person or by proxy, shall constitute a quorum
at a meeting of shareholders. If less than a majority of the outstanding shares
is represented at a meeting, a majority of the shares so represented may adjourn
the meeting from time to time without further notice. At such adjourned meeting
at which a quorum shall be present or represented, any business may be
transacted which might have been transacted at the meeting as originally
notified. The shareholders present at a duly organized meeting may continue to
transact business until adjournment, notwithstanding the withdrawal of enough
shareholders to constitute less than a quorum. If a quorum is present, the
affirmative vote of majority of the shares represented at the meeting and
entitled to vote on the subject matter shall be the act of the shareholders,
unless the vote of a greater number of shareholders voting by classes is
required by law or the charter. Directors, however, are elected by a plurality
of the votes cast at an election of directors.
Section 9. Proxies. At all meetings of shareholders, a shareholder may vote
by proxy executed in writing by the shareholder or by his or her duly authorized
attorney in fact. Proxies may be given telephonically or electronically as long
as the holder uses a procedure for verifying the identity of the shareholder.
Proxies solicited on behalf of the management shall be voted as directed by the
shareholder or, in the absence of such direction, as determined by a majority of
the board of directors. No proxy shall be valid more than eleven months from the
date of its execution except for a proxy coupled with an interest.
Section 10. Voting of Shares in the Name of Two or More Persons. When
ownership stands in the name of two or more persons, in the absence of written
directions to the savings bank to the contrary, at any meeting of the
shareholders of the savings bank, any one or more of such shareholders may cast,
in person or by proxy, all votes to which such ownership is entitled. In the
event an attempt is made to cast conflicting votes, in person or by proxy, by
the several persons in whose names shares of stock stand, the vote or votes to
which those persons are entitled. In the event an attempt is made to cast
conflicting votes, in person or by proxy, by the several persons in whose names
shares of stock stand, the votes to which those persons are entitled shall be
cast as directed by a majority of those holding such and present in person or by
proxy at such meeting, but no votes shall be cast for such stock if a majority
cannot agree.
Section 11. Voting of Shares of Certain Holders. Shares standing in the
name of another corporation may be voted by an officer, agent, or proxy as the
bylaws of such corporation may prescribe, or, in the absence of such provision,
as the board of directors of such corporation may determine. Shares held by an
administrator, executor, guardian, or conservator may be voted by him or her,
either in person or by proxy, without a transfer of such shares into his or her
name. Shares standing in the name of a trustee may be voted by him or her,
either in person or by proxy, but no trustee shall be entitled to vote shares
held by him or her, without a transfer of such shares into his or her name.
Shares held in trust in an IRA or Keogh Account, however, may be voted by the
savings bank if no other instructions are received. Shares standing in the name
of a receiver may be voted by such receiver, and shares held by or under the
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control of a receiver may be voted by such receiver without the transfer of his
or her name if authority to do so is contained in an appropriate order of the
court or other public authority by which such receiver was appointed.
A shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee, and
thereafter the pledgee shall be entitled to vote the shares so transferred.
Neither treasury shares of its own stock held by the savings bank nor
shares held by another corporation, if a majority of the shares entitled to vote
for the election of directors of such other corporation are held by the savings
bank, shall be voted at any meeting or counted in determining the total number
of outstanding shares at any given time for purposes of any meeting.
Section 12. Cumulative Voting. Every shareholder entitled to vote at an
election for directors shall have the right to vote, in person or by proxy, the
number of shares owned by the shareholder for as many persons as there are
directors to be elected and for whose election the shareholder has a right to
vote, or to cumulate the votes by giving one candidate as many votes as the
number of such directors to be elected multiplied by the number of shares shall
equal or by distributing such votes on the same principal among any number of
candidates.
Section 13. Inspectors of Election. In advance of any meeting of
shareholders, the board of directors may appoint any persons other than nominees
for office as inspectors of election to act at such meeting or any adjournment.
The number of inspectors shall be either one or three. Any such appointment
shall not be altered at the meeting. If inspectors of election are not so
appointed, the chairman of the board or the president may, or on the request of
not fewer than 10 percent of the votes represented at the meeting shall, make
such appointment at the meeting. If appointed at the meeting, the majority of
the votes present shall determine whether one or three inspectors are to be
appointed. In case any person appointed as inspector fails to appear or fails or
refuses to act, the vacancy may be filled by appointment by the board of
directors in advance of the meeting or at the meeting by the chairman of the
board or the president.
Unless otherwise prescribed by regulations of the Office, the duties of
such inspectors shall include: determining the number of shares and the voting
power of each share, the shares represented at the meeting, the existence of a
quorum, and the authenticity, validity and effect of proxies; receiving votes,
ballots, or consents; hearing and determining all challenges and questions in
any way arising in connection with the rights to vote; counting and tabulating
all votes or consents; determining the result; and such acts as may be proper to
conduct the election or vote with fairness to all shareholders.
Section 14. Nominating Committee. The board of directors shall act as a
nominating committee for selecting the management nominees for election as
directors. Except in the case of a nominee substituted as a result of the death
or other incapacity of a management nominee, the nominating committee shall
deliver written nominations to the secretary at least 20 days prior to the date
of the annual meeting. Upon delivery, such nominations shall be posted in a
conspicuous place in each office of the savings bank. No nominations for
directors except those made by the nominating committee shall be voted upon at
the annual meeting unless other nominations by shareholders are made in writing
and delivered to the secretary of the savings bank at least five days prior to
the date of the annual meeting. Upon delivery, such nominations shall be posed
in a conspicuous place in each office of the savings bank. Ballots bearing the
names of all person nominated by the nominating committee and by shareholders
shall be provided for use at the annual meeting. However, if the nominating
committee shall fail or refuse to act at least 20 days prior to the annual
meeting, nominations for directors may be made at the annual meeting by any
shareholder entitled to vote and shall be voted upon.
Section 15. New Business. Any new business to be taken up at the annual
meeting shall be stated in writing and filed with the secretary of the savings
bank at least five days before the date of the annual meeting, and all business
so stated, proposed, and filed shall be considered at the annual meeting; but no
other proposal shall be acted upon at the annual meeting. Any shareholder may
make any other proposal at the annual meeting and the dame may be discussed and
considered, but unless stated in writing and filed with the secretary at least
five days before the meeting, such
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proposal shall be laid over for action at an adjourned, special, or annual
meeting of the shareholders taking place 30 days or more thereafter. This
provision shall not prevent the consideration and approval or disapproval at the
annual meeting or reports of officers, directors, and committees; but in
connection with such reports, no new business shall be acted upon at such annual
meeting unless stated and filed as herein provided.
Section 16. Informal Action by Shareholders. Any action required to be
taken at a meeting of the shareholders, or any other action which may be taken
at a meeting of shareholders, may be taken without a meeting if consent in
writing , setting forth the action so taken, shall be given by all of the
shareholders entitled to vote with respect to the subject matter.
ARTICLE III-BOARD OF DIRECTORS
Section 1. General Powers. The business and affairs of the savings bank
shall be under the direction of its board of directors shall annually elect a
chairman of the board and a president from among its members and shall
designate, when present, either the chairman of the board or the president to
preside at the meetings.
Section 2. Number and Term. The board of directors shall consist of ten
(10) members and shall be divided into three classes as nearly equal in number
as possible. The members of each class shall be elected for a term of three
years and until their successors are elected and qualified. One class shall be
elected by ballot annually.
Section 3. Regular Meetings. A regular meeting of the board of directors
shall be held without other notice than this bylaw following the annual meeting
of shareholders. The board of directors may provide, by resolution, the time and
place, for the holding of additional regular meetings without other notice than
such resolution. Directors may participate in a meeting by means of a conference
telephone or similar communications device through which all persons
participating can hear each other at the same time. Participation by such means
shall constitute presence in person for all purposes.
Section 4. Qualification. Each director shall at all times be the
beneficial owner of not less than 100 shares of capital stock of the savings
bank unless the savings bank is a wholly owned subsidiary of a holding company.
Section 5. Special Meetings. Special meetings of the board of directors
may be called by or at the request of the chairman of the board, the president,
or one-third of the directors. The persons authorized to call special meetings
of the board of directors may fix any place, within the savings bank's normal
lending territory, as the place for holding any special meeting of the board of
directors called by such persons.
Members of the board of directors may participate in special meetings by
means of conference telephone or similar communications equipment by which all
persons participating in the meeting can hear each other. Such participation
shall constitute presence in person for all purposes.
Section 6. Notice. Written notice of any special meeting shall be given
to each director at least 24 hours prior thereto when delivered personally or by
telegram or at least five days prior thereto when delivered by mail at the
address at which the director is most likely to be reached. Such notice shall be
deemed to be delivered when deposited in the mail so addressed, with postage
prepaid if mailed, when delivered to the telegraph company if sent by telegram,
or when the savings bank receives notice of delivery if electronically
transmitted. Any director may waive notice of any meeting by a writing filed
with the secretary. The attendance of a director at a meeting shall constitute a
waiver of notice of such meeting, except where a director attends a meeting for
the express purpose of objecting to the transaction of any business because the
meeting is not lawfully called or convened. Neither the business to be
transacted at, nor the purpose of, any meeting of the board of directors need be
specified in the notice of waiver of notice of such meeting.
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Section 7. Quorum. A majority of the number of directors fixed by Section 2
of this Article III shall constitute a quorum for the transaction of business at
any meeting of the board of directors; but if less than such majority is present
at a meeting, a majority of the directors present may adjourn the meeting from
time to time. Notice of any adjourned meeting shall be given in the same manner
as prescribed by Section 5 of this Article III.
Section 8. Manner of Acting. The act of the majority of the present
directors at a meeting at which a quorum is present shall be the act of the
board of directors, unless a greater number is prescribed by regulation of the
Office or by these bylaws.
Section 9. Action Without a Meeting. Any action required or permitted to be
taken by the board of directors at a meeting may be taken without a meeting if a
consent in writing, setting forth the action so taken, shall be signed by all of
the directors, shall automatically constitute a resignation, effective when such
resignation is accepted by the board of directors.
Section 10. Resignation. Any director may resign at any time by sending a
written notice of such resignation to the home office of the savings bank
addressed to the chairman of the board or the president. Unless otherwise
specified, such resignation shall take effect upon receipt by the chairman of
the board or the president. More than three consecutive absences from regular
meetings of the board of directors, unless excused by resolution of the board of
directors.
Section 11. Vacancies. Any vacancy occurring on the board of directors may
be filled by the affirmative vote of a majority of the remaining directors
although less than a quorum of the board of directors. A director elected to
fill a vacancy shall be elected to serve until the next election of directors by
the shareholders. Any directorship to be filled by reason of an increase in the
number of directors may be filled by election by the board of directors for a
term of office continuing only until the next election of directors by the
shareholders.
Section 12. Compensation. Directors, as such, may receive a stated salary
for their services. By resolution of the board of directors, a reasonable fixed
sum, and reasonable expenses of attendance, if any, may be allowed for
attendance at each regular or special meeting of the board of directors. Members
of either standing or special committees may be allowed such compensation for
attendance at committee meetings as the board of directors may determine.
Section 13. Presumption of Assent. A director of the savings bank who is
present at a meeting of the board of directors at which action on any savings
bank matter is taken shall be presumed to have assented to the action taken
unless his or her dissent or abstention shall be entered in the minutes of the
meeting or unless he or she shall file a written dissent to such action with the
person acting as the secretary of the meeting before the adjournment thereof or
shall forward such dissent by registered mail to the secretary of the savings
bank within five days after the date a copy of the minutes of the meeting is
received. Such right to dissent shall not apply to a director who voted in favor
of such action.
Section 14. Removal of Directors. At a meeting of shareholders called
expressly for that purpose, any director may be removed only for cause by a vote
of the holders of a majority of the shares then entitled to vote at an election
of directors. If less than the entire board is to be removed, no one of the
directors may be removed if the votes cast against the removal would be
sufficient to elect a director if then cumulatively voted at an election of the
class of directors of which such director is a part. Whenever the holders of the
shares of any class are entitled to elect one or more directors by the
provisions of the charter or supplemental sections thereto, the provisions of
this section shall apply, in respect to the removal of a director or directors
so elected, to the vote of the holders of the outstanding shares of that class
and not to the vote of the outstanding shares as a whole.
Section 15. Advisory Directors. The board of directors may by resolution
appoint advisory directors to the board, who may also serve as directors
emeriti, and shall have such authority and receive such compensation and
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reimbursement as the board of directors shall provide. Advisory directors or
directors emeriti shall not have the authority to participate by vote in the
transaction of business.
Section 16. Age Limitation. No person shall be eligible for election,
reelection, appointment, or reappointment to the board of directors is such
person is then more than 72 years of age. Any director who attains age 72 during
the term shall be allowed to complete the term. This Section 16 of this Article
III does not apply to a director who has served as a director of Baltimore
County Savings Bank, F.S.B. continuously since 1980. Persons may serve as
advisory directors without regard to age.
ARTICLE IV - EXECUTIVE AND OTHER COMMITTEES
Section 1. Appointment. The board of directors, by resolution adopted by a
majority of the full board, may designate the chief executive officer and two or
more of the other directors to constitute an executive committee. The
designation of any committee pursuant to Article IV and the delegation of
authority shall not operate to relieve the board of directors, or any director,
of any responsibility imposed by law or regulation.
Section 2. Authority. The executive committee, when the board of directors
is not in session, shall have and may exercise all of the authority of the board
of directors except to the extent, if any, that such authority shall be limited
by the resolution appointing the executive committee; and except also that the
executive committee shall not have the authority of the board of directors with
reference to: the declaration of dividends; the amendment of the charter or
bylaws of the savings bank, or recommending to the stockholders a plan of
merger, consolidation, or conversion; the sale, lease, or other disposition of
all or substantially all of the property and assets of the savings bank
otherwise than in the usual and regular course of its business; a voluntary
dissolution of the savings bank; a revocation of any of the foregoing; or the
approval of a transaction in which any member of the executive committee,
directly or indirectly, has any material beneficial interest.
Section 3. Tenure. Subject to the provisions of Section 8 of this Article
IV, each member of the executive committee shall hold office until the next
regular annual meeting of the board of directors following his or her
designation and until a successor is designated as a member of the executive
committee.
Section 4. Meetings. Regular meetings of the executive committee may be
held with notice at such times and places as the executive committee may fix
from time to time by resolution. Special meetings of the executive committee may
be called by any member thereof upon not less than one day's notice stating the
place, date, and hour of the meeting, which notice may be written or oral. Any
member of the executive committee may waive notice of any meeting and no notice
of any meeting need be given to any member thereof who attends in person. The
notice of a meeting of the executive committee need not state the business
proposed to be transacted at the meeting.
Section 5. Quorum. A majority of the members of the executive committee
shall constitute a quorum for the transaction of business at any meeting
thereof, and action of the executive committee must be authorized by the
affirmative vote of a majority of the members present at a meeting at which a
quorum is present.
Section 6. Action Without a Meeting. Any action required or permitted to
be taken by the executive committee at a meeting may be taken without a meeting
if a consent in writing, setting forth the action so taken, shall be signed by
all of the members of the executive committee.
Section 7. Vacancies. Any vacancy in the executive committee may be filled
by a resolution adopted by a majority of the full board of directors.
Section 8. Resignations and Removal. Any member of the executive committee
may be removed at any time with or without cause by resolution adopted by a
majority of the full board of directors. Any member of the executive
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committee may resign from the executive committee at any time by giving written
notice to the president or secretary of the savings bank. Unless otherwise
specified, such resignation shall take effect upon its receipt; the acceptance
of such resignation shall not be necessary to make it effective.
Section 9. Procedure. The executive committee shall elect a presiding
officer from its members and may fix its own rules of procedure which shall not
be inconsistent with these bylaws. It shall keep regular minutes of its
proceedings and report the same to the board of directors for its information at
the meeting held next after the proceedings shall have occurred.
Section 10. Other Committees. The board of directors may by resolution
establish an audit, loan, or other committee composed of directors as they may
determine to be necessary or appropriate for the conduct of the business of the
savings bank and may prescribe the duties, constitution, and procedures thereof.
ARTICLE V - OFFICERS
Section 1. Positions. The officers of the savings bank shall be a
president, one or more vice presidents, a secretary, and a treasurer or
comptroller, each of whom shall be elected by the board of directors. The board
of directors may also designate the chairman of the board as an officer. The
offices of the secretary and treasurer may be held by the same person and a vice
president may also be either the secretary or the treasurer or comptroller. The
board of directors may designate one or more vice presidents as executive vice
president or senior vice president. The board of directors may also elect or
authorize the appointment of such other officers as the business of the savings
bank may require. The officers shall have such authority and perform such duties
as the board of directors may from time to time authorize or determine. In the
absence of action by the board of directors, the officers shall have such powers
and duties as generally pertain to their respective offices.
Section 2. Election and Term of Office. The officers of the savings bank
shall be elected annually at the first meeting of the board of directors held
after each annual meeting of the shareholders. If the election of officers is
not held at such meeting, such election shall be held as soon thereafter as
possible. Each officer shall hold office until a successor has been duly elected
and qualified or until the officer's death, resignation, or removal in the
manner hereinafter provided. Election or appointment of an officer, employee, or
agent shall not of itself create contractual rights. The board of directors may
authorize the savings bank to enter into an employment contract with any officer
in accordance with regulations of the Office, but no such contract shall impair
the right of the board of directors to remove any officer at any time in
accordance with Section 3 of this Article V.
Section 3. Removal. Any officer may be removed by the board of directors
whenever in its judgment the best interests of the savings bank will be served
thereby, but such removal, other than for cause, shall be without prejudice to
the contractual rights, if any, of the person so removed.
Section 4. Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification, or otherwise may be filled by the board
of directors for the unexpired portion of the term.
Section 5. Remuneration. The remuneration of the officers shall be fixed
from time to time by the board of directors.
ARTICLE VI - CONTRACTS, LOANS, CHECKS, AND DEPOSITS
Section 1. Contracts. To the extent permitted by regulations of the Office,
and except as otherwise prescribed by these bylaws with respect to certificates
for shares, the board of directors may authorize any officer, employee, or
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agent of the savings bank to enter into any contract or execute and deliver any
instrument in the name of and on behalf of the savings bank. Such authority may
be general or confined to specific instances.
Section 2. Loans. No loans shall be contracted on behalf of the savings
bank and no evidence of indebtedness shall be issued in its name unless
authorized by the board of directors. Such authority may be general or confined
to specific instances.
Section 3. Checks, Drafts, etc. All checks, drafts, or other orders for the
payment of money, notes, or other evidences of indebtedness issued in the name
of the savings bank shall be signed by one or more officers, employees, or
agents of the savings bank in such manner as shall from time to time be
determined by the board of directors.
Section 4. Deposits. All funds of the savings bank not otherwise employed
shall be deposited from time to time to the credit of the savings bank in any
duly authorized depositories as the board of directors may select.
ARTICLE VII - CERTIFICATES FOR SHARES AND THEIR TRANSFER
Section 1. Certificates for Shares. Certificates representing shares of
capital stock of the savings bank shall be in such form as shall be determined
by the board of directors and approved by the Office. Such certificates shall be
signed by the chief executive officer or by any other officer of the savings
bank authorized by the board of directors, attested by the secretary or an
assistant secretary, and sealed with the corporate seal or a facsimile thereof.
The signatures of such officers upon a certificate may be facsimiles if the
certificate is manually signed on behalf of a transfer agent or a registrar
other than the savings bank itself or one of its employees. Each certificate for
shares of capital stock shall be consecutively numbered or otherwise identified.
The name and address of the person to whom the shares are issued, with the
number of shares and date of issue, shall be entered on the stock transfer books
of the savings bank. All certificates surrendered to the savings bank for
transfer shall be canceled and no new certificate shall be issued until the
former certificate for a like number of shares has been surrendered and
canceled, except that in the case of a lost or destroyed certificate, a new
certificate may be issued upon such terms and indemnity to the savings bank as
the board of directors may prescribe.
Section 2. Transfer of Shares. Transfer of shares of capital stock of the
savings bank shall be made only on its stock transfer books. Authority for such
transfer shall be given only by the holder of record or by his or her legal
representative, who shall furnish proper evidence of such authority, or by his
attorney authorized by a duly executed power of attorney and filed with the
savings bank. Such transfer shall be made only on surrender for cancellation of
the certificate for such shares. The person in whose name shares of capital
stock stand on the books of the savings bank shall be deemed by the savings bank
to be the owner for all purposes.
ARTICLE VIII - FISCAL YEAR; ANNUAL AUDIT
The fiscal year of the savings bank shall end on the 30th day of September
of each year. The appointment of accountants shall be subject to annual
ratification by the shareholders.
ARTICLE IX - DIVIDENDS
Subject to the terms of the savings bank's charter and the regulations and
orders of the Office, the board of directors may, from time to time, declare,
and the savings bank may pay, dividends on its outstanding shares of capital
stock.
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ARTICLE X - CORPORATE SEAL
The board of directors shall provide a savings bank seal which shall be two
concentric circles between which shall be the name of the savings bank. The year
of incorporation or an emblem may appear in the center.
ARTICLE XI - AMENDMENTS
These bylaws may be amended in a manner consistent with regulations of the
Office and shall be effective after: (i) approval of the amendment by a majority
vote of the authorized board of directors, or by a majority vote of the votes
cast by the shareholders of the savings bank at any legal meeting, and (ii)
receipt of any applicable regulatory approval. When a savings bank fails to meet
its quorum requirements, solely due to vacancies on the board, then the
affirmative vote of a majority of the sitting board will be required to amend
the bylaws.
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Exhibit C
BALTIMORE COUNTY SAVINGS BANK, M.H.C.
CHARTER
Section 1. Corporate Title. The name of the mutual holding company is
Baltimore County Savings Bank, M.H.C. (the "Mutual Company").
Section 2. Duration. The duration of the Mutual Company is perpetual.
Section 3. Purpose and powers. The purpose of the Mutual Company is to
pursue any or all of the lawful objectives of a federal mutual savings and loan
holding company chartered under Section 10(o) of the Home Owners' Loan Act, 12
U.S.C. 1467a(o), and to exercise all of the express, implied, and incidental
powers conferred thereby and all acts amendatory thereof and supplemental
thereto, subject to the Constitution and the laws of the United States as they
are now in effect, or as they may hereafter be amended, and subject to all
lawful and applicable rules, regulations and orders of the Office of Thrift
Supervision (the "Office").
Section 4. Capital. The Mutual Company shall have no capital stock.
Section 5. Members. All holders of the savings, demand or other
authorized accounts of Baltimore County Savings Bank, F.S.B. (the "Savings
Bank") are members of the Mutual Company. In the consideration of all questions
requiring action by the members of the Mutual Company, each holder of an account
in the Savings Bank shall be permitted to cast one vote for each $100.00, or
fraction thereof, of the withdrawal value of the member's account. A member who
had a loan from the Savings Bank (a "Borrower Member") as of June 16, 1987 shall
have one additional vote for the period of time the loan is in existence. A
member who becomes a Borrower Member after June 16, 1987 shall not be entitled
to an additional vote. No member, however, shall cast more than 1,000 votes.
Voting may be by proxy, subject to the rules and regulations of the Office. Any
number of members present and voting represented in person or by proxy, at a
regular or special meeting of the members shall constitute a quorum. A majority
of all votes cast at any meeting of the members shall determine any question.
All accounts shall be nonassessable.
Section 6. Directors. The Mutual Company shall be under the direction of
a board of directors. The authorized number of directors shall not be fewer
than five nor more than fifteen, as fixed in the Mutual Company's bylaws, except
that the number of directors may be decreased to a number less than five or
increased to a number greater than fifteen with the prior approval of the
Director of the Office or his or her delegate. Each director of the Mutual
Company shall be a member of the Savings Bank. Members of the Mutual Company
shall elect directors by ballot: Provided, that in the event of a vacancy, if
the members of the Mutual Company fail to do so, by electing a director to serve
until the next annual meeting of the members. Directors shall be elected for
periods of three (3) years, and until their successors are elected and
qualified, but provision shall be made for the election of approximately one-
third of the Board each year.
Section 7. Capital, surplus, and distribution of earnings. The Mutual
Company shall distribute net earnings on its accounts on such basis and in
accordance with such terms and conditions as may from time to time be authorized
by the Office; provided, that the Mutual Company may establish minimum balance
requirements for accounts to be eligible for distribution of earnings.
All holders of accounts of the Savings Bank shall be entitled to equal
distribution of the assets of the Mutual Company, pro rata to the value of their
accounts in the Savings Bank, in the event of a voluntary or involuntary
liquidation, dissolution, or winding up of the Mutual Company. Moreover, in any
such event, or in any other situation
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in which the priority of such accounts is in controversy, all such accounts
shall, to the extent of their withdrawal value, be debts of the Mutual Company
having the same priority as the claims of general creditors of the Mutual
Company not having priority (other than any priority arising or resulting from
consensual subordination) over other general creditors of the Mutual Company.
Section 8. Amendment. Adoption of any preapproved charter amendment shall
be effective after such preapproved amendment has been approved by the members
at a legal meeting. Any other amendment, addition, change or repeal of this
charter must be approved by the Office prior to approval by the members at a
legal meeting and shall be effective upon filing with the Office in accordance
with regulatory procedures.
BALTIMORE COUNTY SAVINGS BANK, M.H.C.
Attest: By:
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Gary C. Loraditch Michael J. Dietz
Secretary President and Chief Executive
Officer
OFFICE OF THRIFT SUPERVISION
Attest: By:
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Secretary of the Office of Thrift Director of the Office of Thrift
Supervision Supervision
Effective Date:
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Exhibit D
MUTUAL BYLAWS
OF
BALTIMORE COUNTY SAVINGS BANK, M.H.C.
1. Annual meeting of members. The annual meeting of the members of
Baltimore County Savings Bank, M.H.C. (the "Mutual Company") for the election of
directors and for the transaction of any other business of the Mutual Company
shall be held, as designated by the board of directors, at its home office, or
any other convenient place the board of directors may designate, at 3:00 p.m. on
the second Wednesday in February of each year, if not a legal holiday, or if a
legal holiday then on the next succeeding day not a legal holiday. At each
annual meeting, the officers shall make a full report of the financial condition
of the Mutual Company and of its progress for the preceding year and shall
outline a program for the succeeding year.
2. Special meeting of members. Special meetings of the members of the
Mutual Company may be called at any time by the president or the board of
directors and shall be called by the president, a vice president, or the
secretary upon the written request of members of record, holding in the
aggregate at least one-tenth of the voting capital of the Mutual Company. Such
written request shall state the purpose of the meeting and shall be delivered at
the principal place of business of the Mutual Company addressed to the
president. For purposes of this section, "voting capital" means FDIC-insured
deposits as of the voting record date. Annual and special meetings shall be
conducted in accordance with the most current edition of Robert's Rules of Order
or any other set of written procedures agreed to by the board of directors.
3. Notice of meeting of members. Notice of each meeting shall be either
published once a week for the two successive calendar weeks (in each instance on
any day of the week) immediately prior to the week in which such meeting shall
convene, in a newspaper printed in the English language and of general
circulation in the city or county in which the principal place of business of
the Mutual Company is located, or mailed postage prepaid at least 15 days and
not more than 45 days prior to the date on which such meeting shall convene, to
each of its members of record at the last address appearing on the books of the
Mutual Company. Such notice shall state the name of the Mutual Company, the
place of the meeting, the date and time when it shall convene, and the matters
to be considered. A similar notice shall be posted in a conspicuous place in
each of the offices of the Mutual Company during the 14 days immediately
preceding the date on which such meeting shall convene. If any member, in
person or by authorized attorney, shall waive in writing notice of any meeting
of members, notice thereof need not be given to such member. When any meeting is
adjourned for 30 days or more, notice of the adjournment and reconvening of the
meeting shall be given as in the case of the original meeting.
4. Fixing of record date. For the purpose of determining members entitled
to notice of or to vote at any meeting of members or any adjournment thereof, or
in order to make a determination of members for any other proper purpose, the
board of directors shall fix in advance a record date for any such determination
of members. Such date shall be not more than 60 days nor fewer than 10 days
prior to the date on which the action, requiring such determination of members,
is to be taken. The member entitled to participate in any such action shall be
the member of record on the books of the Mutual Company on such record date.
The number of votes which each member shall be entitled to cast at any meeting
of members shall be determined from the books of the Mutual Company as of such
record date. Any member of such record date who ceases to be a member prior to
such meeting shall not be entitled to vote at that meeting. The same
determination shall apply to any adjourned meeting.
5. Member quorum. Any number of members present and voting, represented
in person or by proxy, at a regular or special meeting of the members shall
constitute a quorum. A majority of all votes cast at any meeting of the members
shall determine any question, unless otherwise required by regulation.
Directors, however, are elected by a plurality of the votes cast at an election
of directors. At any adjourned meeting any business may be
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transacted which might have been transacted at the meeting as originally called.
Members present at a duly constituted meeting may continue to transact business
until adjournment.
6. Voting by proxy. Voting at any annual or special meeting of the
members may be by proxy pursuant to the rules and regulations of the Office of
Thrift Supervision ("Office"), provided, that no proxies shall be voted at any
meeting unless such proxies shall have been placed on file with the secretary of
the Mutual Company, for verification, prior to the convening of such meeting.
Proxies may be given telephonically or electronically as long as the holder uses
a procedure for verifying the identity of the member. All proxies with a term
greater than eleven months or solicited at the expense of the Mutual Company
must run to the board of directors as a whole, or to a committee appointed by a
majority of such board. Accounts held by an administrator, executor, guardian,
conservator or receiver may be voted in person or by proxy by such person.
Accounts held by a trustee may be voted by such trustee either in person or by
proxy, in accordance with the terms of the trust agreement, but no trustee shall
be entitled to vote accounts without a transfer of such accounts into the
trustee name. Accounts held in trust in an IRA or Keogh Account, however, may
be voted by the Mutual Company if no other instructions are received. Joint
accounts shall be entitled to no more than 1,000 votes, and any owner may cast
all the votes unless the Mutual Company has otherwise been notified in writing.
7. Communication between members. Communication between members shall be
subject to any applicable rules or regulations of the Office. No member,
however, shall have the right to inspect or copy any portion of any books or
records of the Mutual Company or its second-tier subsidiary, Baltimore County
Savings Bank, F.S.B. (the "Savings Bank") containing: (i) a list of depositors
or borrowers from such Saving Bank; (ii) their addresses; (iii) individual
deposit or loan balances or records; or (iv) any data from which such
information could reasonably be constructed.
8. Number of directors, membership. The number of directors shall be
ten, except where authorized by the Office, and shall be divided into three
classes as nearly equal in number as possible. Each director shall be a member
of the Mutual Company. The members of each class shall be elected for a term of
three years and until their successors are elected and qualified. One class
shall be elected by ballot annually.
9. Meetings of the board. The board of directors shall meet regularly
without notice at the principal place of business of the Mutual Company at least
once each month at an hour and date fixed by resolution of the board, provided
that the place of meeting may be changed by the directors. Special meetings of
the board may be held at any place specified in a notice of such meeting and
shall be called by the secretary upon the written request of the chairman or of
three directors. All special meetings shall be held upon at least 24 hours
written notice to each director unless notice is waived in writing before or
after such meeting. Such notice shall state the place, date, time, and purposes
of such meeting. A majority of the authorized directors shall constitute a
quorum for the transaction of business. The act of a majority of the directors
present at any meeting at which there is a quorum shall be the act of the board.
Action may be taken without a meeting if unanimous written consent is obtained
for such action. The board may also permit telephonic participation at
meetings. The meetings shall be under the direction of a chairman, appointed
annually by the board, or in the absence of the chairman, the meetings shall be
under the direction of the president.
10. Officers, employees, and agents. Annually at the meeting of the board
of directors of the Mutual Company following the annual meeting of the members
of the Mutual Company, the board shall elect a president, one or more vice
presidents, a secretary, and a treasurer or comptroller: Provided, that the
offices of president and secretary may not be held by the same person and a vice
president may also be the treasurer or comptroller. The board may appoint such
additional officers, employees, and agents as it may from time to time
determine. The term of office of all officers shall be one year or until their
respective successors are elected and qualified. Any officer may be removed at
any time by the board with or without cause, but such removal, other than for
cause, shall be without prejudice to the contractual rights, if any, of the
person so removed. In the absence of designation from time
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to time of powers and duties by the board, the officers shall have such powers
and duties as generally pertain to their respective offices.
Any indemnification by the Mutual Company of the Mutual Company's personnel
is subject to any applicable rules or regulations of the Office.
11. Vacancies, resignation or removal of directors. Members of the Mutual
Company shall elect directors by ballot: Provided, that in the event of a
vacancy on the board between meetings of members, the board of directors may, by
their affirmative vote, fill such vacancy, even if the remaining directors
constitute less than a quorum. A director elected to fill a vacancy shall be
elected to serve only until the next election of directors by the members. Any
director may resign at any time by sending a written notice of such resignation
to the Mutual Company delivered to the secretary. Unless otherwise specified
therein such resignation shall take effect upon receipt by the secretary. More
than three consecutive absences from regular meetings of the board, unless
excused by resolution of the board, shall automatically constitute a
resignation, effective when such resignation is accepted by the board.
At a meeting of members called expressly for that purpose, directors or the
entire board may be removed, only with cause, by a vote of the holders of a
majority of the shares then entitled to vote at an election of directors.
12. Powers of the board. The board of directors shall have the power:
(a) By resolution, to appoint from among its members and remove an
executive committee, which committee shall have and may exercise the powers of
the board between the meetings of the board, but no such committee shall have
the authority of the board to amend the charter or bylaws, adopt a plan of
merger, consolidation, dissolution, or provide for the disposition of all or
substantially all the property and assets of the Mutual Company. Such committee
shall not operate to relieve the board, or any member thereof, of any
responsibility imposed by law;
(b) To appoint and remove by resolution the members of such other
committees as may be deemed necessary and prescribe the duties thereof;
(c) To fix the compensation of directors, officers, and employees; and to
remove any officer or employee at any time with or without cause;
(d) To limit payments on capital which may be accepted; and
(e) To exercise any and all of the powers of the Mutual Company not
expressly reserved by the charter to the members.
13. Execution of instruments, generally. All documents and instruments or
writings of any nature shall be signed, executed, verified, acknowledged, and
delivered by such officers, agents, or employees of the Mutual Company or any
one of them and in such manner as from time to time may be determined by
resolution of the board. All notes, drafts, acceptances, checks, endorsements,
and all evidences of indebtedness of the Mutual Company whatsoever shall be
signed by such officer or officers or such agent or agents of the Mutual Company
and in such manner as the board may from time to time determine. Endorsements
for deposit to the credit of the Mutual Company in any of its duly authorized
depositories shall be made in such manner as the board may from time to time
determine. Proxies to vote with respect to shares or accounts of other
associations or stock of other corporations owned by, or standing in the name
of, the Mutual Company may be executed and delivered from time to time on behalf
of the Mutual Company by the president or a vice president and the secretary or
an assistant secretary of the Mutual Company or by any other persons so
authorized by the board.
14. Nominating committee. The chairman, at least 30 days prior to the
date of each annual meeting, shall appoint a nominating committee of three
persons who are members of the Mutual Company. Such committee shall
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make nominations for directors in writing and deliver to the secretary such
written nominations at least 15 days prior to the date of the annual meeting,
which nominations shall then be posted in a prominent place in the principal
place of business for the 15-day period prior to the date of the annual meeting,
except in the case of a nominee substituted as a result of death or other
incapacity. Provided such committee is appointed and makes such nominations, no
nominations for directors except those made by the nominating committee shall be
voted upon at the annual meeting unless other nominations by members are made in
writing and delivered to the secretary of the Mutual Company at least 10 days
prior to the date of the annual meeting, which nominations shall then be posted
in a prominent place in the principal place of business for the 10-day period
prior to the date of the annual meeting, except in the case of a nominee
substituted as a result of death or other incapacity. Ballots bearing the names
of all persons nominated by the nominating committee and by other members prior
to the annual meeting shall be provided for use by the members at the annual
meeting. If at any time the chairman shall fail to appoint such nominating
committee, or the nominating committee shall fail or refuse to act at least 15
days prior to the annual meeting, nominations for directors may be made at the
annual meeting by any member and shall be voted upon.
15. New business. Any new business to be taken up at the annual meeting,
including any proposal to increase or decrease the number of directors of the
Mutual Company, shall be stated in writing and filed with the secretary of the
Mutual Company at least 30 days before the date of the annual meeting, and all
business so stated, proposed, and filed shall be considered at the annual
meeting; but no other proposal shall be acted upon at the annual meeting. Any
member may make any other proposal at the annual meeting and the same may be
discussed and considered; but unless stated in writing and filed with the
secretary 30 days before the meeting, such proposal shall be laid over for
action at an adjourned, special, or regular meeting of the members taking place
at least 30 days thereafter. This provision shall not prevent the consideration
and approval or disapproval at the annual meeting of the reports of officers and
committees, but in connection with such reports no new business shall be acted
upon at such annual meeting unless stated and filed as herein provided.
16. Seal. The seal shall be two concentric circles between which shall be
the name of the Mutual Company. The year of incorporation, the word
"Incorporated," or an emblem may appear in the center.
17. Amendment. Adoption of any bylaw amendment pursuant to (S)544.5 of
the Office's regulations, as long as consistent with applicable law, rules and
regulations, and which adequately addresses the subject and purpose of the
stated bylaw section, shall be effective after: (i) approval of the amendment by
a majority vote of the authorized board, or by a vote of the members of the
Mutual Company at a legal meeting; and (ii) receipt of any applicable regulatory
approval. When a Mutual Company fails to meet its quorum requirement, solely
due to vacancies on the board, the bylaws may be amended by an affirmative vote
of a majority of the sitting board.
18. Age limitations. No person shall be eligible for election,
reelection, appointment, or reappointment to the board of directors if such
person is then more than 72 years of age. Any director who attains age 72
during the term shall be allowed to complete the term. This Section 18 does not
apply to a director who has served as a director of Baltimore County Savings
Bank, F.S.B. continuously since 1980. Persons may serve as advisory directors
without regard to age.
19. Advisory Directors. The board of directors may by resolution appoint
advisory directors to the board, who may also serve as directors emeriti, and
shall have such authority and receive such compensation and reimbursement as
the board of directors shall provide. Advisory directors or directors emeriti
shall not have the authority to participate by vote in the transaction of
business.
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Exhibit E
BCSB BANKCORP, INC.
FEDERAL MHC SUBSIDIARY HOLDING COMPANY CHARTER
Section 1. Corporate title. The full corporate title of the MHC subsidiary
holding company is BCSB Bankcorp, Inc. (the "MHC subsidiary holding company").
Section 2. Domicile. The domicile of the MHC subsidiary holding company shall be
in the County of Baltimore, in the State of Maryland.
Section 3. Duration. The duration of the MHC subsidiary holding company is
perpetual.
Section 4. Purpose and powers. The purpose of the MHC subsidiary holding company
is to pursue any or all of the lawful objectives of a federal mutual holding
company chartered under section 10(o) of the Home Owners' Loan Act, 12 U.S.C.
1467a(o), and to exercise all of the express, implied, and incidental powers
conferred thereby and by all acts amendatory thereof and supplemental thereto,
subject to the Constitution and laws of the United States as they are now in
effect, or as they may hereafter be amended, and subject to all lawful and
applicable rules, regulations, and orders of the Office of Thrift Supervision
("Office").
Section 5. Capital stock. The total number of shares of all classes of the
capital stock that the MHC subsidiary holding company has authority to issue is
15,000,000, of which 13,500,000 shares shall be common stock of par value of
$.01 per share and of which 1,500,000 shares shall be serial preferred stock of
par value of $.01 per share. The shares may be issued from time to time as
authorized by the board of directors without further approval of shareholders,
except as otherwise provided in this Section 5 or to the extent that such
approval is required by governing law, rule, or regulation. The consideration
for the issuance of the shares shall be paid in full before their issuance and
shall not be less than the par value. Neither promissory notes nor future
services shall constitute payment or part payment for the issuance of shares of
the MHC subsidiary holding company. The consideration for the shares shall be
cash, tangible or intangible property (to the extent direct investment in such
property would be permitted), labor or services actually performed for the MHC
subsidiary holding company, or any combination of the foregoing. In the absence
of actual fraud in the transaction, the value of such property, labor, or
services, as determined by the board of directors of the MHC subsidiary holding
company, shall be conclusive. Upon payment of such consideration, such shares
shall be deemed to be fully paid and nonassessable. In the case of a stock
dividend, that part of the retained earnings of the MHC subsidiary holding
company which is transferred to common stock or paid-in capital accounts upon
the issuance of shares as a stock dividend shall be deemed to be the
consideration for their issuance.
Except for shares issued in the initial organization of MHC subsidiary
holding company, no shares of capital stock (including shares issuable upon
conversion, exchange or exercise of other securities) shall be issued, directly
or indirectly, to officers, directors, or controlling persons (except for shares
issued to Baltimore County Savings Bank, M.H.C., the parent mutual holding
company of the MHC subsidiary holding company) other than as part of a general
public offering or as qualifying shares to a director, unless the issuance or
the plan under which they would be issued has been approved by a majority of the
total votes eligible to be cast at a legal meeting.
Nothing contained in this Section 5 (or in any supplementary sections
hereto) shall entitle the holders of any class or series of capital stock to
vote as a separate class or series or to more than one vote per share: provided,
that this restriction on voting separately by class or series shall not apply:
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(i) To any provision which would authorize the holders of preferred
stock, voting as a class or series, to elect some members of the board of
directors, less than a majority thereof, in the event of default in the payment
of dividends on any class or series of preferred stock;
(ii) To any provision that would require the holders of preferred
stock, voting as a class or series, to approve the merger or consolidation of
the MHC subsidiary holding company with another corporation or the sale, lease,
or conveyance (other than by mortgage or pledge) of properties or business in
exchange for securities of a corporation other than the MHC subsidiary holding
company if the preferred stock is exchanged for securities of such other
corporation: Provided, That no provision may require such approval for
transactions undertaken with the assistance or pursuant to the direction of the
Office or the Federal Deposit Insurance Corporation;
(iii) To any amendment which would adversely change the specific terms
of any class or series of capital stock as set forth in this Section 5 (or in
any supplementary sections hereto), including any amendment which would create
or enlarge any class or series ranking prior thereto in rights and preferences.
An amendment which increases the number of authorized shares of any class or
series of capital stock, or substitutes the surviving entity in a merger or
consolidation for the MHC subsidiary holding company, shall not be considered to
be such an adverse change.
A description of the different classes and series (if any) of the MHC
subsidiary holding company's capital stock and a statement of the designations,
and the relative rights, preferences and limitations of the shares of each class
of and series (if any) of capital stock are as follows:
A. Common stock. Except as provided in this Section 5 (or in any
supplementary sections thereto), the holders of common stock shall exclusively
possess all voting power. Each holder of shares of common stock shall be
entitled to one vote for each share held by such holder and there shall be no
right to cumulate votes in an election of directors.
Whenever there shall have been paid, or declared and set aside for
payment, to the holders of the outstanding shares of any class of stock having
preference over the common stock as to the payment of dividends, the full amount
of dividends and of sinking fund, retirement fund or other retirement payments,
if any, to which such holders are respectively entitled in preference to the
common stock, then dividends may be paid on the common stock and on any class or
series of stock entitled to participate therewith as to dividends out of any
assets legally available for the payment of dividends.
In the event of any liquidation, dissolution, or winding up of the MHC
subsidiary holding company, the holders of the common stock (and the holders of
any class or series of stock entitled to participate with the common stock in
the distribution of assets) shall be entitled to receive, in cash or in kind,
the assets of the MHC subsidiary holding company available for distribution
remaining after: (i) payment or provision for payment of the MHC subsidiary
holding company's debts and liabilities; (ii) distributions or provision for
distributions in settlement of any liquidation account; and (iii) distributions
or provisions for distributions to holders of any class or series of stock
having preference over the common stock in the liquidation, dissolution, or
winding up of the MHC subsidiary holding company. Each share of common stock
shall have the same relative rights as and be identical in all respects with all
the other shares of common stock.
B. Preferred stock. The MHC subsidiary holding company may provide in
supplementary sections to its charter for one or more classes of preferred
stock, which shall be separately identified. The shares of any class may be
divided into and issued in series, with each series separately designated so as
to distinguish the shares thereof from the shares of all other series and
classes. The terms of each series shall be set forth in a supplementary section
to the charter. All shares of the same class shall be identical except as to the
following relative rights and preferences, as to which there may be variations
between different series:
(a) The distinctive serial designation and the number of shares
constituting such series;
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(b) The dividend rate or the amount of dividends to be paid on the
shares of such series, whether dividends shall be cumulative and, if so, from
which date(s) the payment date(s) for dividends, and the participating or other
special rights, if any, with respect to dividends;
(c) The voting powers, full or limited, if any, of shares of such
series;
(d) Whether the shares of such series shall be redeemable and, if so,
the price(s) at which, and the terms and conditions on which, such shares may be
redeemed;
(e) The amount(s) payable upon the shares of such series in the event
of voluntary or involuntary liquidation, dissolution, or winding up of the MHC
subsidiary holding company;
(f) Whether the shares of such series shall be entitled to the benefit
of a sinking or retirement fund to be applied to the purchase or redemption of
such shares, and if so entitled, the amount of such fund and the manner of its
application, including the price(s) at which such shares may be redeemed or
purchased through the application of such fund;
(g) Whether the shares of such series shall be convertible into, or
exchangeable for, shares of any other class or classes of stock of the MHC
subsidiary holding company and, if so, the conversion price(s) or the rate(s) of
exchange, and the adjustments thereof, if any, at which such conversion or
exchange may be made, and any other terms and conditions of such conversion or
exchange;
(h) The price or other consideration for which the shares of such
series shall be issued; and
(i) Whether the shares of such series which are redeemed or converted
shall have the status of authorized but unissued shares of serial preferred
stock and whether such shares may be reissued as shares of the same or any other
series of serial preferred stock.
Each share of each series of serial preferred stock shall have the same
relative rights as and be identical in all respects with all the other shares of
the same series.
The board of directors shall have authority to divide, by the adoption
of supplementary charter sections, any authorized class of preferred stock into
series, and, within the limitations set forth in this section and the remainder
of this charter, fix and determine the relative rights and preferences of the
shares of any series so established.
Prior to the issuance of any preferred shares of a series established
by a supplementary charter section adopted by the board of directors, the MHC
subsidiary holding company shall file with the Secretary of the Office a dated
copy of that supplementary section of this charter establishing and designating
the series and fixing and determining the relative rights and preferences
thereof.
Section 6. Preemptive rights. Holders of the capital stock of the MHC subsidiary
holding company shall not be entitled to preemptive rights with respect to any
shares of the MHC subsidiary holding company which may be issued.
Section 7. Directors. The MHC subsidiary holding company shall be under the
direction of a board of directors. The authorized number of directors, as stated
in the MHC subsidiary holding company's bylaws, shall not be fewer than five nor
more than fifteen except when a greater or lesser number is approved by the
Director of the Office, or his or her delegate.
At the first annual meeting of shareholders of the MHC subsidiary
holding company, the board of directors of the MHC subsidiary holding company
shall be divided into three classes as nearly equal in number as the then total
number of directors constituting the entire board of directors shall permit,
which classes shall be designated Class I,
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Class II and Class III. At such annual meeting of shareholders, directors
assigned to Class I shall be elected to hold office for a term expiring at the
first succeeding annual meeting of shareholders thereafter, directors assigned
to Class II shall be elected to hold office for a term expiring at the second
succeeding annual meeting thereafter, and directors assigned to Class III shall
be elected to hold office for a term expiring at the third succeeding annual
meeting thereafter. Thereafter, at each annual meeting of shareholders of the
MHC subsidiary holding company, directors of classes the terms of which expire
at such annual meeting shall be elected for terms of three years.
Notwithstanding the foregoing, a director whose term shall expire at any annual
meeting shall continue to serve until such time as his successor shall have been
duly elected and shall have qualified unless his position on the board of
directors shall have been abolished by action taken to reduce the size of the
board of directors prior to said meeting.
Should the number of directors of the MHC subsidiary holding company be
reduced, the directorship(s) eliminated shall be allocated among classes as
appropriate so that the number of directors in each class is as specified in the
immediately preceding paragraph. The board of directors shall designate, by the
name of the incumbent(s), the position(s) to be abolished. Notwithstanding the
foregoing, no decrease in the number of directors shall have the effect of
shortening the term of any incumbent director. Should the number of directors of
the MHC subsidiary holding company be increased, the additional directorships
shall be allocated among classes as appropriate so that the number of directors
in each class is as specified in the immediately preceding paragraph.
Whenever the holders of any one or more series of preferred stock of
the MHC subsidiary holding company shall have the right, voting separately as a
class, to elect one or more directors of the MHC subsidiary holding company, the
board of directors shall consist of said directors so elected in addition to the
number of directors fixed as provided above in this Section 7. Notwithstanding
the foregoing, and except as otherwise may be required by law and provisions of
the preferred stock of the MHC subsidiary holding company, whenever the holders
of any one or more series of preferred stock of the MHC subsidiary holding
company shall have the right, voting separately as a class, to elect one or more
directors of the MHC subsidiary holding company, the terms of the director or
directors elected by such holders shall expire at the next succeeding annual
meeting of shareholders.
Section 8. Certain provisions applicable for five years. Not withstanding
anything contained in the MHC subsidiary holding company's charter or bylaws to
the contrary, until ___________ __, 2003, the following provisions shall apply:
A. Beneficial Ownership Limitation. No person, other than Baltimore
County Savings Bank, M.H.C., the parent mutual holding company of the MHC
subsidiary holding company, shall directly or indirectly offer to acquire or
acquire the beneficial ownership of more than 10 percent of the common stock of
the MHC subsidiary holding company. This limitation shall not apply to the
purchase of shares by underwriters in connection with a public offering or the
purchase of shares by a tax-qualified employee stock benefit plan which is
exempt from the approval requirements under Section 574.3(c)(1)(vi) of the
Office's regulations.
In the event shares are acquired in violation of this Section 8, all
shares beneficially owned by any person in excess of 10% shall be considered
"excess shares" and shall not be counted as shares entitled to vote and shall
not be voted by any person or counted as voting shares in connection with any
matters submitted to the shareholders for a vote.
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For purposes of this Section 8, the following definitions apply:
(1) The term "person" includes an individual, a group acting
in concert, a corporation, a partnership, an association, a
joint stock company, a trust, an unincorporated organization
or similar company, a syndicate or any other group formed for
the purpose of acquiring, holding or disposing of the common
stock of the MHC subsidiary holding company.
(2) The term "offer" includes every offer to buy or otherwise
acquire, solicitation of an offer to sell, tender offer for,
or request or invitation for tenders of, a security or
interest in a security for value.
(3) The term "acquire" includes every type of acquisition,
whether effected by purchase, exchange, operation of law or
otherwise.
(4) The term "acting in concert" means (a) knowing
participation in a joint activity or conscious parallel action
towards a common goal whether or not pursuant to an express
agreement, or (b) a combination or pooling of voting or other
interests in the securities of an issuer for a common purpose
pursuant to any contract, understanding, relationship,
agreement or other arrangements, whether written or otherwise.
B. Call for Special Meeting. Special meetings of shareholders
relating to changes in control of the MHC subsidiary holding company or
amendments to its charter shall be called only upon direction of the board of
directors.
Section 9. Amendment of charter. Except as provided in Section 5, no amendment,
addition, alteration, change, or repeal of this charter shall be made, unless
such is proposed by the board of directors of the MHC subsidiary holding
company, approved by the shareholders by a majority of the votes eligible to be
cast at a legal meeting, unless a higher vote is otherwise required, and
approved or preapproved by the Office.
BCSB BANKCORP, INC.
Attest: By:
--------------------------------- ------------------------------
Gary C. Loraditch Michael J. Dietz
Secretary President
Attest: By:
--------------------------------- ------------------------------
Secretary of the Office of Thrift Director of the Office of Thrift
Supervision Supervision
Effective Date:
-------------------------
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Exhibit F
BYLAWS
BCSB BANCORP, INC.
ARTICLE I - HOME OFFICE
The home office of BCSB Bancorp, Inc. (the "subsidiary holding
company") shall be 4111 E. Joppa Road, in the County of Baltimore in the State
of Maryland.
ARTICLE II - SHAREHOLDERS
Section 1. Place of Meetings. All annual and special meetings of
shareholders shall be held at the home office of the subsidiary holding company
or at such other convenient place as the board of directors may determine.
Section 2. Annual Meeting. A meeting of the shareholders of the
subsidiary holding company for the election of directors and for the transaction
of any other business of the subsidiary holding company shall be held annually
within 150 days after the end of the subsidiary holding company's fiscal year on
the second Wednesday of February, if not a legal holiday, and, if a legal
holiday, then on the next day following which is not a legal holiday, at 4:00
p.m., or at such other date and time within such 150-day period as the board of
directors may determine.
Section 3. Special Meetings. Special meetings of the shareholders for
any purpose or purposes, unless otherwise prescribed by the regulations of the
Office of Thrift Supervision ("Office") may be called at any time by the
chairman of the board, the president, or a majority of the board of directors,
and shall be called by the chairman of the board, the president, or the
secretary upon the written request of the holders of not less than one-tenth of
all of the outstanding capital stock of the subsidiary holding company entitled
to vote at the meeting. Such written request shall state the purpose or purposes
of the meeting and shall be delivered to the home office of the subsidiary
holding company addressed to the chairman of the board, the president, or the
secretary.
Section 4. Conduct of Meetings. Annual and special meetings shall be
conducted in accordance with the most current edition of Robert's Rules of Order
unless otherwise prescribed by regulations of the Office or these bylaws or the
board of directors adopts another written procedure for the conduct of meetings.
The board of directors shall designate, when present, either the chairman of the
board or president to preside at such meetings.
Section 5. Notice of Meetings. Written notice stating the place, day,
and hour of the meeting and the purpose(s) for which the meeting is called shall
be delivered not fewer than 20 nor more than 50 days before the date of the
meeting, either personally or by mail, by or at the direction of the chairman of
the board, the president, or the secretary, or the directors calling the
meeting, to each shareholder of record entitled to vote at such meeting. If
mailed, such notice shall be deemed to be delivered when deposited in the mail,
addressed to the shareholder at the address as it appears on the stock transfer
books or records of the subsidiary holding company as of the record date
prescribed in Section 6 of this Article II with postage prepaid. When any
shareholders' meeting, either annual or special, is adjourned for 30 days or
more, notice of the adjourned meeting shall be given as in the case of an
original meeting. It shall not be necessary to give any notice of the time and
place of any meeting adjourned for less than 30 days or of the business to be
transacted at the meeting, other than an announcement at the meeting at which
such adjournment is taken.
Section 6. Fixing of Record Date. For the purpose of determining
shareholders entitled to notice of or to vote at any meeting of shareholders or
any adjournment, or shareholders entitled to receive payment of any dividend, or
in
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order to make a determination of shareholders for any other proper purpose, the
board of directors shall fix in advance a date as the record date for any such
determination of shareholders. Such date in any case shall be not more than 60
days and, in case of a meeting of shareholders, not fewer than 10 days prior to
the date on which the particular action, requiring such determination of
shareholders, is to be taken. When a determination of shareholders entitled to
vote at any meeting of shareholders has been made as provided in this Section 6,
such determination shall apply to any adjournment.
Section 7. Voting Lists. At least 20 days before each meeting of the
shareholders, the officer or agent having charge of the stock transfer books for
shares of the subsidiary holding company shall make a complete list of the
shareholders of record entitled to vote at such meeting, or any adjournment
thereof, arranged in alphabetical order, with the address and the number of
shares held by each. This list of shareholders shall be kept on file at the home
office of the subsidiary holding company and shall be subject to inspection by
any shareholder of record or the shareholder's agent at any time during usual
business hours for a period of 20 days prior to such meeting. Such list shall
also be produced and kept open at the time and place of the meeting and shall be
subject to inspection by any shareholder of record or the shareholder's agent
during the entire time of the meeting. The original stock transfer book shall
constitute prima facie evidence of the shareholders entitled to examine such
list or transfer books or to vote at any meeting of shareholders. In lieu of
making the shareholder list available for inspection by shareholders as provided
in the preceding paragraph, the board of directors may elect to follow the
procedures prescribed in (S)552.6(d) of the Office's regulations as now or
hereafter in effect.
Section 8. Quorum. A majority of the outstanding shares of the
subsidiary holding company entitled to vote, represented in person or by proxy,
shall constitute a quorum at a meeting of shareholders. If less than a majority
of the outstanding shares is represented at a meeting, a majority of the shares
so represented may adjourn the meeting from time to time without further notice.
At such adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally notified. The shareholders present at a duly organized meeting may
continue to transact business until adjournment, notwithstanding the withdrawal
of enough shareholders to constitute less than a quorum. If a quorum is present,
the affirmative vote of the majority of the shares represented at the meeting
and entitled to vote on the subject matter shall be the act of the shareholders,
unless the vote of a greater number of shareholders voting together or voting by
classes is required by law or the charter. Directors, however, are elected by a
plurality of the votes cast at an election of directors.
Section 9. Proxies. At all meetings of shareholders, a shareholder may
vote by proxy executed in writing by the shareholder or by his or her duly
authorized attorney in fact. Proxies may be given telephonically or
electronically as long as the holder uses a procedure for verifying the identity
of the shareholder. Proxies solicited on behalf of the management shall be voted
as directed by the shareholder or, in the absence of such direction, as
determined by a majority of the board of directors. No proxy shall be valid more
than eleven months from the date of its execution except for a proxy coupled
with an interest.
Section 10. Voting of Shares in the Name of Two or More Persons. When
ownership stands in the name of two or more persons, in the absence of written
directions to the subsidiary holding company to the contrary, at any meeting of
the shareholders of the subsidiary holding company, any one or more of such
shareholders may cast, in person or by proxy, all votes to which such ownership
is entitled. In the event an attempt is made to cast conflicting votes, in
person or by proxy, by the several persons in whose names shares of stock stand,
the vote or votes to which those persons are entitled shall be cast as directed
by a majority of those holding such and present in person or by proxy at such
meeting, but no votes shall be cast for such stock if a majority cannot agree.
Section 11. Voting of Shares of Certain Holders. Shares standing in the
name of another corporation may be voted by any officer, agent, or proxy as the
bylaws of such corporation may prescribe, or, in the absence of such provision,
as the board of directors of such corporation may determine. Shares held by an
administrator, executor, guardian, or conservator may be voted by him or her,
either in person or by proxy, without a transfer of such shares into his or her
name. Shares standing in the name of a trustee may be voted by him or her,
either in person or by proxy, but
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no trustee shall be entitled to vote shares held by him or her, without a
transfer of such shares into his or her name. Shares held in trust in an IRA or
Keogh Account, however, may be voted by the subsidiary holding company if no
other instructions are received. Shares standing in the name of a receiver may
be voted by such receiver, and shares held by or under the control of a receiver
may be voted by such receiver without the transfer into his or her name if
authority to do so is contained in an appropriate order of the court or other
public authority by which such receiver was appointed.
A shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee, and
thereafter the pledgee shall be entitled to vote the shares so transferred.
Neither treasury shares of its own stock held by the subsidiary holding
company nor shares held by another corporation, if a majority of the shares
entitled to vote for the election of directors of such other corporation are
held by the subsidiary holding company, shall be voted at any meeting or counted
in determining the total number of out standing shares at any given time for
purposes of any meeting.
Section 12. Inspectors of Election. In advance of any meeting of
shareholders, the board of directors may appoint any persons other than nominees
for office as inspectors of election to act at such meeting or any adjournment.
The number of inspectors shall be either one or three. Any such appointment
shall not be altered at the meeting. If inspectors of election are not so
appointed, the chairman of the board or the president may, or on the request of
not fewer than 10 percent of the votes represented at the meeting shall, make
such appointment at the meeting. If appointed at the meeting, the majority of
the votes present shall determine whether one or three inspectors are to be
appointed. In case any person appointed as inspector fails to appear or fails or
refuses to act, the vacancy may be filled by appointment by the board of
directors in advance of the meeting or at the meeting by the chairman of the
board or the president.
Unless otherwise prescribed by regulations of the Office, the duties of
such inspectors shall include: determining the number of shares and the voting
power of each share, the shares represented at the meeting, the existence of a
quorum, and the authenticity, validity and effect of proxies; receiving votes,
ballots, or consents; hearing and determining all challenges and questions in
any way arising in connection with the rights to vote; counting and tabulating
all votes or consents; determining the result; and such acts as may be proper to
conduct the election or vote with fairness to all shareholders.
Section 13. Nominating Committee. The board of directors shall act as a
nominating committee for selecting the management nominees for election as
directors. Except in the case of a nominee substituted as a result of the death
or other incapacity of a management nominee, the nominating committee shall
deliver written nominations to the secretary at least 20 days prior to the date
of the annual meeting. Provided such committee makes such nominations, no
nominations for directors except those made by the nominating committee shall be
voted upon at the annual meeting unless other nominations by shareholders are
made in writing and delivered to the secretary of the subsidiary holding company
in accordance with the provision of Section 14 of Article II set forth below.
Section 14. Notice for Nominations and Proposals for New Business.
A. Nominations for the election of directors and proposals for any new
business to be taken up at any annual or special meeting of shareholders may be
made by the board of directors of the subsidiary holding company or by any
shareholder of the subsidiary holding company entitled to vote generally in the
election of directors. In order for a shareholder of the subsidiary holding
company to make any such nominations and/or proposals, he or she shall give
notice thereof in writing, delivered or mailed by first class United States
mail, postage prepaid, to the secretary of the subsidiary holding company not
less than 30 days nor more than 60 days prior to any such meeting; provided,
however, that if less than 40 days' notice of the meeting is given to
shareholders, such written notice shall be delivered or mailed, as prescribed,
to the secretary of the subsidiary holding company not later than the close of
the tenth day following the day on which notice of the meeting was mailed to
shareholders. Each such notice given by a shareholder with respect to
nominations for the election of directors shall set forth (i) the name, age,
business address and, if known, residence address of each nominee proposed in
such notice, (ii) the principal occupation or employment of each such nominee,
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and (iii) the number of shares of stock of the subsidiary holding company which
are beneficially owned by each such nominee. In addition, the shareholder making
such nomination shall promptly provide any other information reasonably
requested by the subsidiary holding company.
B. Each such notice given by a shareholder to the secretary of the
subsidiary holding company with respect to business proposals to bring before a
meeting shall set forth in writing as to each matter: (i) a brief description of
the business desired to be brought before the meeting and the reasons for
conducting such business at the meeting; (ii) the name and address, as they
appear on the subsidiary holding company's books, of the shareholder proposing
such business; (iii) the class and number of shares of the subsidiary holding
company which are beneficially owned by the shareholder; and (iv) any material
interest of the shareholder in such business. Notwithstanding anything in these
Articles to the contrary, no business shall be conducted at the meeting except
in accordance with the procedures set forth in this Section 14 of Article II.
C. The chairman of the annual or special meeting of shareholders may,
if the facts warrant, determine and declare to such meeting that a nomination or
proposal was not made in accordance with the foregoing procedure, and, if he
should so determine, he shall so declare to the meeting and the defective
nomination or proposal shall be disregarded and laid over for action at the next
succeeding adjourned, special or annual meeting of the shareholders taking place
thirty days or more thereafter. This provision shall not require the holding of
any adjourned or special meeting of shareholders for the purpose of considering
such defective nomination or proposal.
Section 15. Informal Action by Shareholders. Any action required to be
taken at a meeting of the shareholders, or any other action which may be taken
at a meeting of shareholders, may be taken without a meeting if consent in
writing, setting forth the action so taken, shall be given by all of the
shareholders entitled to vote with respect to the subject matter.
ARTICLE III - BOARD OF DIRECTORS
Section 1. General Powers. The business and affairs of the subsidiary
holding company shall be under the direction of its board of directors. The
board of directors shall annually elect a chairman of the board and a president
from among its members and shall designate, when present, either the chairman of
the board or the president to preside at its meetings.
Section 2. Number and Term. The board of directors shall consist of ten
(10) members and shall be divided into three classes as nearly equal in number
as possible. The members of each class shall be elected for a term of three
years and until their successors are elected and qualified. One class shall be
elected by ballot annually.
Section 3. Regular Meetings. A regular meeting of the board of
directors shall be held without other notice than this bylaw following the
annual meeting of shareholders. The board of directors may provide, by
resolution, the time and place, for the holding of additional regular meetings
without other notice than such resolution. Directors may participate in a
meeting by means of a conference telephone or similar communications device
through which all persons participating can hear each other at the same time.
Participation by such means shall constitute presence in person for all
purposes.
Section 4. Qualification. Each director shall at all times be the
beneficial owner of not less than 100 shares of capital stock of the subsidiary
holding company unless the subsidiary holding company is a wholly owned
subsidiary of a holding company.
Section 5. Special Meetings. Special meetings of the board of directors may
be called by or at the request of the chairman of the board, the president, or
one-third of the directors. The persons authorized to call special meetings
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of the board of directors may fix any place, within the subsidiary holding
company's normal lending territory, as the place for holding any special meeting
of the board of directors called by such persons.
Members of the board of directors may participate in special meetings by
means of conference telephone or similar communications equipment by which all
persons participating in the meeting can hear each other. Such participation
shall constitute presence in person for all purposes.
Section 6. Notice. Written notice of any special meeting shall be given
to each director at least 24 hours prior thereto when delivered personally or by
telegram or at least five days prior thereto when delivered by mail at the
address at which the director is most likely to be reached. Such notice shall be
deemed to be delivered when deposited in the mail so addressed, with postage
prepaid if mailed, when delivered to the telegraph company if sent by telegram,
or when the subsidiary holding company receives notice of delivery if
electronically transmitted. Any director may waive notice of any meeting by a
writing filed with the secretary. The attendance of a director at a meeting
shall constitute a waiver of notice of such meeting, except where a director
attends a meeting for the express purpose of objecting to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any meeting of the board of
directors need be specified in the notice of waiver of notice of such meeting.
Section 7. Quorum. A majority of the number of directors fixed by
Section 2 of this Article III shall constitute a quorum for the transaction of
business at any meeting of the board of directors; but if less than such
majority is present at a meeting, a majority of the directors present may
adjourn the meeting from time to time. Notice of any adjourned meeting shall be
given in the same manner as prescribed by Section 5 of this Article III.
Section 8. Manner of Acting. The act of the majority of the directors
present at a meeting at which a quorum is present shall be the act of the board
of directors, unless a greater number is prescribed by regulation of the Office
or by these bylaws.
Section 9. Action Without a Meeting. Any action required or permitted
to be taken by the board of directors at a meeting may be taken without a
meeting if a consent in writing, setting forth the action so taken, shall be
signed by all of the directors.
Section 10. Resignation. Any director may resign at any time by sending
a written notice of such resignation to the home office of the subsidiary
holding company addressed to the chairman of the board or the president. Unless
otherwise specified, such resignation shall take effect upon receipt by the
chairman of the board or the president. More than three consecutive absences
from regular meetings of the board of directors, unless excused by resolution of
the board of directors, shall automatically constitute a resignation, effective
when such resignation is accepted by the board of directors.
Section 11. Vacancies. Any vacancy occurring on the board of directors
may be filled by the affirmative vote of a majority of the remaining directors
although less than a quorum of the board of directors. A director elected to
fill a vacancy shall be elected to serve until the next election of directors by
the shareholders. Any directorship to be filled by reason of an increase in the
number of directors may be filled by election by the board of directors for a
term of office continuing only until the next election of directors by the
shareholders.
Section 12. Compensation. Directors, as such, may receive a stated
salary for their services. By resolution of the board of directors, a reasonable
fixed sum, and reasonable expenses of attendance, if any, may be allowed for
attendance at each regular or special meeting of the board of directors. Members
of either standing or special committees may be allowed such compensation for
attendance at committee meetings as the board of directors may determine.
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Section 13. Presumption of Assent. A director of the subsidiary holding
company who is present at a meeting of the board of directors at which action on
any subsidiary holding company matter is taken shall be presumed to have
assented to the action taken unless his or her dissent or abstention shall be
entered in the minutes of the meeting or unless he or she shall file a written
dissent to such action with the person acting as the secretary of the meeting
before the adjournment thereof or shall forward such dissent by registered mail
to the secretary of the subsidiary holding company within five days after the
date a copy of the minutes of the meeting is received. Such right to dissent
shall not apply to a director who voted in favor of such action.
Section 14. Removal of Directors. At a meeting of shareholders called
expressly for that purpose, any director may be removed only for cause by a vote
of the holders of a majority of the shares then entitled to vote at an election
of directors. Whenever the holders of the shares of any class are entitled to
elect one or more directors by the provisions of the charter or supplemental
sections thereto, the provisions of this section shall apply, in respect to the
removal of a director or directors so elected, to the vote of the holders of the
outstanding shares of that class and not to the vote of the outstanding shares
as a whole.
Section 15. Advisory Directors. The board of directors may by
resolution appoint advisory directors to the board, who may also serve as
directors emeriti, and shall have such authority and receive such compensation
and reimbursement as the board of directors shall provide. Advisory directors or
directors emeriti shall not have the authority to participate by vote in the
transaction of business.
Section 16. Age Limitation. No person shall be eligible for election,
reelection, appointment, or reappointment to the board of directors if such
person is then more than 72 years of age. Any director who attains age 72 during
the term shall be allowed to complete the term. This Section 16 of this Article
III does not apply to a director who has served as a director of Baltimore
County Savings Bank, F.S.B. continuously since 1980. Persons may serve as
advisory directors without regard to age.
ARTICLE IV - EXECUTIVE AND OTHER COMMITTEES
Section 1. Appointment. The board of directors, by resolution adopted
by a majority of the full board, may designate the chief executive officer and
two or more of the other directors to constitute an executive committee. The
designation of any committee pursuant to this Article IV and the delegation of
authority shall not operate to relieve the board of directors, or any director,
of any responsibility imposed by law or regulation.
Section 2. Authority. The executive committee, when the board of
directors is not in session, shall have and may exercise all of the authority of
the board of directors except to the extent, if any, that such authority shall
be limited by the resolution appointing the executive committee; and except also
that the executive committee shall not have the authority of the board of
directors with reference to: the declaration of dividends; the amendment of the
charter or bylaws of the subsidiary holding company, or recommending to the
stockholders a plan of merger, consolidation, or conversion; the sale, lease, or
other disposition of all or substantially all of the property and assets of the
subsidiary holding company otherwise than in the usual and regular course of its
business; a voluntary dissolution of the subsidiary holding company; a
revocation of any of the foregoing; or the approval of a transaction in which
any member of the executive committee, directly or indirectly, has any material
beneficial interest.
Section 3. Tenure. Subject to the provisions of Section 8 of this
Article IV, each member of the executive committee shall hold office until the
next regular annual meeting of the board of directors following his or her
designation and until a successor is designated as a member of the executive
committee.
Section 4. Meetings. Regular meetings of the executive committee may be
held without notice at such times and places as the executive committee may fix
from time to time by resolution. Special meetings of the executive committee may
be called by any member thereof upon not less than one day's notice stating the
place, date, and hour
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of the meeting, which notice may be written or oral. Any member of the executive
committee may waive notice of any meeting and no notice of any meeting need be
given to any member thereof who attends in person. The notice of a meeting of
the executive committee need not state the business proposed to be transacted at
the meeting.
Section 5. Quorum. A majority of the members of the executive committee
shall constitute a quorum for the transaction of business at any meeting
thereof, and action of the executive committee must be authorized by the
affirmative vote of a majority of the members present at a meeting at which a
quorum is present.
Section 6. Action Without a Meeting. Any action required or permitted
to be taken by the executive committee at a meeting may be taken without a
meeting if a consent in writing, setting forth the action so taken, shall be
signed by all of the members of the executive committee.
Section 7. Vacancies. Any vacancy in the executive committee may be
filled by a resolution adopted by a majority of the full board of directors.
Section 8. Resignations and Removal. Any member of the executive
committee may be removed at any time with or without cause by resolution adopted
by a majority of the full board of directors. Any member of the executive
committee may resign from the executive committee at any time by giving written
notice to the president or secretary of the subsidiary holding company. Unless
otherwise specified, such resignation shall take effect upon its receipt; the
acceptance of such resignation shall not be necessary to make it effective.
Section 9. Procedure. The executive committee shall elect a presiding
officer from its members and may fix its own rules of procedure which shall not
be inconsistent with these bylaws. It shall keep regular minutes of its
proceedings and report the same to the board of directors for its information at
the meeting held next after the proceedings shall have occurred.
Section 10. Other Committees. The board of directors may by resolution
establish an audit, loan, or other committee composed of directors as they may
determine to be necessary or appropriate for the conduct of the business of the
subsidiary holding company and may prescribe the duties, constitution, and
procedures thereof.
ARTICLE V - OFFICERS
Section 1. Positions. The officers of the subsidiary holding company
shall be a president, one or more vice presidents, a secretary, and a treasurer
or comptroller, each of whom shall be elected by the board of directors. The
board of directors may also designate the chairman of the board as an officer.
The offices of the secretary and treasurer may be held by the same person and a
vice president may also be either the secretary or the treasurer or comptroller.
The board of directors may designate one or more vice presidents as executive
vice president or senior vice president. The board of directors may also elect
or authorize the appointment of such other officers as the business of the
subsidiary holding company may require. The officers shall have such authority
and perform such duties as the board of directors may from time to time
authorize or determine. In the absence of action by the board of directors, the
officers shall have such powers and duties as generally pertain to their
respective offices.
Section 2. Election and Term of Office. The officers of the subsidiary
holding company shall be elected annually at the first meeting of the board of
directors held after each annual meeting of the shareholders. If the election of
officers is not held at such meeting, such election shall be held as soon
thereafter as possible. Each officer shall hold office until a successor has
been duly elected and qualified or until the officer's death, resignation, or
removal in the manner hereinafter provided. Election or appointment of an
officer, employee, or agent shall not of itself create contractual rights. The
board of directors may authorize the subsidiary holding company to enter into an
employment contract with any officer in accordance with regulations of the
Office, but no such contract shall impair the right of the board of directors to
remove any officer at any time in accordance with Section 3 of this Article V.
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Section 3. Removal. Any officer may be removed by the board of
directors whenever in its judgment the best interests of the subsidiary holding
company will be served thereby, but such removal, other than for cause, shall be
without prejudice to the contractual rights, if any, of the person so removed.
Section 4. Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification, or otherwise may be filled by the board
of directors for the unexpired portion of the term.
Section 5. Remuneration. The remuneration of the officers shall be
fixed from time to time by the board of directors.
ARTICLE VI - CONTRACTS, LOANS, CHECKS, AND DEPOSITS
Section 1. Contracts. To the extent permitted by regulations of the
Office, and except as otherwise prescribed by these bylaws with respect to
certificates for shares, the board of directors may authorize any officer,
employee, or agent of the subsidiary holding company to enter into any contract
or execute and deliver any instrument in the name of and on behalf of the
subsidiary holding company. Such authority may be general or confined to
specific instances.
Section 2. Loans. No loans shall be contracted on behalf of the
subsidiary holding company and no evidence of indebtedness shall be issued in
its name unless authorized by the board of directors. Such authority may be
general or confined to specific instances.
Section 3. Checks, Drafts, etc. All checks, drafts, or other orders for
the payment of money, notes, or other evidences of indebtedness issued in the
name of the subsidiary holding company shall be signed by one or more officers,
employees, or agents of the subsidiary holding company in such manner as shall
from time to time be determined by the board of directors.
Section 4. Deposits. All funds of the subsidiary holding company not
otherwise employed shall be deposited from time to time to the credit of the
subsidiary holding company in any duly authorized depositories as the board of
directors may select.
ARTICLE VII - CERTIFICATES FOR SHARES AND THEIR TRANSFER
Section 1. Certificates for Shares. Certificates representing shares of
capital stock of the subsidiary holding company shall be in such form as shall
be determined by the board of directors and approved by the Office. Such
certificates shall be signed by the chief executive officer or by any other
officer of the subsidiary holding company authorized by the board of directors,
attested by the secretary or an assistant secretary, and sealed with the
corporate seal or a facsimile thereof. The signatures of such officers upon a
certificate may be facsimiles if the certificate is manually signed on behalf of
a transfer agent or a registrar other than the subsidiary holding company itself
or one of its employees. Each certificate for shares of capital stock shall be
consecutively numbered or otherwise identified. The name and address of the
person to whom the shares are issued, with the number of shares and date of
issue, shall be entered on the stock transfer books of the subsidiary holding
company. All certificates surrendered to the subsidiary holding company for
transfer shall be canceled and no new certificate shall be issued until the
former certificate for a like number of shares has been surrendered and
canceled, except that in the case of a lost or destroyed certificate, a new
certificate may be issued upon such terms and indemnity to the subsidiary
holding company as the board of directors may prescribe.
Section 2. Transfer of Shares. Transfer of shares of capital stock of
the subsidiary holding company shall be made only on its stock transfer books.
Authority for such transfer shall be given only by the holder of record or by
his or her legal representative, who shall furnish proper evidence of such
authority, or by his attorney authorized by a
F-8
<PAGE>
duly executed power of attorney and filed with the subsidiary holding company.
Such transfer shall be made only on surrender for cancellation of the
certificate for such shares. The person in whose name shares of capital stock
stand on the books of the subsidiary holding company shall be deemed by the
subsidiary holding company to be the owner for all purposes.
ARTICLE VIII - FISCAL YEAR; ANNUAL AUDIT
The fiscal year of the subsidiary holding company shall end on the 30th
day of September of each year. The appointment of accountants shall be subject
to annual ratification by the shareholders.
ARTICLE IX - DIVIDENDS
Subject to the terms of the subsidiary holding company's charter and
the regulations and orders of the Office, the board of directors may, from time
to time, declare, and the subsidiary holding company may pay, dividends on its
outstanding shares of capital stock.
ARTICLE X - CORPORATE SEAL
The board of directors shall provide a subsidiary holding company seal
which shall be two concentric circles between which shall be the name of the
subsidiary holding company. The year of incorporation or an emblem may appear in
the center.
ARTICLE XI - AMENDMENTS
These bylaws may be amended in a manner consistent with regulations of
the Office and shall be effective after: (i) approval of the amendment by a
majority vote of the authorized board of directors, or by a majority vote of the
votes cast by the shareholders of the subsidiary holding company at any legal
meeting, and (ii) receipt of any applicable regulatory approval. When a
subsidiary holding company fails to meet its quorum requirements, solely due to
vacancies on the board, then the affirmative vote of a majority of the sitting
board will be required to amend the bylaws.
F-9
<PAGE>
EXHIBIT 4
COMMON STOCK
NUMBER SHARES
----- -----
BCSB BANKCORP, INC.
INCORPORATED UNDER THE LAWS OF THE UNITED STATES
This certifies that
is the owner of CUSIP
fully paid and nonassessable shares of
common stock, par value $0.01 per share, of
BCSB BANKCORP, INC. (the "Corporation"), a Federal corporation. The shares
represented by this certificate are transferable only on the stock transfer
books of the Corporation by the holder of record hereof, or by his duly
authorized attorney or legal representative, upon the surrender of this
certificate properly endorsed. This certificate is not valid until
countersigned and registered by the Corporation's transfer agent and registrar.
THIS SECURITY IS NOT A DEPOSIT OR ACCOUNT AND IS NOT FEDERALLY INSURED OR
GUARANTEED.
IN WITNESS WHEREOF, the Corporation has caused this certificate to be executed
by the facsimile signatures of its duly authorized officers and has caused a
facsimile of its corporate seal to be hereunto affixed.
Dated: , 1998
----------------
- --------------------------------------- --------------------------------
Gary C. Loraditch Michael J. Dietz
Secretary President
[CORPORATE SEAL]
********************************************************************************
RESTRICTIONS ON TRANSFER
The Charter includes a provision which prohibits any person from directly or
indirectly acquiring the beneficial ownership of more than 10% of any class of
equity security of the Corporation. Such provision eliminates the voting rights
of securities acquired in violation of the provision. Such provision will
expire five years from the date of completion of the reorganization of Baltimore
County Savings Bank, F.S.B. (the "Bank") into the mutual holding company form of
organization. The Corporation will furnish without charge to each stockholder
who so requests additional information with respect to such restrictions. Such
request may be made in writing to the Secretary of the Corporation.
********************************************************************************
<PAGE>
The shares represented by this certificate are issued subject to all the
provisions of the Charter and Bylaws of the Corporation as from time to time
amended (copies of which are on file at the principal executive office of the
Corporation), to all of which the holder by acceptance hereof assents.
The Corporation will furnish without charge to each stockholder who so
requests, a full statement of the designations and any preferences, conversion
and other rights, voting powers, restrictions, limitations as to dividends,
qualifications, and terms and conditions of redemption of the shares of each
class which the Corporation is authorized to issue, the differences in the
relative rights and preferences between the shares of each such series of
preferred stock to the extent they have been set, and the authority of the Board
of Directors of the Corporation set the relative rights and preferences of
subsequent series of preferred stock. Such requests shall be made in writing to
the Secretary of the Corporation.
The following abbreviations, when used in the inscription on the face of
this Certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of survivorship and not as tenants in
common
UNIF TRANSFER MIN ACT - ..........Custodian.......... under Uniform Transfers to
(Cust) (Minor)
Minors Act.......................
(State)
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, HEREBY SELL(S),
----------------------------------
ASSIGN(S) AND TRANSFER(S) UNTO
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- -----------------------------------
/ /
- -----------------------------------
- --------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares
- -------------------------------------------------------------------------
of the common stock evidenced by this certificate, and do hereby irrevocably
constitute and appoint , Attorney, to transfer
----------------------------------
the said shares on the books of the Corporation, with full power of
substitution.
Dated
---------------------
-----------------------------------------
Signature
-----------------------------------------
Signature
In presence of:
-----------------------------------------
SEE REVERSE SIDE FOR RESTRICTIONS ON TRANSFER
NOTE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME OF THE
STOCKHOLDER(S) AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
<PAGE>
Exhibit G
PLAN OF STOCK ISSUANCE
DATED AS OF
October 22, 1997
--------------------------------
BCSB BANKCORP, INC.
Baltimore, Maryland
<PAGE>
BCSB BANKCORP, INC.
PLAN OF STOCK ISSUANCE
I. GENERAL
The Board of Directors of Baltimore County Savings Bank, F.S.B.,
Baltimore, Maryland (the "Bank"), has adopted a Plan of Reorganization from
Mutual Savings Bank to Mutual Holding Company and Subsidiary Holding Company
Formation (the "Reorganization Plan"), whereby the Bank will reorganize into the
mutual holding company form of organization as a wholly owned subsidiary of a
subsidiary holding company.
The MHC Reorganization will be effected as follows, or in any manner
approved by the Board of Directors of the Bank and the OTS that is consistent
with the purposes of this Plan and applicable laws and regulations:
(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");
(iii) Interim One will organize a Federal stock corporation (SHC) as a wholly
owned subsidiary of Interim One; (iv) the Bank will exchange its charter for a
federal stock savings bank charter (Stock Bank); (v) Interim One will cancel its
outstanding stock and exchange its charter for a federal mutual holding company
charter (MHC); (vi) Interim Two will merge with and into Stock Bank, with Stock
Bank surviving; (vii) former members of the Bank will become members of the MHC;
(viii) MHC will receive all of the stock of Stock Bank in exchange for its
shares of Interim Two stock; (ix) the MHC will transfer all of the outstanding
shares of Stock Bank to SHC. Such transactions are collectively referred to
herein as the "MHC Reorganization."
Simultaneously with the MHC Reorganization, the SHC will, subject to
the provisions of this Plan of Stock Issuance and the Reorganization Plan,
conduct a stock offering and sale of up to 49.9% of the shares of Common Stock
of the SHC to be outstanding following consummation of the MHC Reorganization to
certain members of the Bank, employee benefit plans of the Bank, the MHC or the
SHC, and to other investors pursuant to this Plan of Stock Issuance. The offer
and sale of up to 49.9% of the Common Stock is referred to herein as the "Stock
Issuance." Following completion of the MHC Reorganization and the Stock
Issuance, Stock Bank will be a wholly owned subsidiary of SHC, and SHC will be a
majority-owned subsidiary of MHC, with up to 49.9% of the outstanding Common
Stock owned by the purchasers of Common Stock in the Stock Issuance and the
remaining outstanding Common Stock owned by MHC.
II. DEFINITIONS
As used in this Plan of Stock Issuance, the terms set forth below have
the following meaning:
Acting in Concert: The term "Acting in Concert" means: (i) knowing
-----------------
participation in a joint activity or interdependent conscious parallel action
towards a common goal whether or not pursuant to an express agreement; or (ii) a
combination or pooling of voting or other interests in the securities of an
issuer for a common purpose pursuant to any contract, understanding,
relationship, agreement or other arrangement, whether written or otherwise. Any
person (as defined by 12 C.F.R. (S)563b.2(a)(26)) Acting in Concert with another
person ("other party") shall also be deemed to be Acting in Concert with any
person who is also Acting in Concert with that other party, except that any
Tax-Qualified Employee Stock Benefit Plan will not be deemed to be Acting in
Concert with its trustee or a person who serves in a similar capacity solely for
the purpose of determining whether stock held by the trustee and stock held by
the Tax-Qualified Employee Benefit Plan will be aggregated.
G-1
<PAGE>
Affiliate: The term "Affiliate" means a Person who, directly or
---------
indirectly, through one or more intermediaries, controls or is controlled by or
is under common control with the Person specified.
Associate: The term "Associate," when used to indicate a relationship
---------
with any person, means: (i) any corporation or organization (other than the
Bank, the MHC, the SHC or a majority-owned subsidiary of the Bank or the MHC or
the SHC) of which such person is an officer or partner or is, directly or
indirectly, the beneficial owner of 10% or more of any class of equity
securities; (ii) any trust or other estate in which such person has a
substantial beneficial interest or as to which such person serves as trustee or
in a similar fiduciary capacity, except that, for purposes of Sections V and IX
hereof, such term shall not include a Tax-Qualified Employee Stock Benefit Plan
in which a person has a substantial beneficial interest or serves as a trustee
in a similar fiduciary capacity, and, for purposes of Section X hereof, such
term shall not include any Tax-Qualified Employee Stock Benefit Plan; and (iii)
any relative or spouse of such person, or any relative of such spouse, who has
the same home as such person or who is a director of the Bank, the MHC or the
SHC, or any of their subsidiaries.
Bank: The term "Bank" means Baltimore County Savings Bank, F.S.B., in
----
its form as a federal mutual savings bank.
Common Stock: The term "Common Stock" means common stock, par value
------------
$1.00 per share, of SHC. An example of the certificate to represent such shares
is attached hereto as Exhibit A and incorporated herein by reference.
Community Offering: The term "Community Offering" means the offering of
------------------
shares of Common Stock to the general public by the SHC concurrently with or
following the Subscription Offering, giving preference to natural persons and
trusts of natural persons (including individual retirement and Keogh retirement
accounts and personal trusts in which such natural persons have substantial
interests) who permanently reside in the Bank's Local Community.
Effective Date: The term "Effective Date" means the date of closing of
--------------
the sale of shares of Common Stock in the Stock Issuance conducted pursuant to
this Stock Plan.
Eligibility Record Date: The term "Eligibility Record Date" means the
-----------------------
close of business on September 30, 1996.
Eligible Account Holder: The term "Eligible Account Holder" means the
-----------------------
holder of a Qualifying Deposit in the Bank on the Eligibility Record Date.
FDIC: The term "FDIC" means the Federal Deposit Insurance Corporation
----
or any successor federal agency which insures deposit accounts held in savings
banks.
Independent Appraiser: The term "Independent Appraiser" means a person
---------------------
independent of the Bank, experienced and expert in the area of corporate
appraisal, and acceptable to the OTS, retained by the Bank to prepare an
appraisal of the pro forma market value of the Stock Bank, as a subsidiary of
the SHC.
Insider: The term "Insider" means any Officer or director of a company
-------
or of any affiliate of such company, and any person Acting in Concert with any
such Officer or director.
Local Community: The term "Local Community" means Baltimore County and
---------------
Hartford County, Maryland.
Market Maker: The term "Market Maker" means a dealer (i.e., any person
------------
who engages, either for all or part of such person's time, directly or
indirectly as agent, broker or principal in the business of offering, buying,
selling or otherwise dealing or trading in securities issued by another person)
who, with respect to a particular secur-
G-2
<PAGE>
ity: (i)(a) regularly publishes bona fide, competitive bid and offer quotations
in a recognized interdealer quotation system or (b) furnishes bona fide
competitive bid and offer quotations on request; and (ii) is ready, willing and
able to effect transactions in reasonable quantities at its quoted prices with
other brokers or dealers.
Member: The term "Member" means any Person qualifying as a Member of
------
the Bank in accordance with its mutual charter and bylaws and entitled to vote
on the Reorganization Plan at the Special Meeting.
MHC: The term "MHC" means the mutual holding company resulting from the
---
MHC Reorganization, which mutual holding company shall be named "Baltimore
County Savings Bank, M.H.C." or such other name as may be selected by the Board
of Directors of the MHC.
MHC Reorganization: The term "MHC Reorganization" collectively means
------------------
all steps which are necessary for the Bank to reorganize into the mutual holding
company form of organization as a subsidiary of a subsidiary holding company in
the manner specified in the Reorganization Plan.
Officer: The term "Officer" means an executive officer of the MHC, the
-------
SHC or the Bank (as applicable), including the Chairman of the Board, President,
Executive Vice Presidents, Senior Vice Presidents in charge of principal
business functions, Secretary and Treasurer.
Order Form: The term "Order Form" means the order form or forms to be
----------
used by Eligible Account Holders, Supplemental Eligible Account Holders and
other persons eligible to purchase Common Stock pursuant to the Stock Plan,
which Order Form is attached hereto as Exhibit B and incorporated herein by
reference.
OTS: The term "OTS" means the Office of Thrift Supervision of the
---
United States Department of the Treasury or any successor agency having
jurisdiction over the Bank, the MHC or the SHC.
Other Member: The term "Other Member" means any person, other than an
------------
Eligible Account Holder or a Supplemental Eligible Account Holder, who is a
Member as of the Voting Record Date.
Person: The term "Person" means any corporation, partnership, trust,
------
incorporated association or any other entity or a natural person.
Qualifying Deposit: The term "Qualifying Deposit" means a savings
------------------
balance in any Savings Account in the Bank as of the close of business on the
Eligibility Record Date or the Supplemental Eligibility Record Date, as
applicable, which is equal to or greater than $50.00.
Registration Statement: The term "Registration Statement" means the
----------------------
Registration Statement on Form S-1 or SB-2 or other applicable form and any
amendments thereto filed by the SHC with the SEC pursuant to the Securities Act
of 1933, as amended, to register shares of Common Stock to be sold pursuant to
the Stock Plan.
Reorganization Plan: The term "Reorganization Plan" means the Plan of
-------------------
Reorganization from Mutual Savings Bank to Mutual Holding Company and Subsidiary
Holding Company Formation, including all exhibits thereto, as adopted by the
Board of Directors of the Bank and as may be amended from time to time pursuant
to the terms thereof.
Resident: The term "Resident," as used in this Plan in relation to the
--------
preference afforded natural persons and trusts of natural persons in the Local
Community, 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, non-transitory presence
within the Local Community) and continues to reside therein 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 as to
whether a person is residing in the Local Community. To the extent the "person"
is a corporation or other business entity, the principal place of business or
headquarters shall be
G-3
<PAGE>
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, such
determination shall be in the sole discretion of the Bank.
Sale: The terms "sale" and "sell" mean every contract to sell or
----
otherwise dispose of a security or an interest in a security for value, but such
terms do not include an exchange of securities in connection with a merger or
acquisition approved by the OTS or any other federal agency having jurisdiction.
Savings Account: The term "Savings Account" means a withdrawable
---------------
deposit in the Bank and a withdrawable deposit in the Stock Bank after the MHC
Reorganization.
SEC: The term "SEC" means the Securities and Exchange Commission or any
---
successor agency.
SHC: The term "SHC" means the subsidiary holding company resulting from
---
the MHC Reorganization, which subsidiary holding company shall be called "BCSB
Bankcorp, Inc." or such other name as shall be selected by the Board of
Directors of SHC.
Special Meeting: The term "Special Meeting" means the Special Meeting
---------------
of Members of the Bank called for the sole purpose of submitting the
Reorganization Plan and related documents to the Members for their approval or
disapproval, including any adjournment of such meeting.
Stock Bank: The term "Stock Bank" means Baltimore County Savings Bank,
----------
F.S.B., in its form as a federally chartered stock savings bank following the
conversion of the Bank from mutual to stock form.
Stock Issuance: The term "Stock Issuance" means the offer and sale by
--------------
the SHC of up to 49.9% of the shares of Common Stock outstanding following
consummation of the MHC Reorganization in the priorities set forth in Section IV
of this Stock Plan and subject to the other provisions of this Stock Plan,
including without limitation, the limitations on purchases of Common Stock set
forth in Section V hereof.
Stock Plan: The term "Stock Plan" means this Plan of Stock Issuance, as
----------
adopted by the Board of Directors of the SHC and as may be amended from time to
time pursuant to the terms hereof.
Subscription Offering: The term "Subscription Offering" means the
---------------------
offering of shares of Common Stock to the Eligible Account Holders,
Tax-Qualified Employee Stock Benefit Plans, Supplemental Eligible Account
Holders and Other Members under the Stock Plan, giving preference to natural
persons and trusts of natural persons (including individual retirement and Keogh
retirement accounts and personal trusts in which such natural persons have
substantial interests) who are permanent Residents of the Bank's Local Community
if permitted by applicable law and approved by the Bank's Board of Directors in
its sole discretion.
Subscription and Community Prospectus: The term "Subscription and
-------------------------------------
Community Prospectus" means the final prospectus to be used in connection with
the Subscription and Community Offerings.
Subscription Rights: The term "Subscription Rights" means
-------------------
non-transferable, non-negotiable, personal rights of Eligible Account Holders,
Tax-Qualified Employee Stock Benefit Plans, Supplemental Eligible Account
Holders and Other Members to purchase Common Stock offered under the Stock Plan
in connection with the Stock Issuance.
Supplemental Eligibility Record Date: The term "Supplemental
------------------------------------
Eligibility Record Date" means the last day of the calendar quarter preceding
the approval of the Reorganization Plan and the Stock Plan by the OTS.
G-4
<PAGE>
Supplemental Eligible Account Holder: The term "Supplemental Eligible
------------------------------------
Account Holder" means the holder of a Qualifying Deposit in the Bank (other than
Officers and directors and their Associates) on the Supplemental Eligibility
Record Date.
Tax-Qualified Employee Stock Benefit Plan: The term "Tax-Qualified
-----------------------------------------
Employee Stock Benefit Plan" means any defined benefit plan or defined
contribution plan of the Bank, the MHC or the SHC such as an employee stock
ownership plan, stock bonus plan, profit sharing plan or other plan, which, with
its related trust, meets the requirements to be "qualified" under section 401
of the Internal Revenue Code of 1986, as amended. A "non tax-qualified employee
stock benefit plan" means any defined benefit plan or defined contribution plan
which is not so qualified.
Voting Record Date: The term "Voting Record Date" means the date fixed
------------------
by the Board of Directors of the Bank to determine Members of the Bank entitled
to vote at the Special Meeting.
III. TOTAL NUMBER OF SHARES AND PURCHASE PRICE OF COMMON STOCK
A. General.
-------
The aggregate purchase price of all shares of Common Stock which will
be offered and sold in the Stock Issuance will be equal to the estimated pro
forma market value of the Stock Bank, as a subsidiary of the SHC, as determined
by an independent appraisal within the meaning of the regulations of the OTS.
The exact number of shares of Common Stock to be offered will be determined by
the Board of Directors of the Bank and the Board of Directors of the SHC, or
their respective designees, in conjunction with the determination of the
Purchase Price (as that term is defined in Paragraph B below). The number of
shares to be offered may be subsequently adjusted prior to completion of the
Stock Issuance as provided below.
B. Independent Valuation and Purchase Price of Shares.
--------------------------------------------------
All shares of Common Stock sold in the Stock Issuance will be sold at a
uniform price per share referred to in this Plan as the "Purchase Price." The
Purchase Price and the total number of shares of Common Stock to be offered in
the Stock Issuance will be determined by the Board of Directors of the Bank and
the Board of Directors of the SHC, or their respective designees, immediately
prior to the simultaneous completion of all such sales contemplated by this Plan
on the basis of the estimated pro forma market value of the Stock Bank, as a
subsidiary of the SHC, at such time. The estimated pro forma market value of the
Stock Bank, as a subsidiary of the SHC, will be determined for such purpose by
an Independent Appraiser on the basis of such appropriate factors as are not
inconsistent with applicable regulations. Immediately prior to the Subscription
and Community Offerings, a subscription price range of shares for the offerings
will be established (the "Valuation Range"), which will vary from as much as 15%
above to 15% below the midpoint of such range. The number of shares of Common
Stock ultimately issued and sold in the Stock Issuance will be determined at the
close of the Subscription and Community Offerings and any other offering. The
subscription price range and the number of shares to be offered may be changed
subsequent to the Subscription and Community Offerings as the result of any
appraisal updates prior to the completion of the Stock Issuance, without
notifying eligible purchasers in the Subscription and Community Offerings and
without a resolicitation of subscriptions, provided the aggregate purchase price
of the shares sold in the Subscription and Community Offerings is not below the
low end or more than 15 percent above the high end of the Valuation Range
previously approved by the OTS or if, in the opinion of the Boards of Directors
of the Bank and the SHC, the new Valuation Range established by the appraisal
update does not result in a materially different capital position of the SHC.
Notwithstanding the foregoing, no sale of Common Stock may be
consummated unless, prior to such consummation, the Independent Appraiser
confirms to the Bank and the SHC and to the OTS that, to the best knowledge of
the Independent Appraiser, nothing of a material nature has occurred which,
taking into account all relevant factors,
G-5
<PAGE>
would cause the Independent Appraiser to conclude that the aggregate value of
the Common Stock to be sold in the Stock Issuance at the Purchase Price is
incompatible with its estimate of the aggregate consolidated pro forma market
value the Stock Bank, as a subsidiary of the SHC. If such confirmation is not
received, the SHC may cancel the Subscription and Community Offerings and/or any
other offering, extend the Stock Issuance, establish a new Valuation Range,
extend, reopen or hold new Subscription and Community Offerings and/or other
offerings or take such other action as the OTS may permit.
IV. GENERAL PROCEDURES FOR THE STOCK ISSUANCE
A. Subscription Offering.
---------------------
Non-transferable Subscription Rights to purchase shares of Common Stock
will be issued at no cost to Eligible Account Holders, Tax-Qualified Employee
Stock Benefit Plans, Supplemental Eligible Account Holders and Other Members of
the Bank pursuant to priorities established by applicable regulations. To the
extent that Common Stock is available, no subscriber will be allowed to purchase
fewer than 25 shares of Common Stock, provided that this number shall be
decreased if the aggregate purchase price exceeds $500. The priorities
established by applicable regulations for the purchase of shares are as follows:
1. Category No. 1: Eligible Account Holders.
a. Each Eligible Account Holder shall receive,
without payment, non-transferable Subscription Rights to
purchase Common Stock in an amount equal to the greater of the
maximum purchase limitation in the Community Offering,
one-tenth of one percent of the total offering of shares of
Common Stock in the Subscription and Community Offerings or 15
times the product (rounded down to the next whole number)
obtained by multiplying the total number of shares of Common
Stock to be issued in the Subscription and Community Offerings
by a fraction of which the numerator is the amount of the
Qualifying Deposit of the Eligible Account Holder and the
denominator is the total amount of Qualifying Deposits of all
Eligible Account Holders in the Bank in each case on the
Eligibility Record Date.
b. Non-transferable Subscription Rights to purchase
Common Stock received by Officers and directors of the Bank
and their Associates based on their increased deposits in the
Bank in the one year period preceding the Eligibility Record
Date shall be subordinated to all other subscriptions
involving the exercise of non-transferable Subscription Rights
to purchase shares pursuant to this Category.
c. In the event of an oversubscription for shares of
Common Stock pursuant to this Category, shares of Common Stock
shall be allocated among subscribing Eligible Account Holders
giving preference to natural persons and trusts of natural
persons who are permanent Residents of the Local Community, if
permitted by applicable law and approved by the SHC's Board of
Directors in its sole discretion, as follows:
(I) Shares of Common Stock 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
of Common Stock sufficient to make its total
allocation equal to 100 shares or the total amount of
its subscription, whichever is less.
(II) Any shares not so allocated shall be
allocated among the subscribing Eligible Account
Holders on an equitable basis, related to the amounts
of their respective Qualifying Deposits, as compared
to the total Qualifying Deposits of all subscribing
Eligible Account Holders.
G-6
<PAGE>
2. Category No. 2: Tax-Qualified Employee Stock Benefit Plans.
a. Tax-Qualified Employee Stock Benefit Plans of the
Stock Bank, MHC or SHC shall receive, without payment,
non-transferable Subscription Rights to purchase up to 10% of
the shares of Common Stock issued in the Subscription and
Community Offerings.
b. Subscription rights received in this Category
shall be subordinated to the Subscription Rights received by
Eligible Account Holders pursuant to Category No. 1, provided
that any shares of Common Stock sold in excess of the midpoint
of the Valuation Range may be first sold to Tax-Qualified
Employee Stock Benefit Plans.
3. Category No. 3: Supplemental Eligible Account Holders.
a. Each Supplemental Eligible Account Holder shall
receive, without payment, non-trans ferable Subscription
Rights to purchase Common Stock in an amount equal to the
greater of the maximum purchase limitation in the Community
Offering, one-tenth of one percent of the total offering of
shares of Common Stock in the Subscription and Community
Offerings or 15 times the product (rounded down to the next
whole number) obtained by multiplying the total number of the
shares of Common Stock to be issued in the Subscription and
Community Offerings by a fraction of which the numerator is
the amount of the Qualifying Deposit of the Supplemental
Eligible Account Holder and the denominator is the total
amount of the Qualifying Deposits of all Supplemental Eligible
Account Holders on the Supplemental Eligibility Record Date.
b. Subscription Rights received pursuant to this
Category shall be subordinated to the Subscription Rights
received by the Eligible Account Holders and by Tax-Qualified
Employee Stock Benefit Plans pursuant to Category Nos. 1 and
2.
c. Any non-transferable Subscription Rights to
purchase shares received by an Eligible Account Holder in
accordance with Category No. 1 shall reduce to the extent
thereof the Subscription Rights to be distributed to such
Eligible Account Holder pursuant to this Category.
d. In the event of an oversubscription for shares of
Common Stock pursuant to this Category, shares of Common Stock
shall be allocated among the subscribing Supplemental Eligible
Account Holders giving preference to natural persons and
trusts of natural persons who are permanent Residents of the
Local Community, if permitted by applicable law and approved
by the SHC's Board of Directors in its sole discretion, as
follows:
(I) Shares of Common Stock shall be
allocated among subscribing Supplemental Eligible
Account Holders so as to permit each such
Supplemental Eligible Account Holder, to the extent
possible, to purchase a number of shares of Common
Stock sufficient to make its total allocation
(including the number of shares of Common Stock, if
any, allocated in accordance with Category No. 1)
equal to 100 shares of Common Stock or the total
amount of its subscription, whichever is less.
(II) Any shares of Common Stock not
allocated in accordance with subparagraph (I) above
shall be allocated among the subscribing Supplemental
Eligible Account Holders on an equitable basis,
related to the amounts of their respective Qualifying
Deposits on the Supplemental Eligibility Record Date
as compared to the total Qualifying Deposits of all
subscribing Supplemental Eligible Account Holders in
each case on the Supplemental Eligibility Record
Date.
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4. Category No. 4: Other Members.
a. Each Other Member, other than those Members who
are Eligible Account Holders or Supplemental Eligible Account
Holders, shall receive, without payment, non-transferable
Subscription Rights to purchase Common Stock in an amount
equal to the greater of the maximum purchase limitation in the
Community Offering or one-tenth of one percent of the total
offering of shares of Common Stock in the Subscription and
Community Offerings.
b. Subscription Rights received pursuant to this
Category shall be subordinated to the Subscription Rights
received by Eligible Account Holders, Tax-Qualified Employee
Stock Benefit Plans and Supplemental Eligible Account Holders
pursuant to Category Nos. 1, 2 and 3.
c. In the event of an oversubscription for shares of
Common Stock pursuant to this Category, the shares of Common
Stock available shall be allocated among subscribing Other
Members as to permit each subscribing Other Member, to the
extent possible, to purchase a number of shares sufficient to
make his or her total allocation of Common Stock equal to the
lesser of 100 shares or the number of shares subscribed for by
the Other Member. The shares remaining thereafter will be
allocated among subscribing Other Members whose subscriptions
remain unsatisfied on an equitable basis as determined by the
Board of Directors, giving preference to natural persons and
trusts of natural persons who are permanent Residents of the
Local Community if permitted by applicable law and approved by
the SHC's Board of Directors in its sole discretion.
Order Forms may provide that the maximum purchase limitation shall be
based on the midpoint of the Valuation Range. In the event the aggregate
Purchase Price of the Common Stock issued and sold in the Subscription and
Community Offerings is below the midpoint of the Valuation Range, that portion
of subscriptions in excess of the maximum purchase limitation will be refunded.
In the event the aggregate Purchase Price of Common Stock issued and sold in the
Subscription and Community Offerings is above the midpoint of the Valuation
Range, persons who have subscribed for the maximum purchase limitation may be
given the opportunity to increase their subscriptions so as to purchase the
maximum number of shares subject to the availability of shares. The SHC will not
otherwise notify subscribers of any change in the number of shares of Common
Stock offered in the Subscription and Community Offerings.
B. Community Offering.
------------------
1. Any shares of Common Stock not purchased through
the exercise of Subscription Rights in the Subscription
Offering may be sold in a Community Offering, which may
commence concurrently with or following the Subscription
Offering. Shares of Common Stock will be offered in the
Community Offering to the general public, giving preference to
natural persons and the trusts of natural persons (including
individual retirement and Keogh retirement accounts and
personal trusts in which such natural persons have substantial
interests) who are permanent Residents of the Local Community.
The Community Offering may commence concurrently with or as
soon as practicable after the completion of the Subscription
Offering and must be completed within 45 days after the last
day of the Subscription Offering, unless extended by the SHC
with the approval of the OTS. The offering price of the Common
Stock to the general public in the Community Offering will be
the same price paid for such stock by Eligible Account Holders
and other persons in the Subscription Offering. If sufficient
shares are not available to satisfy all orders in the
Community Offering, the shares available will be allocated by
the SHC in its discretion. The SHC shall have the right to
accept or reject orders in the Community Offering in whole or
in part.
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2. Orders accepted in the Community Offering shall be
filled up to a maximum of 2% of the Common Stock, and
thereafter remaining shares shall be allocated on an equal
number of shares basis per order until all orders have been
filled.
3. The Common Stock to be offered in the Community
Offering will be offered and sold in a manner that will
achieve the widest distribution of the Common Stock.
C. Other Offering.
--------------
In the event a Community Offering does not appear feasible, the Bank
will immediately consult with the OTS to determine the most viable alternative
available to effect the completion of the Stock Issuance. Should no viable
alternative exist, the Bank may terminate the Stock Issuance with the
concurrence of the OTS.
D. The Bank and the SHC may retain and pay for the services of
financial and other advisors and investment bankers to assist in connection with
any or all aspects of the Stock Issuance, if necessary. The SHC may elect to
offer to pay fees on a per share basis to securities brokers who assist Persons
in determining to purchase shares in the Stock Issuance.
V. LIMITATIONS ON PURCHASES OF COMMON STOCK
A. No Person may purchase fewer than 25 shares of Common Stock in the
Stock Issuance, to the extent such shares are available.
B. The aggregate amount of outstanding Common Stock owned or controlled
by Persons other than the MHC at the close of the Stock Issuance shall be less
than 50% of the total outstanding Common Stock.
C. The aggregate amount of Common Stock acquired in the Stock Issuance
by any one or more Tax-Qualified Employee Stock Benefit Plans, exclusive of any
Common Stock acquired by such plans in the secondary market, shall not exceed
ten percent (10%) of the (i) outstanding shares of Common Stock, or (ii)
stockholders' equity of the SHC, held by Persons other than the MHC at the close
of the Stock Issuance.
D. The aggregate amount of Common Stock acquired in the Stock Issuance
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 ten percent (10%) of the (i) outstanding shares of Common Stock, or (ii)
stockholders' equity of the SHC, held by Persons other than the MHC at the close
of the Stock Issuance.
E. The aggregate amount of Common Stock acquired in the Stock Issuance
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 (i)
outstanding shares of Common Stock, or (ii) stockholders' equity of the SHC,
held by Persons other than the MHC at the close of the Stock Issuance.
F. 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 1.0% of the total number of shares of Common Stock to be
issued in the Stock Issuance; no Person, together with Associates of or Persons
Acting in Concert with such Person, may purchase in the Community Offering in
the aggregate more than 1.0% of the total number of shares of Common Stock to be
issued in the Stock Issuance; and no Person, together with Associates of or
Persons Acting in Concert with such Person, may purchase in the Stock Issuance
more than the overall maximum purchase limitation of 2.0% of the total number of
shares of Common Stock to be issued in the Stock Issuance; except that
Tax-Qualified Employee Stock Benefit Plans may purchase up to 10% of the total
shares of Common Stock to be issued in the Stock Issuance, and shares to be held
by the Tax-Qualified Employee Stock Benefit Plans and attributable to a
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<PAGE>
participant thereunder shall not be aggregated with shares of Common Stock
purchased by such participant or any other purchaser of Common Stock in the
Stock Issuance.
G. For purposes of the foregoing limitations (i) directors, Officers
and employees of the MHC, the SHC or the Bank shall not be deemed to be
Associates or a group Acting in Concert solely as a result of their capacities
as such and (ii) shares purchased by Tax-Qualified Employee Stock Benefit Plans
and Non-Tax-Qualified Employee Stock Benefit Plans shall not be attributable to
the individual trustees or beneficiaries of any such plan for purposes of
determining compliance with the limitations set forth in this Section V.
H. Subject to any required regulatory approval and the requirements of
applicable laws and regulations, the SHC and the Bank may increase or decrease
any of the purchase limitations set forth herein at any time. In the event that
either an individual purchase limitation or the number of shares of Common Stock
to be sold in the Stock Issuance is increased after commencement of the
Subscription and Community Offerings, any Person who ordered the maximum number
of shares of Common Stock shall be permitted to purchase an additional number of
shares such that such Person may subscribe for the then maximum number of shares
permitted to be subscribed for by such Person, subject to the rights and
preferences of any person who has priority rights to purchase shares of Common
Stock in the Stock Issuance. In the event that either an individual purchase
limitation or the number of shares of Common Stock to be sold in the Stock
Issuance 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.
Each Person purchasing Common Stock in the Stock Issuance shall be
deemed to confirm that such purchase does not conflict with the purchase
limitations under the Stock Plan or otherwise imposed by law, rule or
regulation. In the event that such purchase limitations are violated by any
Person (including any Associate or group of persons affiliated or otherwise
Acting in Concert with such person), the SHC shall have the right to purchase
from such Person at the actual Purchase Price per share all shares acquired by
such Person in excess of such purchase limitations or, if such excess shares
have been sold by such Person, to receive the difference between the actual
Purchase Price per share paid for such excess shares and the price at which such
excess shares were sold by such Person. This right of the SHC to purchase such
excess shares shall be assignable by the SHC.
I. The Bank and the SHC shall have the right to take any action as they
may, in their sole discretion, deem necessary, appropriate or advisable in order
to monitor and enforce the terms, conditions, limitations and restrictions
contained in this Section V and elsewhere in this Stock Plan and the terms,
conditions and representations contained in the Order Form, including, but not
limited to, the absolute right (subject only to any necessary regulatory
approvals or concurrence) to reject, limit or revoke acceptance of any order and
to delay, terminate or refuse to consummate any sale of Common Stock which it
believes might violate, or is designed to, or is any part of a plan to, evade or
circumvent such terms, conditions, limitations, restrictions and
representations. Any such action shall be final, conclusive and binding on all
Persons and the Stock Bank and the SHC shall be free from any liability to any
Person on account of any such action.
VI. TIMING OF STOCK ISSUANCE, MANNER OF PURCHASING COMMON STOCK AND ORDER
FORMS
A. The Subscription and Community Offerings may be commenced
simultaneously with, or at any time after the mailing to Members of the proxy
statement to be used in connection with the Special Meeting. The Subscription
and Community Offerings may be terminated before the Special Meeting, provided
that the offer and sale of the Common Stock shall be conditioned upon the
approval of the Reorganization Plan by the Members at the Special Meeting.
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<PAGE>
B. The timing of the commencement of the Subscription and Community
Offerings shall be determined by the Bank and the SHC in consultation with the
independent appraiser and any financial advisory or investment banking firm
retained in connection with the Stock Issuance. The Bank and the SHC may
consider a number of factors in determining the exact timing of the commencement
of the Subscription and Community Offerings, including, but not limited to,
current and projected future earnings, local and national economic conditions
and the prevailing market for stocks in general and stocks of financial
institutions in particular. The Bank and the SHC shall have the right to
withdraw, terminate, suspend, delay, revoke or modify any such Stock Issuance,
at any time and from time to time, as it in its sole discretion may determine,
subject to any necessary regulatory approval or concurrence, without liability
to any Person.
C. In the event an Order Form: (i) is not delivered and is returned to
the SHC or the Bank by the United States Postal Service (or the SHC or the Bank
is unable to locate the addressee); (ii) is not received by the SHC or the Bank,
or is received by the SHC or the Bank after termination of the date specified
thereon; (iii) is defectively completed or executed; or (iv) is not accompanied
by the total required payment for the shares of Common Stock subscribed for
(including cases in which the subscribers' Savings Accounts are insufficient to
cover the authorized withdrawal for the required payment), the Subscription
Rights of the person to whom such rights have been granted will not be honored
and will be treated as though such person failed to return the completed Order
Form within the time period specified therein. Alternatively, the SHC or the
Bank may, but will not be required to, waive any irregularity relating to any
Order Form or require the submission of a corrected Order Form or the remittance
of full payment for subscribed shares of Common Stock by such date as the SHC or
the Bank may specify. Subscription orders, once tendered, cannot be revoked. The
SHC's and Bank's interpretation of the terms and conditions of this Plan and
acceptability of the Order Forms will be final and conclusive.
D. The SHC will make reasonable efforts to comply with the securities
laws of all states in the United States in which persons entitled to subscribe
for Common Stock pursuant to the Stock Plan reside. However, no such person will
be offered or receive any Common Stock under this Stock Plan who resides in a
foreign country or who resides in a state of the United States with respect to
which any or all of the following apply: (i) a small number of persons otherwise
eligible to subscribe for shares of Common Stock under this Stock Plan 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 person would require the SHC 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.
VII. PAYMENT FOR COMMON STOCK
A. Payment for all shares of Common Stock subscribed for in the
Subscription and Community Offerings must be received in full by the Bank or the
SHC, together with properly completed and executed Order Forms, indicating
thereon the number of shares being subscribed for and such other information as
may be required thereon, and, in the case of orders submitted at an office of
the Bank, executed Forms of Certification as required by OTS regulations, on or
prior to the expiration date specified on the Order Form, unless such date is
extended by the SHC and the Bank; provided, however, that payment by
Tax-Qualified Employee Stock Benefit Plans for Common Stock may be made to the
Bank concurrently with the completion of the Stock Issuance.
Payment for all shares of Common Stock may be made in cash (if
delivered in person) or by check or money order, or, if the subscriber has a
Savings Account in the Bank (including a certificate of deposit), the subscriber
may authorize the Bank to charge the subscriber's Savings Account for the
purchase amount. The Bank shall pay interest at not less than the passbook rate
on all amounts paid in cash or by check or money order to purchase shares of
Common Stock in the Subscription and Community Offerings from the date payment
is received until the Stock Issuance is completed or terminated. The Bank shall
not knowingly loan funds or otherwise extend credit to any person for the
purpose of purchasing Common Stock.
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<PAGE>
B. Tax-Qualified Employee Stock Benefit Plans may subscribe for shares
by submitting an Order Form, and in the case of an employee stock ownership plan
together with evidence of a loan commitment from the SHC or an unrelated
financial institution for the purchase of the shares of the Common Stock, during
the Subscription Offering and by making payment for the shares of Common Stock
on the date of the closing of the Stock Issuance.
C. If a subscriber authorizes the Bank to charge its Savings Account,
the funds may remain in the subscriber's Savings Account and continue to earn
interest, but may not be used by the subscriber until all Common Stock has been
sold or the Stock Issuance is terminated, whichever is earlier. The withdrawal
will be given effect only concurrently with the sale of all shares of Common
Stock in the Stock Issuance and only to the extent necessary to satisfy the
subscription at a price equal to the Purchase Price. The Bank will allow
subscribers to purchase shares of Common Stock by withdrawing funds from
certificate accounts without the assessment of early withdrawal penalties. In
the case of early withdrawal of only a portion of such account, the certificate
evidencing such account shall be canceled if the remaining balance of the
account is less than the applicable minimum balance requirement. In that event,
the remaining balance will earn interest at the passbook rate. This waiver of
the early withdrawal penalty is applicable only to withdrawals made in
connection with the purchase of Common Stock under the Stock Plan.
D. The Bank shall pay interest at not less than the passbook rate for
all amounts paid in cash, by check or money order to purchase shares of Common
Stock in the Stock Issuance from the date payment is received until the Stock
Issuance is completed or terminated.
E. Each share of Common Stock issued in the Stock Issuance shall be
non-assessable upon payment in full of the Purchase Price.
VIII. CONDITIONS TO THE STOCK ISSUANCE
Consummation of the Stock Issuance is subject to (i) consummation of
the MHC Reorganization, (ii) the receipt of all required federal and state
approvals for the issuance of Common Stock in the Stock Issuance, including
without limitation the approval of the OTS, and (iii) the sale in the Stock
Issuance of such minimum number of shares of Common Stock within the Valuation
Range, as may be determined by the Boards of Directors of the Bank and the SHC.
IX. REQUIREMENTS FOLLOWING THE STOCK ISSUANCE
A. If the SHC has more than thirty-five (35) holders of Common Stock at
the close of the Stock Issuance, the SHC shall register the Common Stock
pursuant to the Securities Exchange Act of 1934, as amended, and shall undertake
not to deregister such stock for a period of three years thereafter.
B. If the SHC has more than one-hundred (100) holders of Common Stock
at the close of the Stock Issuance, the SHC, to the extent required by
applicable laws and regulations and policies of the OTS, shall use its best
efforts to (i) encourage and assist a market maker to establish and maintain a
market for the Common Stock and (ii) list the Common Stock on a national or
regional securities exchange or to have quotations for the Common Stock
disseminated on the Nasdaq System.
C. Without the prior written approval of the OTS, Insiders of the Bank
and their Associates shall be prohibited for a period of three years following
completion of the Stock Issuance from purchasing outstanding shares of SHC
stock, except from a broker or dealer registered with the SEC. Notwithstanding
the preceding sentence, this restriction shall not apply to (i) negotiated
transactions involving more than 1% of the total outstanding shares of SHC stock
and, (ii) purchases made and shares held by a Tax-Qualified Employee Stock
Benefit Plan or non-tax-qualified employee stock benefit plans which may be
attributable to Insiders of the Bank and their Associates may be made without
OTS permission or the use of a broker or dealer.
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<PAGE>
The foregoing restriction on purchases of Common Stock shall be in
addition to any restrictions that may be imposed by Federal and state securities
laws.
X. RESTRICTIONS ON TRANSFER OF COMMON STOCK
All shares of the Common Stock which are purchased in the Stock
Issuance by Persons other than Insiders of the Bank and their Associates, shall
be transferable without restriction. Unless otherwise permitted by the OTS,
shares of Common Stock purchased by Insiders of the Bank and their Associates in
the Stock Issuance shall be subject to the restriction that such shares shall
not be sold or otherwise disposed of for value for a period of one year
following the date of purchase, except for any disposition of such shares
following the death of such Insider or Associate. The shares of Common Stock
issued by the SHC to Insiders of the Bank and their Associates shall bear the
following legend giving appropriate notice of such one-year restriction:
"The shares of stock evidenced by this certificate are restricted as to
transfer for a period of one year from the date of this Certificate
pursuant to applicable regulations of the Office of Thrift Supervision
of the United States Department of the Treasury. Except in the event of
the death of the registered holder, the shares represented by this
Certificate may not be sold prior thereto without a legal opinion of
counsel for the SHC that said transfer is permissible under the
provisions of applicable laws and regulations."
In addition, the SHC shall give appropriate instructions to the
transfer agent for its Common Stock with respect to the applicable restrictions
relating to the transfer of restricted stock. Any shares issued at a later date
as a stock dividend, stock split or otherwise with respect to any such
restricted stock shall be subject to the same holding period restrictions as may
then be applicable to such restricted stock. The foregoing restriction on
transfer shall be in addition to any restrictions on transfer that may be
imposed by Federal and state securities laws.
XI. ESTABLISHMENT AND FUNDING OF CHARITABLE FOUNDATION
As part of the Stock Issuance, the SHC and the Bank intend to establish
a charitable foundation that will qualify as an exempt organization under
Section 501(c)(3) of the Internal Revenue Code (the "Charitable Foundation") or
a charitable trust that will not so qualify but that is intended to be a grantor
trust under Sections 671-679 of the Internal Revenue Code (the "Charitable
Trust"), and to donate to the Charitable Foundation or Charitable Trust cash,
securities, or Common Stock in an amount up to $750,000 or 75,000 shares of
Common Stock. The Charitable Foundation or Charitable Trust is being formed in
connection with the Stock Issuance in order to complement the Bank's existing
community reinvestment activities and to share with the Bank's local community a
part of the Bank's financial success as a locally headquartered,
community-oriented, financial services institution. The Charitable Foundation
will be dedicated to, and the Charitable Trust will be primarily dedicated to,
the promotion of charitable purposes, including community development, grants or
donations to support housing assistance, not-for-profit community groups and
other types of organizations or civic-minded projects. It is expected that the
Charitable Foundation will annually distribute total grants to assist charitable
organizations or to fund projects within its local community of not less than 5%
of the average fair value of Charitable Foundation assets each year. The
Charitable Trust, if established, is not required to distribute a specific
percentage of its assets annually towards any charitable purpose. In order to
serve the purposes for which it was formed and maintain its Section 501(c)(3)
qualification, the Charitable Foundation may sell, on an annual basis, a limited
portion of any securities contributed to it by the SHC.
The board of directors of the Charitable Foundation or the trustees of
the Charitable Trust will be comprised of individuals who are officers or
directors of the Bank, as well as other members of the community. The board of
directors of the Charitable Foundation or the trustees of the Charitable Trust
will be responsible for establishing the policies of the Charitable Foundation
or Charitable Trust with respect to grants or donations, consistent with the
stated purposes of the Charitable Foundation or Charitable Trust, respectively.
The establishment and funding of the Charitable Foundation or Charitable Trust
as part of the Stock Issuance is subject to the approval of the OTS.
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<PAGE>
XII. EXPENSES OF THE STOCK ISSUANCE
The Bank and the SHC shall use their best efforts to assure that the
expenses incurred by them in connection with the Stock Issuance are reasonable.
XIII. AMENDMENT OR TERMINATION
If deemed necessary or desirable, this Stock Plan may be substantively
amended by the Board of Directors of the SHC or the Bank, as applicable, as a
result of comments from regulatory authorities or otherwise prior to approval of
the Stock Plan by the OTS, and at any time thereafter with the concurrence of
the OTS. This Stock Plan may be terminated by the Board of Directors of the SHC
or the Bank, as applicable, at any time prior to approval of the Stock Plan by
the OTS, and at any time thereafter with the concurrence of the OTS. Unless an
extension is approved by the OTS, this Stock Plan shall terminate if the Stock
Issuance is not completed within 90 days after the date on which this Stock Plan
is approved by the OTS.
XIV. INTERPRETATION
References herein to provisions of Federal law and the rules and
regulations of the OTS shall in all cases be deemed to refer to the provisions
of the same which were in effect at the time of adoption of this Stock Plan by
the Board of Directors of the SHC, and any subsequent amendments to such
provisions. All interpretations of this Stock Plan and application of its
provisions to particular circumstances by a majority of the Board of Directors
of the SHC shall be final.
XV. AUTHORIZED ACTION
Notwithstanding anything contained in this Stock Plan to the contrary,
any action authorized to be taken by the Stock Bank herein may be taken by the
Bank during the period that the Stock Bank is in organization.
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XVI. CONTRIBUTIONS TO TAX-QUALIFIED EMPLOYEE STOCK BENEFIT PLANS
The MHC, the SHC and the Stock Bank may make scheduled discretionary
contributions to their Tax-Qualified Employee Stock Benefit Plans, provided such
contributions do not cause the Stock Bank to fail to meet then-applicable
regulatory capital requirements.
XVII. MHC CONVERSION TO STOCK FORM
It is possible that the MHC may convert from mutual to stock form in
the future; however, there are no agreements, arrangements, understandings or
plans with respect to such a conversion and there can be no assurance that such
a conversion would occur. Although the Common Stock held by persons other than
the MHC could remain outstanding following a conversion of the MHC from mutual
to stock form, it is anticipated that the MHC would seek to convert all shares
of Common Stock not held by it to shares of common stock of the MHC by means of
an offer to exchange made to holders of such Common Stock or by means of a
merger of an interim savings association and the Stock Bank under terms which
provide for such an exchange by operation of law. There can be no assurance that
such exchanges will be permitted by the OTS or that, if permitted, the terms of
any such exchange, which would have to take into account the respective values
of the Stock Bank and the MHC at such time, would be acceptable to then-existing
holders of the Common Stock.
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Exhibit 3.1
BCSB BANKCORP, INC.
FEDERAL MHC SUBSIDIARY HOLDING COMPANY CHARTER
Section 1. Corporate title. The full corporate title of the MHC subsidiary
holding company is BCSB Bankcorp, Inc. (the "MHC subsidiary holding company").
Section 2. Domicile. The domicile of the MHC subsidiary holding company shall be
in the County of Baltimore, in the State of Maryland.
Section 3. Duration. The duration of the MHC subsidiary holding company is
perpetual.
Section 4. Purpose and powers. The purpose of the MHC subsidiary holding company
is to pursue any or all of the lawful objectives of a federal mutual holding
company chartered under section 10(o) of the Home Owners' Loan Act, 12 U.S.C.
1467a(o), and to exercise all of the express, implied, and incidental powers
conferred thereby and by all acts amendatory thereof and supplemental thereto,
subject to the Constitution and laws of the United States as they are now in
effect, or as they may hereafter be amended, and subject to all lawful and
applicable rules, regulations, and orders of the Office of Thrift Supervision
("Office").
Section 5. Capital stock. The total number of shares of all classes of the
capital stock that the MHC subsidiary holding company has authority to issue is
15,000,000, of which 13,500,000 shares shall be common stock of par value of
$.01 per share and of which 1,500,000 shares shall be serial preferred stock of
par value of $.01 per share. The shares may be issued from time to time as
authorized by the board of directors without further approval of shareholders,
except as otherwise provided in this Section 5 or to the extent that such
approval is required by governing law, rule, or regulation. The consideration
for the issuance of the shares shall be paid in full before their issuance and
shall not be less than the par value. Neither promissory notes nor future
services shall constitute payment or part payment for the issuance of shares of
the MHC subsidiary holding company. The consideration for the shares shall be
cash, tangible or intangible property (to the extent direct investment in such
property would be permitted), labor or services actually performed for the MHC
subsidiary holding company, or any combination of the foregoing. In the absence
of actual fraud in the transaction, the value of such property, labor, or
services, as determined by the board of directors of the MHC subsidiary holding
company, shall be conclusive. Upon payment of such consideration, such shares
shall be deemed to be fully paid and nonassessable. In the case of a stock
dividend, that part of the retained earnings of the MHC subsidiary holding
company which is transferred to common stock or paid-in capital accounts upon
the issuance of shares as a stock dividend shall be deemed to be the
consideration for their issuance.
Except for shares issued in the initial organization of MHC subsidiary
holding company, no shares of capital stock (including shares issuable upon
conversion, exchange or exercise of other securities) shall be issued, directly
or indirectly, to officers, directors, or controlling persons (except for shares
issued to Baltimore County Savings Bank, M.H.C., the parent mutual holding
company of the MHC subsidiary holding company) other than as part of a general
public offering or as qualifying shares to a director, unless the issuance or
the plan under which they would be issued has been approved by a majority of the
total votes eligible to be cast at a legal meeting.
Nothing contained in this Section 5 (or in any supplementary sections
hereto) shall entitle the holders of any class or series of capital stock to
vote as a separate class or series or to more than one vote per share: provided,
that this restriction on voting separately by class or series shall not apply:
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(i) To any provision which would authorize the holders of preferred
stock, voting as a class or series, to elect some members of the board of
directors, less than a majority thereof, in the event of default in the payment
of dividends on any class or series of preferred stock;
(ii) To any provision that would require the holders of preferred
stock, voting as a class or series, to approve the merger or consolidation of
the MHC subsidiary holding company with another corporation or the sale, lease,
or conveyance (other than by mortgage or pledge) of properties or business in
exchange for securities of a corporation other than the MHC subsidiary holding
company if the preferred stock is exchanged for securities of such other
corporation: Provided, That no provision may require such approval for
transactions undertaken with the assistance or pursuant to the direction of the
Office or the Federal Deposit Insurance Corporation;
(iii) To any amendment which would adversely change the specific terms
of any class or series of capital stock as set forth in this Section 5 (or in
any supplementary sections hereto), including any amendment which would create
or enlarge any class or series ranking prior thereto in rights and preferences.
An amendment which increases the number of authorized shares of any class or
series of capital stock, or substitutes the surviving entity in a merger or
consolidation for the MHC subsidiary holding company, shall not be considered to
be such an adverse change.
A description of the different classes and series (if any) of the MHC
subsidiary holding company's capital stock and a statement of the designations,
and the relative rights, preferences and limitations of the shares of each class
of and series (if any) of capital stock are as follows:
A. Common stock. Except as provided in this Section 5 (or in any
supplementary sections thereto), the holders of common stock shall exclusively
possess all voting power. Each holder of shares of common stock shall be
entitled to one vote for each share held by such holder and there shall be no
right to cumulate votes in an election of directors.
Whenever there shall have been paid, or declared and set aside for
payment, to the holders of the outstanding shares of any class of stock having
preference over the common stock as to the payment of dividends, the full amount
of dividends and of sinking fund, retirement fund or other retirement payments,
if any, to which such holders are respectively entitled in preference to the
common stock, then dividends may be paid on the common stock and on any class or
series of stock entitled to participate therewith as to dividends out of any
assets legally available for the payment of dividends.
In the event of any liquidation, dissolution, or winding up of the MHC
subsidiary holding company, the holders of the common stock (and the holders of
any class or series of stock entitled to participate with the common stock in
the distribution of assets) shall be entitled to receive, in cash or in kind,
the assets of the MHC subsidiary holding company available for distribution
remaining after: (i) payment or provision for payment of the MHC subsidiary
holding company's debts and liabilities; (ii) distributions or provision for
distributions in settlement of any liquidation account; and (iii) distributions
or provisions for distributions to holders of any class or series of stock
having preference over the common stock in the liquidation, dissolution, or
winding up of the MHC subsidiary holding company. Each share of common stock
shall have the same relative rights as and be identical in all respects with all
the other shares of common stock.
B. Preferred stock. The MHC subsidiary holding company may provide in
supplementary sections to its charter for one or more classes of preferred
stock, which shall be separately identified. The shares of any class may be
divided into and issued in series, with each series separately designated so as
to distinguish the shares thereof from the shares of all other series and
classes. The terms of each series shall be set forth in a supplementary section
to the charter. All shares of the same class shall be identical except as to the
following relative rights and preferences, as to which there may be variations
between different series:
(a) The distinctive serial designation and the number of shares
constituting such series;
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(b) The dividend rate or the amount of dividends to be paid on the
shares of such series, whether dividends shall be cumulative and, if so, from
which date(s) the payment date(s) for dividends, and the participating or other
special rights, if any, with respect to dividends;
(c) The voting powers, full or limited, if any, of shares of such
series;
(d) Whether the shares of such series shall be redeemable and, if so,
the price(s) at which, and the terms and conditions on which, such shares may be
redeemed;
(e) The amount(s) payable upon the shares of such series in the event
of voluntary or involuntary liquidation, dissolution, or winding up of the MHC
subsidiary holding company;
(f) Whether the shares of such series shall be entitled to the benefit
of a sinking or retirement fund to be applied to the purchase or redemption of
such shares, and if so entitled, the amount of such fund and the manner of its
application, including the price(s) at which such shares may be redeemed or
purchased through the application of such fund;
(g) Whether the shares of such series shall be convertible into, or
exchangeable for, shares of any other class or classes of stock of the MHC
subsidiary holding company and, if so, the conversion price(s) or the rate(s) of
exchange, and the adjustments thereof, if any, at which such conversion or
exchange may be made, and any other terms and conditions of such conversion or
exchange;
(h) The price or other consideration for which the shares of such
series shall be issued; and
(i) Whether the shares of such series which are redeemed or converted
shall have the status of authorized but unissued shares of serial preferred
stock and whether such shares may be reissued as shares of the same or any other
series of serial preferred stock.
Each share of each series of serial preferred stock shall have the same
relative rights as and be identical in all respects with all the other shares of
the same series.
The board of directors shall have authority to divide, by the adoption
of supplementary charter sections, any authorized class of preferred stock into
series, and, within the limitations set forth in this section and the remainder
of this charter, fix and determine the relative rights and preferences of the
shares of any series so established.
Prior to the issuance of any preferred shares of a series established
by a supplementary charter section adopted by the board of directors, the MHC
subsidiary holding company shall file with the Secretary of the Office a dated
copy of that supplementary section of this charter establishing and designating
the series and fixing and determining the relative rights and preferences
thereof.
Section 6. Preemptive rights. Holders of the capital stock of the MHC subsidiary
holding company shall not be entitled to preemptive rights with respect to any
shares of the MHC subsidiary holding company which may be issued.
Section 7. Directors. The MHC subsidiary holding company shall be under the
direction of a board of directors. The authorized number of directors, as stated
in the MHC subsidiary holding company's bylaws, shall not be fewer than five nor
more than fifteen except when a greater or lesser number is approved by the
Director of the Office, or his or her delegate.
At the first annual meeting of shareholders of the MHC subsidiary
holding company, the board of directors of the MHC subsidiary holding company
shall be divided into three classes as nearly equal in number as the then total
number of directors constituting the entire board of directors shall permit,
which classes shall be designated Class I,
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Class II and Class III. At such annual meeting of shareholders, directors
assigned to Class I shall be elected to hold office for a term expiring at the
first succeeding annual meeting of shareholders thereafter, directors assigned
to Class II shall be elected to hold office for a term expiring at the second
succeeding annual meeting thereafter, and directors assigned to Class III shall
be elected to hold office for a term expiring at the third succeeding annual
meeting thereafter. Thereafter, at each annual meeting of shareholders of the
MHC subsidiary holding company, directors of classes the terms of which expire
at such annual meeting shall be elected for terms of three years.
Notwithstanding the foregoing, a director whose term shall expire at any annual
meeting shall continue to serve until such time as his successor shall have been
duly elected and shall have qualified unless his position on the board of
directors shall have been abolished by action taken to reduce the size of the
board of directors prior to said meeting.
Should the number of directors of the MHC subsidiary holding company be
reduced, the directorship(s) eliminated shall be allocated among classes as
appropriate so that the number of directors in each class is as specified in the
immediately preceding paragraph. The board of directors shall designate, by the
name of the incumbent(s), the position(s) to be abolished. Notwithstanding the
foregoing, no decrease in the number of directors shall have the effect of
shortening the term of any incumbent director. Should the number of directors of
the MHC subsidiary holding company be increased, the additional directorships
shall be allocated among classes as appropriate so that the number of directors
in each class is as specified in the immediately preceding paragraph.
Whenever the holders of any one or more series of preferred stock of
the MHC subsidiary holding company shall have the right, voting separately as a
class, to elect one or more directors of the MHC subsidiary holding company, the
board of directors shall consist of said directors so elected in addition to the
number of directors fixed as provided above in this Section 7. Notwithstanding
the foregoing, and except as otherwise may be required by law and provisions of
the preferred stock of the MHC subsidiary holding company, whenever the holders
of any one or more series of preferred stock of the MHC subsidiary holding
company shall have the right, voting separately as a class, to elect one or more
directors of the MHC subsidiary holding company, the terms of the director or
directors elected by such holders shall expire at the next succeeding annual
meeting of shareholders.
Section 8. Certain provisions applicable for five years. Not withstanding
anything contained in the MHC subsidiary holding company's charter or bylaws to
the contrary, until ___________ __, 2003, the following provisions shall apply:
A. Beneficial Ownership Limitation. No person, other than Baltimore
County Savings Bank, M.H.C., the parent mutual holding company of the MHC
subsidiary holding company, shall directly or indirectly offer to acquire or
acquire the beneficial ownership of more than 10 percent of the common stock of
the MHC subsidiary holding company. This limitation shall not apply to the
purchase of shares by underwriters in connection with a public offering or the
purchase of shares by a tax-qualified employee stock benefit plan which is
exempt from the approval requirements under Section 574.3(c)(1)(vi) of the
Office's regulations.
In the event shares are acquired in violation of this Section 8, all
shares beneficially owned by any person in excess of 10% shall be considered
"excess shares" and shall not be counted as shares entitled to vote and shall
not be voted by any person or counted as voting shares in connection with any
matters submitted to the shareholders for a vote.
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For purposes of this Section 8, the following definitions apply:
(1) The term "person" includes an individual, a group acting
in concert, a corporation, a partnership, an association, a
joint stock company, a trust, an unincorporated organization
or similar company, a syndicate or any other group formed for
the purpose of acquiring, holding or disposing of the common
stock of the MHC subsidiary holding company.
(2) The term "offer" includes every offer to buy or otherwise
acquire, solicitation of an offer to sell, tender offer for,
or request or invitation for tenders of, a security or
interest in a security for value.
(3) The term "acquire" includes every type of acquisition,
whether effected by purchase, exchange, operation of law or
otherwise.
(4) The term "acting in concert" means (a) knowing
participation in a joint activity or conscious parallel action
towards a common goal whether or not pursuant to an express
agreement, or (b) a combination or pooling of voting or other
interests in the securities of an issuer for a common purpose
pursuant to any contract, understanding, relationship,
agreement or other arrangements, whether written or otherwise.
B. Call for Special Meeting. Special meetings of shareholders
relating to changes in control of the MHC subsidiary holding company or
amendments to its charter shall be called only upon direction of the board of
directors.
Section 9. Amendment of charter. Except as provided in Section 5, no amendment,
addition, alteration, change, or repeal of this charter shall be made, unless
such is proposed by the board of directors of the MHC subsidiary holding
company, approved by the shareholders by a majority of the votes eligible to be
cast at a legal meeting, unless a higher vote is otherwise required, and
approved or preapproved by the Office.
BCSB BANKCORP, INC.
Attest: By:
--------------------------------- ------------------------------
Gary C. Loraditch Michael J. Dietz
Secretary President
Attest: By:
--------------------------------- ------------------------------
Secretary of the Office of Thrift Director of the Office of Thrift
Supervision Supervision
Effective Date:
-------------------------
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Exhibit 3.2
BYLAWS
BCSB BANCORP, INC.
ARTICLE I - HOME OFFICE
The home office of BCSB Bancorp, Inc. (the "subsidiary holding
company") shall be 4111 E. Joppa Road, in the County of Baltimore in the State
of Maryland.
ARTICLE II - SHAREHOLDERS
Section 1. Place of Meetings. All annual and special meetings of
shareholders shall be held at the home office of the subsidiary holding company
or at such other convenient place as the board of directors may determine.
Section 2. Annual Meeting. A meeting of the shareholders of the
subsidiary holding company for the election of directors and for the transaction
of any other business of the subsidiary holding company shall be held annually
within 150 days after the end of the subsidiary holding company's fiscal year on
the second Wednesday of February, if not a legal holiday, and, if a legal
holiday, then on the next day following which is not a legal holiday, at 4:00
p.m., or at such other date and time within such 150-day period as the board of
directors may determine.
Section 3. Special Meetings. Special meetings of the shareholders for
any purpose or purposes, unless otherwise prescribed by the regulations of the
Office of Thrift Supervision ("Office") may be called at any time by the
chairman of the board, the president, or a majority of the board of directors,
and shall be called by the chairman of the board, the president, or the
secretary upon the written request of the holders of not less than one-tenth of
all of the outstanding capital stock of the subsidiary holding company entitled
to vote at the meeting. Such written request shall state the purpose or purposes
of the meeting and shall be delivered to the home office of the subsidiary
holding company addressed to the chairman of the board, the president, or the
secretary.
Section 4. Conduct of Meetings. Annual and special meetings shall be
conducted in accordance with the most current edition of Robert's Rules of Order
unless otherwise prescribed by regulations of the Office or these bylaws or the
board of directors adopts another written procedure for the conduct of meetings.
The board of directors shall designate, when present, either the chairman of the
board or president to preside at such meetings.
Section 5. Notice of Meetings. Written notice stating the place, day,
and hour of the meeting and the purpose(s) for which the meeting is called shall
be delivered not fewer than 20 nor more than 50 days before the date of the
meeting, either personally or by mail, by or at the direction of the chairman of
the board, the president, or the secretary, or the directors calling the
meeting, to each shareholder of record entitled to vote at such meeting. If
mailed, such notice shall be deemed to be delivered when deposited in the mail,
addressed to the shareholder at the address as it appears on the stock transfer
books or records of the subsidiary holding company as of the record date
prescribed in Section 6 of this Article II with postage prepaid. When any
shareholders' meeting, either annual or special, is adjourned for 30 days or
more, notice of the adjourned meeting shall be given as in the case of an
original meeting. It shall not be necessary to give any notice of the time and
place of any meeting adjourned for less than 30 days or of the business to be
transacted at the meeting, other than an announcement at the meeting at which
such adjournment is taken.
Section 6. Fixing of Record Date. For the purpose of determining
shareholders entitled to notice of or to vote at any meeting of shareholders or
any adjournment, or shareholders entitled to receive payment of any dividend, or
in
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order to make a determination of shareholders for any other proper purpose, the
board of directors shall fix in advance a date as the record date for any such
determination of shareholders. Such date in any case shall be not more than 60
days and, in case of a meeting of shareholders, not fewer than 10 days prior to
the date on which the particular action, requiring such determination of
shareholders, is to be taken. When a determination of shareholders entitled to
vote at any meeting of shareholders has been made as provided in this Section 6,
such determination shall apply to any adjournment.
Section 7. Voting Lists. At least 20 days before each meeting of the
shareholders, the officer or agent having charge of the stock transfer books for
shares of the subsidiary holding company shall make a complete list of the
shareholders of record entitled to vote at such meeting, or any adjournment
thereof, arranged in alphabetical order, with the address and the number of
shares held by each. This list of shareholders shall be kept on file at the home
office of the subsidiary holding company and shall be subject to inspection by
any shareholder of record or the shareholder's agent at any time during usual
business hours for a period of 20 days prior to such meeting. Such list shall
also be produced and kept open at the time and place of the meeting and shall be
subject to inspection by any shareholder of record or the shareholder's agent
during the entire time of the meeting. The original stock transfer book shall
constitute prima facie evidence of the shareholders entitled to examine such
list or transfer books or to vote at any meeting of shareholders. In lieu of
making the shareholder list available for inspection by shareholders as provided
in the preceding paragraph, the board of directors may elect to follow the
procedures prescribed in (S)552.6(d) of the Office's regulations as now or
hereafter in effect.
Section 8. Quorum. A majority of the outstanding shares of the
subsidiary holding company entitled to vote, represented in person or by proxy,
shall constitute a quorum at a meeting of shareholders. If less than a majority
of the outstanding shares is represented at a meeting, a majority of the shares
so represented may adjourn the meeting from time to time without further notice.
At such adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally notified. The shareholders present at a duly organized meeting may
continue to transact business until adjournment, notwithstanding the withdrawal
of enough shareholders to constitute less than a quorum. If a quorum is present,
the affirmative vote of the majority of the shares represented at the meeting
and entitled to vote on the subject matter shall be the act of the shareholders,
unless the vote of a greater number of shareholders voting together or voting by
classes is required by law or the charter. Directors, however, are elected by a
plurality of the votes cast at an election of directors.
Section 9. Proxies. At all meetings of shareholders, a shareholder may
vote by proxy executed in writing by the shareholder or by his or her duly
authorized attorney in fact. Proxies may be given telephonically or
electronically as long as the holder uses a procedure for verifying the identity
of the shareholder. Proxies solicited on behalf of the management shall be voted
as directed by the shareholder or, in the absence of such direction, as
determined by a majority of the board of directors. No proxy shall be valid more
than eleven months from the date of its execution except for a proxy coupled
with an interest.
Section 10. Voting of Shares in the Name of Two or More Persons. When
ownership stands in the name of two or more persons, in the absence of written
directions to the subsidiary holding company to the contrary, at any meeting of
the shareholders of the subsidiary holding company, any one or more of such
shareholders may cast, in person or by proxy, all votes to which such ownership
is entitled. In the event an attempt is made to cast conflicting votes, in
person or by proxy, by the several persons in whose names shares of stock stand,
the vote or votes to which those persons are entitled shall be cast as directed
by a majority of those holding such and present in person or by proxy at such
meeting, but no votes shall be cast for such stock if a majority cannot agree.
Section 11. Voting of Shares of Certain Holders. Shares standing in the
name of another corporation may be voted by any officer, agent, or proxy as the
bylaws of such corporation may prescribe, or, in the absence of such provision,
as the board of directors of such corporation may determine. Shares held by an
administrator, executor, guardian, or conservator may be voted by him or her,
either in person or by proxy, without a transfer of such shares into his or her
name. Shares standing in the name of a trustee may be voted by him or her,
either in person or by proxy, but
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no trustee shall be entitled to vote shares held by him or her, without a
transfer of such shares into his or her name. Shares held in trust in an IRA or
Keogh Account, however, may be voted by the subsidiary holding company if no
other instructions are received. Shares standing in the name of a receiver may
be voted by such receiver, and shares held by or under the control of a receiver
may be voted by such receiver without the transfer into his or her name if
authority to do so is contained in an appropriate order of the court or other
public authority by which such receiver was appointed.
A shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee, and
thereafter the pledgee shall be entitled to vote the shares so transferred.
Neither treasury shares of its own stock held by the subsidiary holding
company nor shares held by another corporation, if a majority of the shares
entitled to vote for the election of directors of such other corporation are
held by the subsidiary holding company, shall be voted at any meeting or counted
in determining the total number of out standing shares at any given time for
purposes of any meeting.
Section 12. Inspectors of Election. In advance of any meeting of
shareholders, the board of directors may appoint any persons other than nominees
for office as inspectors of election to act at such meeting or any adjournment.
The number of inspectors shall be either one or three. Any such appointment
shall not be altered at the meeting. If inspectors of election are not so
appointed, the chairman of the board or the president may, or on the request of
not fewer than 10 percent of the votes represented at the meeting shall, make
such appointment at the meeting. If appointed at the meeting, the majority of
the votes present shall determine whether one or three inspectors are to be
appointed. In case any person appointed as inspector fails to appear or fails or
refuses to act, the vacancy may be filled by appointment by the board of
directors in advance of the meeting or at the meeting by the chairman of the
board or the president.
Unless otherwise prescribed by regulations of the Office, the duties of
such inspectors shall include: determining the number of shares and the voting
power of each share, the shares represented at the meeting, the existence of a
quorum, and the authenticity, validity and effect of proxies; receiving votes,
ballots, or consents; hearing and determining all challenges and questions in
any way arising in connection with the rights to vote; counting and tabulating
all votes or consents; determining the result; and such acts as may be proper to
conduct the election or vote with fairness to all shareholders.
Section 13. Nominating Committee. The board of directors shall act as a
nominating committee for selecting the management nominees for election as
directors. Except in the case of a nominee substituted as a result of the death
or other incapacity of a management nominee, the nominating committee shall
deliver written nominations to the secretary at least 20 days prior to the date
of the annual meeting. Provided such committee makes such nominations, no
nominations for directors except those made by the nominating committee shall be
voted upon at the annual meeting unless other nominations by shareholders are
made in writing and delivered to the secretary of the subsidiary holding company
in accordance with the provision of Section 14 of Article II set forth below.
Section 14. Notice for Nominations and Proposals for New Business.
A. Nominations for the election of directors and proposals for any new
business to be taken up at any annual or special meeting of shareholders may be
made by the board of directors of the subsidiary holding company or by any
shareholder of the subsidiary holding company entitled to vote generally in the
election of directors. In order for a shareholder of the subsidiary holding
company to make any such nominations and/or proposals, he or she shall give
notice thereof in writing, delivered or mailed by first class United States
mail, postage prepaid, to the secretary of the subsidiary holding company not
less than 30 days nor more than 60 days prior to any such meeting; provided,
however, that if less than 40 days' notice of the meeting is given to
shareholders, such written notice shall be delivered or mailed, as prescribed,
to the secretary of the subsidiary holding company not later than the close of
the tenth day following the day on which notice of the meeting was mailed to
shareholders. Each such notice given by a shareholder with respect to
nominations for the election of directors shall set forth (i) the name, age,
business address and, if known, residence address of each nominee proposed in
such notice, (ii) the principal occupation or employment of each such nominee,
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and (iii) the number of shares of stock of the subsidiary holding company which
are beneficially owned by each such nominee. In addition, the shareholder making
such nomination shall promptly provide any other information reasonably
requested by the subsidiary holding company.
B. Each such notice given by a shareholder to the secretary of the
subsidiary holding company with respect to business proposals to bring before a
meeting shall set forth in writing as to each matter: (i) a brief description of
the business desired to be brought before the meeting and the reasons for
conducting such business at the meeting; (ii) the name and address, as they
appear on the subsidiary holding company's books, of the shareholder proposing
such business; (iii) the class and number of shares of the subsidiary holding
company which are beneficially owned by the shareholder; and (iv) any material
interest of the shareholder in such business. Notwithstanding anything in these
Articles to the contrary, no business shall be conducted at the meeting except
in accordance with the procedures set forth in this Section 14 of Article II.
C. The chairman of the annual or special meeting of shareholders may,
if the facts warrant, determine and declare to such meeting that a nomination or
proposal was not made in accordance with the foregoing procedure, and, if he
should so determine, he shall so declare to the meeting and the defective
nomination or proposal shall be disregarded and laid over for action at the next
succeeding adjourned, special or annual meeting of the shareholders taking place
thirty days or more thereafter. This provision shall not require the holding of
any adjourned or special meeting of shareholders for the purpose of considering
such defective nomination or proposal.
Section 15. Informal Action by Shareholders. Any action required to be
taken at a meeting of the shareholders, or any other action which may be taken
at a meeting of shareholders, may be taken without a meeting if consent in
writing, setting forth the action so taken, shall be given by all of the
shareholders entitled to vote with respect to the subject matter.
ARTICLE III - BOARD OF DIRECTORS
Section 1. General Powers. The business and affairs of the subsidiary
holding company shall be under the direction of its board of directors. The
board of directors shall annually elect a chairman of the board and a president
from among its members and shall designate, when present, either the chairman of
the board or the president to preside at its meetings.
Section 2. Number and Term. The board of directors shall consist of ten
(10) members and shall be divided into three classes as nearly equal in number
as possible. The members of each class shall be elected for a term of three
years and until their successors are elected and qualified. One class shall be
elected by ballot annually.
Section 3. Regular Meetings. A regular meeting of the board of
directors shall be held without other notice than this bylaw following the
annual meeting of shareholders. The board of directors may provide, by
resolution, the time and place, for the holding of additional regular meetings
without other notice than such resolution. Directors may participate in a
meeting by means of a conference telephone or similar communications device
through which all persons participating can hear each other at the same time.
Participation by such means shall constitute presence in person for all
purposes.
Section 4. Qualification. Each director shall at all times be the
beneficial owner of not less than 100 shares of capital stock of the subsidiary
holding company unless the subsidiary holding company is a wholly owned
subsidiary of a holding company.
Section 5. Special Meetings. Special meetings of the board of directors may
be called by or at the request of the chairman of the board, the president, or
one-third of the directors. The persons authorized to call special meetings
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of the board of directors may fix any place, within the subsidiary holding
company's normal lending territory, as the place for holding any special meeting
of the board of directors called by such persons.
Members of the board of directors may participate in special meetings by
means of conference telephone or similar communications equipment by which all
persons participating in the meeting can hear each other. Such participation
shall constitute presence in person for all purposes.
Section 6. Notice. Written notice of any special meeting shall be given
to each director at least 24 hours prior thereto when delivered personally or by
telegram or at least five days prior thereto when delivered by mail at the
address at which the director is most likely to be reached. Such notice shall be
deemed to be delivered when deposited in the mail so addressed, with postage
prepaid if mailed, when delivered to the telegraph company if sent by telegram,
or when the subsidiary holding company receives notice of delivery if
electronically transmitted. Any director may waive notice of any meeting by a
writing filed with the secretary. The attendance of a director at a meeting
shall constitute a waiver of notice of such meeting, except where a director
attends a meeting for the express purpose of objecting to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any meeting of the board of
directors need be specified in the notice of waiver of notice of such meeting.
Section 7. Quorum. A majority of the number of directors fixed by
Section 2 of this Article III shall constitute a quorum for the transaction of
business at any meeting of the board of directors; but if less than such
majority is present at a meeting, a majority of the directors present may
adjourn the meeting from time to time. Notice of any adjourned meeting shall be
given in the same manner as prescribed by Section 5 of this Article III.
Section 8. Manner of Acting. The act of the majority of the directors
present at a meeting at which a quorum is present shall be the act of the board
of directors, unless a greater number is prescribed by regulation of the Office
or by these bylaws.
Section 9. Action Without a Meeting. Any action required or permitted
to be taken by the board of directors at a meeting may be taken without a
meeting if a consent in writing, setting forth the action so taken, shall be
signed by all of the directors.
Section 10. Resignation. Any director may resign at any time by sending
a written notice of such resignation to the home office of the subsidiary
holding company addressed to the chairman of the board or the president. Unless
otherwise specified, such resignation shall take effect upon receipt by the
chairman of the board or the president. More than three consecutive absences
from regular meetings of the board of directors, unless excused by resolution of
the board of directors, shall automatically constitute a resignation, effective
when such resignation is accepted by the board of directors.
Section 11. Vacancies. Any vacancy occurring on the board of directors
may be filled by the affirmative vote of a majority of the remaining directors
although less than a quorum of the board of directors. A director elected to
fill a vacancy shall be elected to serve until the next election of directors by
the shareholders. Any directorship to be filled by reason of an increase in the
number of directors may be filled by election by the board of directors for a
term of office continuing only until the next election of directors by the
shareholders.
Section 12. Compensation. Directors, as such, may receive a stated
salary for their services. By resolution of the board of directors, a reasonable
fixed sum, and reasonable expenses of attendance, if any, may be allowed for
attendance at each regular or special meeting of the board of directors. Members
of either standing or special committees may be allowed such compensation for
attendance at committee meetings as the board of directors may determine.
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<PAGE>
Section 13. Presumption of Assent. A director of the subsidiary holding
company who is present at a meeting of the board of directors at which action on
any subsidiary holding company matter is taken shall be presumed to have
assented to the action taken unless his or her dissent or abstention shall be
entered in the minutes of the meeting or unless he or she shall file a written
dissent to such action with the person acting as the secretary of the meeting
before the adjournment thereof or shall forward such dissent by registered mail
to the secretary of the subsidiary holding company within five days after the
date a copy of the minutes of the meeting is received. Such right to dissent
shall not apply to a director who voted in favor of such action.
Section 14. Removal of Directors. At a meeting of shareholders called
expressly for that purpose, any director may be removed only for cause by a vote
of the holders of a majority of the shares then entitled to vote at an election
of directors. Whenever the holders of the shares of any class are entitled to
elect one or more directors by the provisions of the charter or supplemental
sections thereto, the provisions of this section shall apply, in respect to the
removal of a director or directors so elected, to the vote of the holders of the
outstanding shares of that class and not to the vote of the outstanding shares
as a whole.
Section 15. Advisory Directors. The board of directors may by
resolution appoint advisory directors to the board, who may also serve as
directors emeriti, and shall have such authority and receive such compensation
and reimbursement as the board of directors shall provide. Advisory directors or
directors emeriti shall not have the authority to participate by vote in the
transaction of business.
Section 16. Age Limitation. No person shall be eligible for election,
reelection, appointment, or reappointment to the board of directors if such
person is then more than 72 years of age. Any director who attains age 72 during
the term shall be allowed to complete the term. This Section 16 of this Article
III does not apply to a director who has served as a director of Baltimore
County Savings Bank, F.S.B. continuously since 1980. Persons may serve as
advisory directors without regard to age.
ARTICLE IV - EXECUTIVE AND OTHER COMMITTEES
Section 1. Appointment. The board of directors, by resolution adopted
by a majority of the full board, may designate the chief executive officer and
two or more of the other directors to constitute an executive committee. The
designation of any committee pursuant to this Article IV and the delegation of
authority shall not operate to relieve the board of directors, or any director,
of any responsibility imposed by law or regulation.
Section 2. Authority. The executive committee, when the board of
directors is not in session, shall have and may exercise all of the authority of
the board of directors except to the extent, if any, that such authority shall
be limited by the resolution appointing the executive committee; and except also
that the executive committee shall not have the authority of the board of
directors with reference to: the declaration of dividends; the amendment of the
charter or bylaws of the subsidiary holding company, or recommending to the
stockholders a plan of merger, consolidation, or conversion; the sale, lease, or
other disposition of all or substantially all of the property and assets of the
subsidiary holding company otherwise than in the usual and regular course of its
business; a voluntary dissolution of the subsidiary holding company; a
revocation of any of the foregoing; or the approval of a transaction in which
any member of the executive committee, directly or indirectly, has any material
beneficial interest.
Section 3. Tenure. Subject to the provisions of Section 8 of this
Article IV, each member of the executive committee shall hold office until the
next regular annual meeting of the board of directors following his or her
designation and until a successor is designated as a member of the executive
committee.
Section 4. Meetings. Regular meetings of the executive committee may be
held without notice at such times and places as the executive committee may fix
from time to time by resolution. Special meetings of the executive committee may
be called by any member thereof upon not less than one day's notice stating the
place, date, and hour
F-6
<PAGE>
of the meeting, which notice may be written or oral. Any member of the executive
committee may waive notice of any meeting and no notice of any meeting need be
given to any member thereof who attends in person. The notice of a meeting of
the executive committee need not state the business proposed to be transacted at
the meeting.
Section 5. Quorum. A majority of the members of the executive committee
shall constitute a quorum for the transaction of business at any meeting
thereof, and action of the executive committee must be authorized by the
affirmative vote of a majority of the members present at a meeting at which a
quorum is present.
Section 6. Action Without a Meeting. Any action required or permitted
to be taken by the executive committee at a meeting may be taken without a
meeting if a consent in writing, setting forth the action so taken, shall be
signed by all of the members of the executive committee.
Section 7. Vacancies. Any vacancy in the executive committee may be
filled by a resolution adopted by a majority of the full board of directors.
Section 8. Resignations and Removal. Any member of the executive
committee may be removed at any time with or without cause by resolution adopted
by a majority of the full board of directors. Any member of the executive
committee may resign from the executive committee at any time by giving written
notice to the president or secretary of the subsidiary holding company. Unless
otherwise specified, such resignation shall take effect upon its receipt; the
acceptance of such resignation shall not be necessary to make it effective.
Section 9. Procedure. The executive committee shall elect a presiding
officer from its members and may fix its own rules of procedure which shall not
be inconsistent with these bylaws. It shall keep regular minutes of its
proceedings and report the same to the board of directors for its information at
the meeting held next after the proceedings shall have occurred.
Section 10. Other Committees. The board of directors may by resolution
establish an audit, loan, or other committee composed of directors as they may
determine to be necessary or appropriate for the conduct of the business of the
subsidiary holding company and may prescribe the duties, constitution, and
procedures thereof.
ARTICLE V - OFFICERS
Section 1. Positions. The officers of the subsidiary holding company
shall be a president, one or more vice presidents, a secretary, and a treasurer
or comptroller, each of whom shall be elected by the board of directors. The
board of directors may also designate the chairman of the board as an officer.
The offices of the secretary and treasurer may be held by the same person and a
vice president may also be either the secretary or the treasurer or comptroller.
The board of directors may designate one or more vice presidents as executive
vice president or senior vice president. The board of directors may also elect
or authorize the appointment of such other officers as the business of the
subsidiary holding company may require. The officers shall have such authority
and perform such duties as the board of directors may from time to time
authorize or determine. In the absence of action by the board of directors, the
officers shall have such powers and duties as generally pertain to their
respective offices.
Section 2. Election and Term of Office. The officers of the subsidiary
holding company shall be elected annually at the first meeting of the board of
directors held after each annual meeting of the shareholders. If the election of
officers is not held at such meeting, such election shall be held as soon
thereafter as possible. Each officer shall hold office until a successor has
been duly elected and qualified or until the officer's death, resignation, or
removal in the manner hereinafter provided. Election or appointment of an
officer, employee, or agent shall not of itself create contractual rights. The
board of directors may authorize the subsidiary holding company to enter into an
employment contract with any officer in accordance with regulations of the
Office, but no such contract shall impair the right of the board of directors to
remove any officer at any time in accordance with Section 3 of this Article V.
F-7
<PAGE>
Section 3. Removal. Any officer may be removed by the board of
directors whenever in its judgment the best interests of the subsidiary holding
company will be served thereby, but such removal, other than for cause, shall be
without prejudice to the contractual rights, if any, of the person so removed.
Section 4. Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification, or otherwise may be filled by the board
of directors for the unexpired portion of the term.
Section 5. Remuneration. The remuneration of the officers shall be
fixed from time to time by the board of directors.
ARTICLE VI - CONTRACTS, LOANS, CHECKS, AND DEPOSITS
Section 1. Contracts. To the extent permitted by regulations of the
Office, and except as otherwise prescribed by these bylaws with respect to
certificates for shares, the board of directors may authorize any officer,
employee, or agent of the subsidiary holding company to enter into any contract
or execute and deliver any instrument in the name of and on behalf of the
subsidiary holding company. Such authority may be general or confined to
specific instances.
Section 2. Loans. No loans shall be contracted on behalf of the
subsidiary holding company and no evidence of indebtedness shall be issued in
its name unless authorized by the board of directors. Such authority may be
general or confined to specific instances.
Section 3. Checks, Drafts, etc. All checks, drafts, or other orders for
the payment of money, notes, or other evidences of indebtedness issued in the
name of the subsidiary holding company shall be signed by one or more officers,
employees, or agents of the subsidiary holding company in such manner as shall
from time to time be determined by the board of directors.
Section 4. Deposits. All funds of the subsidiary holding company not
otherwise employed shall be deposited from time to time to the credit of the
subsidiary holding company in any duly authorized depositories as the board of
directors may select.
ARTICLE VII - CERTIFICATES FOR SHARES AND THEIR TRANSFER
Section 1. Certificates for Shares. Certificates representing shares of
capital stock of the subsidiary holding company shall be in such form as shall
be determined by the board of directors and approved by the Office. Such
certificates shall be signed by the chief executive officer or by any other
officer of the subsidiary holding company authorized by the board of directors,
attested by the secretary or an assistant secretary, and sealed with the
corporate seal or a facsimile thereof. The signatures of such officers upon a
certificate may be facsimiles if the certificate is manually signed on behalf of
a transfer agent or a registrar other than the subsidiary holding company itself
or one of its employees. Each certificate for shares of capital stock shall be
consecutively numbered or otherwise identified. The name and address of the
person to whom the shares are issued, with the number of shares and date of
issue, shall be entered on the stock transfer books of the subsidiary holding
company. All certificates surrendered to the subsidiary holding company for
transfer shall be canceled and no new certificate shall be issued until the
former certificate for a like number of shares has been surrendered and
canceled, except that in the case of a lost or destroyed certificate, a new
certificate may be issued upon such terms and indemnity to the subsidiary
holding company as the board of directors may prescribe.
Section 2. Transfer of Shares. Transfer of shares of capital stock of
the subsidiary holding company shall be made only on its stock transfer books.
Authority for such transfer shall be given only by the holder of record or by
his or her legal representative, who shall furnish proper evidence of such
authority, or by his attorney authorized by a
F-8
<PAGE>
duly executed power of attorney and filed with the subsidiary holding company.
Such transfer shall be made only on surrender for cancellation of the
certificate for such shares. The person in whose name shares of capital stock
stand on the books of the subsidiary holding company shall be deemed by the
subsidiary holding company to be the owner for all purposes.
ARTICLE VIII - FISCAL YEAR; ANNUAL AUDIT
The fiscal year of the subsidiary holding company shall end on the 30th
day of September of each year. The appointment of accountants shall be subject
to annual ratification by the shareholders.
ARTICLE IX - DIVIDENDS
Subject to the terms of the subsidiary holding company's charter and
the regulations and orders of the Office, the board of directors may, from time
to time, declare, and the subsidiary holding company may pay, dividends on its
outstanding shares of capital stock.
ARTICLE X - CORPORATE SEAL
The board of directors shall provide a subsidiary holding company seal
which shall be two concentric circles between which shall be the name of the
subsidiary holding company. The year of incorporation or an emblem may appear in
the center.
ARTICLE XI - AMENDMENTS
These bylaws may be amended in a manner consistent with regulations of
the Office and shall be effective after: (i) approval of the amendment by a
majority vote of the authorized board of directors, or by a majority vote of the
votes cast by the shareholders of the subsidiary holding company at any legal
meeting, and (ii) receipt of any applicable regulatory approval. When a
subsidiary holding company fails to meet its quorum requirements, solely due to
vacancies on the board, then the affirmative vote of a majority of the sitting
board will be required to amend the bylaws.
F-9
<PAGE>
EXHIBIT 4
COMMON STOCK
NUMBER SHARES
----- -----
BCSB BANKCORP, INC.
INCORPORATED UNDER THE LAWS OF THE UNITED STATES
This certifies that
is the owner of CUSIP
fully paid and nonassessable shares of
common stock, par value $0.01 per share, of
BCSB BANKCORP, INC. (the "Corporation"), a Federal corporation. The shares
represented by this certificate are transferable only on the stock transfer
books of the Corporation by the holder of record hereof, or by his duly
authorized attorney or legal representative, upon the surrender of this
certificate properly endorsed. This certificate is not valid until
countersigned and registered by the Corporation's transfer agent and registrar.
THIS SECURITY IS NOT A DEPOSIT OR ACCOUNT AND IS NOT FEDERALLY INSURED OR
GUARANTEED.
IN WITNESS WHEREOF, the Corporation has caused this certificate to be executed
by the facsimile signatures of its duly authorized officers and has caused a
facsimile of its corporate seal to be hereunto affixed.
Dated: , 1998
----------------
- --------------------------------------- --------------------------------
Gary C. Loraditch Michael J. Dietz
Secretary President
[CORPORATE SEAL]
********************************************************************************
RESTRICTIONS ON TRANSFER
The Charter includes a provision which prohibits any person from directly or
indirectly acquiring the beneficial ownership of more than 10% of any class of
equity security of the Corporation. Such provision eliminates the voting rights
of securities acquired in violation of the provision. Such provision will
expire five years from the date of completion of the reorganization of Baltimore
County Savings Bank, F.S.B. (the "Bank") into the mutual holding company form of
organization. The Corporation will furnish without charge to each stockholder
who so requests additional information with respect to such restrictions. Such
request may be made in writing to the Secretary of the Corporation.
********************************************************************************
<PAGE>
The shares represented by this certificate are issued subject to all the
provisions of the Charter and Bylaws of the Corporation as from time to time
amended (copies of which are on file at the principal executive office of the
Corporation), to all of which the holder by acceptance hereof assents.
The Corporation will furnish without charge to each stockholder who so
requests, a full statement of the designations and any preferences, conversion
and other rights, voting powers, restrictions, limitations as to dividends,
qualifications, and terms and conditions of redemption of the shares of each
class which the Corporation is authorized to issue, the differences in the
relative rights and preferences between the shares of each such series of
preferred stock to the extent they have been set, and the authority of the Board
of Directors of the Corporation set the relative rights and preferences of
subsequent series of preferred stock. Such requests shall be made in writing to
the Secretary of the Corporation.
The following abbreviations, when used in the inscription on the face of
this Certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of survivorship and not as tenants in
common
UNIF TRANSFER MIN ACT - ..........Custodian.......... under Uniform Transfers to
(Cust) (Minor)
Minors Act.......................
(State)
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, HEREBY SELL(S),
----------------------------------
ASSIGN(S) AND TRANSFER(S) UNTO
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- -----------------------------------
/ /
- -----------------------------------
- --------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares
- -------------------------------------------------------------------------
of the common stock evidenced by this certificate, and do hereby irrevocably
constitute and appoint , Attorney, to transfer
----------------------------------
the said shares on the books of the Corporation, with full power of
substitution.
Dated
---------------------
-----------------------------------------
Signature
-----------------------------------------
Signature
In presence of:
-----------------------------------------
SEE REVERSE SIDE FOR RESTRICTIONS ON TRANSFER
NOTE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME OF THE
STOCKHOLDER(S) AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
<PAGE>
Exhibit 5
[Housley Kantarian & Bronstein, P.C. Letterhead]
January 23, 1998
Board of Directors
BCSB Bankcorp, Inc.
4111 E. Joppa Road, Suite 300
Baltimore, Maryland 21236
RE: Registration Statement on Form SB-2
Ladies and Gentlemen:
You have requested our opinion as special counsel to BCSB Bankcorp, Inc.
(the "Corporation") in connection with the offer and sale of the Corporation's
common stock, par value $.01 per share (the "Common Stock"), pursuant to the
Corporation's Registration Statement on Form SB-2 to be filed with the
Securities and Exchange Commission under the Securities Act of 1933, as amended
(the "Registration Statement").
In rendering this opinion, we understand that the Common Stock will be
offered and sold in the manner described in the Prospectus which is a part of
the Registration Statement. We have examined such records and documents and made
such examination as we have deemed relevant in connection with this opinion.
Based upon the foregoing, it is our opinion that the shares of Common Stock
will, when issued and sold as contemplated by the Registration Statement, be
legally issued, fully paid and nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to us in the Prospectus under the
heading "Legal Opinions."
HOUSLEY KANTARIAN & BRONSTEIN, P.C.
By: /s/ Gary R. Bronstein
-------------------------------
Gary R. Bronstein
<PAGE>
[LETTERHEAD OF RP FINANCIAL, LC. APPEARS HERE]
EXHIBIT 8.3
January 20, 1998
Board of Directors
Baltimore County Savings Bank, F.S.B.
4111 E. Joppa Road
Suite 300
Baltimore, Maryland 21236
Re: Plan of Conversion: Subscription Rights
Gentlemen:
All capitalized terms not otherwise defined in this letter have the
meanings given such terms in the Plan of Reorganization and Plan of Stock
Issuance adopted by the Board of Directors of Baltimore County Savings Bank,
F.S.B. ("BCSB" or the "Bank"). Pursuant to the Plan of Reorganization and Plan
of Stock Issuance, 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.
We understand that in accordance with the Plan of Reorganization and Plan
of Stock Issuance Subscription Rights to purchase shares of Common Stock in the
Holding Company are to be issued to: (1) Eligible Account Holders; (2) the ESOP;
(3) Supplemental Eligible Account Holders; and (4) Other Members. Based solely
upon our observation that the Subscription Rights will be available to such
parties without cost, will be legally non-transferable and of short duration,
and will afford such parties the right only to purchase shares of Common Stock
at the same price as will be paid by members of the general public in the
Community Offering, but without undertaking any independent investigation of
state or federal law or the position of the Internal Revenue Service with
respect to this issue, we are of the belief that, as a factual matter:
(1) the Subscription Rights will have no ascertainable market value;
and,
(2) the price at which the Subscription Rights are exercisable will not be
more or less than the pro forma market value of the shares upon
issuance.
Changes in the local and national economy, the legislative and regulatory
environment, the stock market, interest rates, and other external forces (such
as natural disasters or significant world events) may occur from time to time,
often with great unpredictability and may materially impact the value of thrift
stocks as a whole or the Holding Company's value alone. Accordingly, no
assurance can be given that persons who subscribe to shares of Common Stock in
the Subscription Offering will thereafter be able to buy or sell such shares at
the same price paid in the Subscription Offering.
Very truly yours,
RP FINANCIAL, LC.
/s/ Ronald S. Riggins
Ronald S. Riggins
President
<PAGE>
EXHIBIT 10.1
BCSB BANKCORP, INC.
1998 STOCK OPTION PLAN
1. PURPOSE OF THE PLAN.
The purpose of this Plan is to advance the interests of the Company through
providing select key Employees and Directors of the Bank, the Company, and their
Affiliates with the opportunity to acquire Shares. By encouraging such stock
ownership, the Company seeks to attract, retain and motivate the best available
personnel for positions of substantial responsibility and to provide additional
incentives to Directors and key Employees of the Company or any Affiliate to
promote the success of the business.
2. DEFINITIONS.
As used herein, the following definitions shall apply.
(a) "Affiliate" shall mean any "parent corporation" or "subsidiary
corporation" of the Company, as such terms are defined in Section 424(e) and
(f), respectively, of the Code.
(b) "Agreement" shall mean a written agreement entered into in accordance
with Paragraph 5(c).
(c) "Awards" shall mean, collectively, Options and SARs, unless the context
clearly indicates a different meaning.
(d) "Bank" shall mean Baltimore County Savings Bank, F.S.B.
(e) "Board" shall mean the Board of Directors of the Company.
(f) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(g) "Committee" shall mean not only the Stock Option Committee consisting
of at least two Non-Employee Directors appointed by the Board in accordance with
Paragraph 5(a) hereof, but also the Board.
(h) "Common Stock" shall mean the common stock of the Company.
(i) "Company" shall mean BCSB Bankcorp, Inc.
(j) "Continuous Service" shall mean the absence of any interruption or
termination of service as an Employee or Director of the Company or an
Affiliate. Continuous Service shall not be considered interrupted in the case
of sick leave, military leave or any other leave of absence approved by the
Company, in the case of transfers between payroll locations of the Company or
between the Company, an Affiliate or a successor, or in the case of a Director's
performance of services in an emeritus or advisory capacity.
(k) "Director" shall mean any member of the Board, and any member of the
board of directors of any Affiliate that the Board has by resolution designated
as being eligible for participation in this Plan.
(l) "Disability" shall mean a physical or mental condition, which in the
sole and absolute discretion of the Committee, is reasonably expected to be of
indefinite duration and to substantially prevent a Participant from fulfilling
his or her duties or responsibilities to the Company or an Affiliate.
(m) "Effective Date" shall mean the date specified in Paragraph 14 hereof.
<PAGE>
(n) "Employee" shall mean any person employed by the Company, the Bank, or
an Affiliate.
(o) "Exercise Price" shall mean the price per Optioned Share at which an
Option or SAR may be exercised.
(p) "ISO" shall mean an option to purchase Common Stock which meets the
requirements set forth in the Plan, and which is intended to be and is
identified as an "incentive stock option" within the meaning of Section 422 of
the Code.
(q) "Market Value" shall mean the fair market value of the Common Stock, as
determined under Paragraph 7(b) hereof.
(r) "Non-Employee Director" shall have the meaning provided in Rule 16b-3.
(s) "Non-ISO" means an option to purchase Common Stock which meets the
requirements set forth in the Plan but which is not intended to be and is not
identified as an ISO.
(t) "Option" means an ISO and/or a Non-ISO.
(u) "Optioned Shares" shall mean Shares subject to an Award granted
pursuant to this Plan.
(v) "OTS Award Limitations" shall mean the following percentage
limitations, determined with respect to the total shares reserved for awards
under this Plan: 25% for total Plan Share Awards to any particular Employee, 5%
for total Plan Share Awards to any particular non-Employee Director, and 30% for
total Plan Share Awards to the non-Employee Directors as a group.
(w) "Participant" shall mean any person who receives an Award pursuant to
the Plan.
(x) "Plan" shall mean this BCSB Bankcorp, Inc. 1998 Stock Option Plan.
(y) "Rule 16b-3" shall mean Rule 16b-3 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as amended.
(z) "Share" shall mean one share of Common Stock.
(aa) "SAR" (or "Stock Appreciation Right") means a right to receive the
appreciation in value, or a portion of the appreciation in value, of a specified
number of shares of Common Stock.
(bb) "Year of Service" shall mean a full twelve-month period, measured from
the date of an Award and each annual anniversary of that date, during which a
Participant has not terminated Continuous Service for any reason.
3. TERM OF THE PLAN AND AWARDS.
(a) Term of the Plan. The Plan shall continue in effect for a term of ten
years from the Effective Date, unless sooner terminated pursuant to Paragraph 16
hereof. No Award shall be granted under the Plan after ten years from the
Effective Date.
(b) Term of Awards. The term of each Award granted under the Plan shall be
established by the Committee, but shall not exceed 10 years; provided, however,
that in the case of an Employee who owns Shares representing more than 10% of
the outstanding Common Stock at the time an ISO is granted, the term of such ISO
shall not exceed five years.
-2-
<PAGE>
4. SHARES SUBJECT TO THE PLAN.
(a) General Rule. Except as otherwise required under Paragraph 11, the
aggregate number of Shares deliverable pursuant to Awards shall not exceed
________ Shares, which equals 10% of the Shares issued by the Company to the
public in connection with the Bank's mutual holding company reorganization ("MHC
Reorganization"). Such Shares may either be authorized but unissued Shares,
Shares held in treasury, or Shares repurchased on the open market and held in a
grantor trust created by the Company. If any Awards should expire, become
unexercisable, or be forfeited for any reason without having been exercised, the
Optioned Shares shall, unless the Plan shall have been terminated, be available
for the grant of additional Awards under the Plan.
(b) Special Rule for SARs. The number of Shares with respect to which an
SAR is granted, but not the number of Shares which the Company delivers or could
deliver to an Employee or individual upon exercise of an SAR, shall be charged
against the aggregate number of Shares remaining available under the Plan;
provided, however, that in the case of an SAR granted in conjunction with an
Option, under circumstances in which the exercise of the SAR results in
termination of the Option and vice versa, only the number of Shares subject to
the Option shall be charged against the aggregate number of Shares remaining
available under the Plan. The Shares involved in an Option as to which option
rights have terminated by reason of the exercise of a related SAR, as provided
in Paragraph 10 hereof, shall not be available for the grant of further Options
under the Plan.
5. ADMINISTRATION OF THE PLAN.
(a) Appointment of the Committee. The Plan shall be administered by the
Committee. Members of the Committee shall serve at the pleasure of the Board.
In the absence at any time of a duly appointed Committee, the Plan shall be
administered by the Board.
(b) Powers of the Committee. Except as limited by the express provisions
of the Plan or by resolutions adopted by the Board, the Committee shall have
sole and complete authority and discretion (i) to select Participants and grant
Awards, (ii) to determine the form and content of Awards to be issued in the
form of Agreements under the Plan, (iii) to interpret the Plan, (iv) to
prescribe, amend and rescind rules and regulations relating to the Plan, and (v)
to make other determinations necessary or advisable for the administration of
the Plan. The Committee shall have and may exercise such other power and
authority as may be delegated to it by the Board from time to time. A majority
of the entire Committee shall constitute a quorum and the action of a majority
of the members present at any meeting at which a quorum is present, or acts
approved in writing by a majority of the Committee without a meeting, shall be
deemed the action of the Committee.
(c) Agreement. Each Award shall be evidenced by a written agreement
containing such provisions as may be approved by the Committee. Each such
Agreement shall constitute a binding contract between the Company and the
Participant, and every Participant, upon acceptance of such Agreement, shall be
bound by the terms and restrictions of the Plan and of such Agreement. The
terms of each such Agreement shall be in accordance with the Plan, but each
Agreement may include such additional provisions and restrictions determined by
the Committee, in its discretion, provided that such additional provisions and
restrictions are not inconsistent with the terms of the Plan. In particular,
the Committee shall set forth in each Agreement (i) the Exercise Price of an
Option or SAR, (ii) the number of Shares subject to the Award, and its
expiration date, (iii) the manner, time, and rate (cumulative or otherwise) of
exercise or vesting of such Award, and (iv) the restrictions, if any, to be
placed upon such Award, or upon Shares which may be issued upon exercise of such
Award. The Chairman of the Committee and such other Directors and officers as
shall be designated by the Committee are hereby authorized to execute Agreements
on behalf of the Company and to cause them to be delivered to the recipients of
Awards.
(d) Effect of the Committee's Decisions. All decisions, determinations
and interpretations of the Committee shall be final and conclusive on all
persons affected thereby.
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(e) Indemnification. In addition to such other rights of indemnification
as they may have, the members of the Committee shall be indemnified by the
Company in connection with any claim, action, suit or proceeding relating
to any action taken or failure to act under or in connection with the Plan or
any Award, granted hereunder to the full extent provided for under the Company's
governing instruments with respect to the indemnification of Directors.
6. GRANT OF OPTIONS TO EMPLOYEES.
(a) General Rule. Only Employees shall be eligible to receive Awards. In
selecting those Employees to whom Awards will be granted and the number of
shares covered by such Awards, the Committee shall consider the position, duties
and responsibilities of the eligible Employees, the value of their services to
the Company and its Affiliates, and any other factors the Committee may deem
relevant. Notwithstanding the foregoing, the Committee shall automatically make
the Awards specified in Paragraphs 6(b) and 7 hereof, and (ii) no Employee shall
receive Options in excess of the OTS Award Limitations. [NOT APPLICABLE IF
PLAN IS IMPLEMENTED MORE THAN ONE YEAR AFTER THE MHC REORGANIZATION.]
(b) Automatic Grants to Employees. On the Effective Date, each of the
following Employees shall receive an Option (in the form of an ISO, to the
extent permissible under the Code) to purchase the number of Shares listed
below, at an Exercise Price per Share equal to the Market Value of a Share on
the Effective Date; provided that such grant shall not be made to an Employee
whose Continuous Service terminates on or before the Effective Date:
Percentage of Shares
Participant Reserved under Paragraph 4(a)
----------- -----------------------------
Michael J. Dietz ______ %
Gary C. Loraditch ______ %
William M. Loughran ______ %
With respect to each of the above-named Participants, the Option granted to the
Participant hereunder (i) shall vest in accordance with the general rule set
forth in Paragraph 9(a) of the Plan, (ii) shall have a term of ten years from
the Effective Date, and (iii) shall be subject to the general rule set forth in
Paragraph 9(c) with respect to the effect of a Participant's termination of
Continuous Service on the Participant's right to exercise his Options.
(c) Special Rules for ISOs. The aggregate Market Value, as of the date the
Option is granted, of the Shares with respect to which ISOs are exercisable for
the first time by an Employee during any calendar year (under all incentive
stock option plans, as defined in Section 422 of the Code, of the Company or any
present or future Affiliate of the Company) shall not exceed $100,000.
Notwithstanding the foregoing, the Committee may grant Options in excess of the
foregoing limitations, in which case Options granted in excess of such
limitation shall be Non-ISOs.
7. GRANTS OF OPTIONS TO NON-EMPLOYEE DIRECTORS
(a) Automatic Grants. Notwithstanding any other provisions of this Plan,
each Director who is not an Employee but is a Director on the Effective Date
shall receive, on said date, Non-ISOs to purchase ________ Shares. Such Non-
ISOs shall have an Exercise Price per Share equal to the Market Value of a Share
on the date of grant.
(b) Terms of Exercise. Options received under the provisions of this
Paragraph (i) shall become exercisable in accordance with paragraph 9(a) of the
Plan, and (ii) may be exercised from time to time by written notice of intent to
exercise the Option with respect to all or a specified number of the Optioned
Shares, and payment to the Company (contemporaneously with the delivery of such
notice), in cash, in Common Stock, or a combination of cash and Common Stock, of
the amount of the Exercise Price for the number of the Optioned Shares with
respect to which the Option is then being exercised. Each such notice and
payment shall be delivered, or mailed by prepaid registered or certified mail,
addressed to the Treasurer of the Company at the Company's executive offices. A
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Director who exercises Options pursuant to this Paragraph may satisfy all
applicable federal, state and local income and employment tax withholding
obligations, in whole or in part, by irrevocably electing to have the Company
withhold shares of Common Stock, or to deliver to the Company shares of Common
Stock that he already owns, having a value equal to the amount required to be
withheld; provided that to the extent not inconsistent herewith, such election
otherwise complies with those requirements of Paragraphs 8 and 19 hereof.
Options granted under this Paragraph shall have a term of ten years;
provided that Options granted under this Paragraph shall expire one year after
the date on which a Director terminates Continuous Service on the Board for a
reason other than death, but in no event later than the date on which such
Options would otherwise expire. In the event of such Director's death during
the term of his directorship, Options granted under this Paragraph shall become
immediately exercisable, and may be exercised within two years from the date of
his death by the personal representatives of his estate or person or persons to
whom his rights under such Option shall have passed by will or by laws of
descent and distribution, but in no event later than the date on which such
Options would otherwise expire. In the event of such Director's Disability
during his or her directorship, the Director's Option shall become immediately
exercisable, and such Option may be exercised within one year of the termination
of directorship due to Disability, but not later than the date that the Option
would otherwise expire. Unless otherwise inapplicable or inconsistent with the
provisions of this Paragraph, the Options to be granted to Directors hereunder
shall be subject to all other provisions of this Plan.
(c) Effect of the Committee's Decisions. The Committee's determination
whether a Participant's Continuous Service has ceased, and the effective date
thereof, shall be final and conclusive on all persons affected there by.
8. EXERCISE PRICE FOR OPTIONS.
(a) Limits on Committee Discretion. The Exercise Price as to any
particular Option shall not be less than 100% of the Market Value of the
Optioned Shares on the date of grant. In the case of an Employee who owns
Shares representing more than 10% of the Company's outstanding Shares of Common
Stock at the time an ISO is granted, the Exercise Price shall not be less than
110% of the Market Value of the Optioned Shares at the time the ISO is granted.
(b) Standards for Determining Exercise Price. If the Common Stock is
listed on a national securities exchange (including the NASDAQ National Market
System) on the date in question, then the Market Value per Share shall be the
average of the highest and lowest selling price on such exchange on such date,
or if there were no sales on such date, then the Exercise Price shall be the
mean between the bid and asked price on such date. If the Common Stock is
traded otherwise than on a national securities exchange on the date in question,
then the Market Value per Share shall be the mean between the bid and asked
price on such date, or, if there is no bid and asked price on such date, then on
the next prior business day on which there was a bid and asked price. If no
such bid and asked price is available, then the Market Value per Share shall be
its fair market value as determined by the Committee, in its sole and absolute
discretion.
9. EXERCISE OF OPTIONS.
(a) Generally. Each Option shall become exercisable with respect to twenty
percent (20%) of the Optioned Shares upon the Participant's completion of each
of five Years of Service, provided that an Option shall become fully (100%)
exercisable immediately upon termination of the Participant's Continuous Service
due to the Participant's Disability or death. [MAY BE DIFFERENT IF THE PLAN IS
IMPLEMENTED MORE THAN ONE YEAR AFTER THE DATE OF THE MHC REORGANIZATION.] An
Option may not be exercised for a fractional Share. [IF THE PLAN IS IMPLEMENTED
MORE THAN ONE YEAR AFTER THE DATE OF THE MHC REORGANIZATION, VESTING WOULD
ACCELERATE TO 100% UPON A PARTICIPANT'S RETIREMENT OR TERMINATION OF SERVICE IN
CONNECTION WITH A CHANGE IN CONTROL.]
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(b) Procedure for Exercise. A Participant may exercise Options, subject
to provisions relative to its termination and limitations on its exercise, only
by (1) written notice of intent to exercise the Option with respect to a
specified number of Shares, and (2) payment to the Company (contemporaneously
with delivery of such notice) in cash, in Common Stock, or a combination of cash
and Common Stock, of the amount of the Exercise Price for the number of Shares
with respect to which the Option is then being exercised. Each such notice (and
payment where required) shall be delivered, or mailed by prepaid registered or
certified mail, addressed to the Treasurer of the Company at its executive
offices. Common Stock utilized in full or partial payment of the Exercise Price
for Options shall be valued at its Market Value at the date of exercise, and may
consist of Shares subject to the Option being exercised. Upon a Participant's
exercise of an Option, the Company may, in its discretion, pay to the
Participant a cash amount up to, but not exceeding, the amount of dividends, if
any, declared on the underlying Shares between the date of grant and the date of
exercise of the Option.
(c) Period of Exercisability. Except to the extent otherwise provided in
the terms of an Agreement, an Option may be exercised by a Participant only
while he is an Employee and has maintained Continuous Service from the date of
the grant of the Option, or within one year after termination of such Continuous
Service (but not later than the date on which the Option would otherwise
expire), except if the Employee's Continuous Service terminates by reason of --
(1) "Just Cause" which for purposes hereof shall have the meaning set
forth in any unexpired employment or severance agreement between the
Participant and the Bank and/or the Company (and, in the absence of any
such agreement, shall mean termination because of the Employee's personal
dishonesty, incompetence, willful misconduct, breach of fiduciary duty
involving personal profit, intentional failure to perform stated duties,
willful violation of any law, rule or regulation (other than traffic
violations or similar offenses) or final cease-and-desist order), then the
Participant's rights to exercise such Option shall expire on the date of
such termination; or
(2) death, then to the extent that the Participant would have been
entitled to exercise the Option immediately prior to his death, such Option
of the deceased Participant may be exercised within two years from the date
of his death (but not later than the date on which the Option would
otherwise expire) by the personal representatives of his estate or person
or persons to whom his rights under such Option shall have passed by will
or by laws of descent and distribution.
(d) Effect of the Committee's Decisions. The Committee's determination
whether a Participant's Continuous Service has ceased, and the effective date
thereof, shall be final and conclusive on all persons affected thereby.
(e) Mandatory Six-Month Holding Period. Notwithstanding any other
provision of this Plan to the contrary, common stock of the Company that is
purchased upon exercise of an Option or SAR may not be sold within the six-month
period following the grant of that Option or SAR.
10. SARS (STOCK APPRECIATION RIGHTS)
(a) Granting of SARs. In its sole discretion, the Committee may from time
to time grant SARs to Employees either in conjunction with, or independently of,
any Options granted under the Plan. An SAR granted in conjunction with an
Option may be an alternative right wherein the exercise of the Option terminates
the SAR to the extent of the number of shares purchased upon exercise of the
Option and, correspondingly, the exercise of the SAR terminates the Option to
the extent of the number of Shares with respect to which the SAR is exercised.
Alternatively, an SAR granted in conjunction with an Option may be an additional
right wherein both the SAR and the Option may be exercised. An SAR may not be
granted in conjunction with an ISO under circumstances in which the exercise of
the SAR affects the right to exercise the ISO or vice versa, unless the SAR, by
its terms, meets all of the following requirements:
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(1) The SAR will expire no later than the ISO;
(2) The SAR may be for no more than the difference between the Exercise
Price of the ISO and the Market Value of the Shares subject to the ISO at
the time the SAR is exercised;
(3) The SAR is transferable only when the ISO is transferable, and under
the same conditions;
(4) The SAR may be exercised only when the ISO may be exercised; and
(5) The SAR may be exercised only when the Market Value of the Shares
subject to the ISO exceeds the Exercise Price of the ISO.
(b) Exercise Price. The Exercise Price as to any particular SAR shall not
be less than the Market Value of the Optioned Shares on the date of grant.
The provisions of Paragraph 9(c) regarding the period of exercisability of
Options are incorporated by reference herein, and shall determine the period of
exercisability of SARs.
(c) Exercise of SARs. An SAR granted hereunder shall be exercisable at
such times and under such conditions as shall be permissible under the terms of
the Plan and of the Agreement granted to a Participant, provided that an SAR may
not be exercised for a fractional Share. Upon exercise of an SAR, the
Participant shall be entitled to receive, without payment to the Company except
for applicable withholding taxes, an amount equal to the excess of (or, in the
discretion of the Committee if provided in the Agreement, a portion of) the
excess of the then aggregate Market Value of the number of Optioned Shares with
respect to which the Participant exercises the SAR, over the aggregate Exercise
Price of such number of Optioned Shares. This amount shall be payable by the
Company, in the discretion of the Committee, in cash or in Shares valued at the
then Market Value thereof, or any combination thereof.
(d) Procedure for Exercising SARs. To the extent not inconsistent
herewith, the provisions of Paragraph 9(b) as to the procedure for exercising
Options are incorporated by reference, and shall determine the procedure for
exercising SARs.
11. EFFECT OF CHANGES IN COMMON STOCK SUBJECT TO THE PLAN.
(a) Recapitalizations; Stock Splits, Etc. The number and kind of shares
reserved for issuance under the Plan, and the number and kind of shares subject
to outstanding Awards, and the Exercise Price thereof, shall be proportionately
adjusted for any increase, decrease, change or exchange of Shares for a
different number or kind of shares or other securities of the Company which
results from a merger, consolidation, recapitalization, reorganization,
reclassification, stock dividend, split-up, combination of shares, or similar
event in which the number or kind of shares is changed without the receipt or
payment of consideration by the Company.
(b) Transactions in which the Company is Not the Surviving Entity. In the
event of (i) the liquidation or dissolution of the Company, (ii) a merger or
consolidation in which the Company is not the surviving entity, or (iii) the
sale or disposition of all or substantially all of the Company's assets (any of
the foregoing to be referred to herein as a "Transaction"), all outstanding
Awards, together with the Exercise Prices thereof, shall be equitably adjusted
for any change or exchange of Shares for a different number or kind of shares or
other securities which results from the Transaction.
(c) Special Rule for ISOs. Any adjustment made pursuant to subparagraphs
(a) or (b)(1) hereof shall be made in such a manner as not to constitute a
modification, within the meaning of Section 424(h) of the Code, of outstanding
ISOs.
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(d) Conditions and Restrictions on New, Additional, or Different Shares or
Securities. If, by reason of any adjustment made pursuant to this Paragraph, a
Participant becomes entitled to new, additional, or different shares of stock or
securities, such new, additional, or different shares of stock or securities
shall thereupon be subject to all of the conditions and restrictions which were
applicable to the Shares pursuant to the Award before the adjustment was made.
(e) Other Issuances. Except as expressly provided in this Paragraph, the
issuance by the Company or an Affiliate of shares of stock of any class, or of
securities convertible into Shares or stock of another class, for cash or
property or for labor or services either upon direct sale or upon the exercise
of rights or warrants to subscribe therefor, shall not affect, and no adjustment
shall be made with respect to, the number, class, or Exercise Price of Shares
then subject to Awards or reserved for issuance under the Plan.
(f) Certain Special Dividends. The Exercise Price of shares subject to
outstanding Awards shall be proportionately adjusted upon the payment of a
special large and nonrecurring dividend that has the effect of a return of
capital to the stockholders, except that this subparagraph (f) shall not apply
to any dividend which is paid to the Participant pursuant to Paragraph 7(b) or
9(b) hereof.
12. NON-TRANSFERABILITY OF AWARDS.
Awards may not be sold, pledged, assigned, hypothecated, transferred or
disposed of in any manner other than by will or by the laws of descent and
distribution. Notwithstanding the foregoing, or any other provision of this
Plan, a Participant who holds Awards may transfer such Awards (but not Incentive
Stock Options) to his or her spouse, lineal ascendants, lineal descendants, or
to a duly established trust for the benefit of one or more of these individuals.
Awards so transferred may thereafter be transferred only to the Participant who
originally received the grant or to an individual or trust to whom the
Participant could have initially transferred the Awards pursuant to this
Paragraph 12. Awards which are transferred pursuant to this Paragraph 12 shall
be exercisable by the transferee according to the same terms and conditions as
applied to the Participant.
13. TIME OF GRANTING AWARDS.
The date of grant of an Award shall, for all purposes, be the later of the
date on which the Committee makes the determination of granting such Award, and
the Effective Date. Notice of the determination shall be given to each
Participant to whom an Award is so granted within a reasonable time after the
date of such grant.
14. EFFECTIVE DATE.
The Plan shall become effective immediately upon its approval by a
favorable vote of stockholders owning at least a majority of the total votes
eligible to be cast at a duly called meeting of the Company's stockholders held
in accordance with applicable laws, provided that the Plan shall not be
submitted for such approval within the six-month period after the Bank
completes its MHC Reorganization. [STOCKHOLDER APPROVAL MAY BE UNNECESSARY, OR
INVOLVE A DIFFERENT VOTE REQUIREMENT, IF THE PLAN IS IMPLEMENTED MORE THAN ONE
YEAR AFTER THE DATE OF THE MHC REORGANIZATION.] No Awards may be made prior to
approval of the Plan by the stockholders of the Company.
15. MODIFICATION OF AWARDS.
At any time, and from time to time, the Board may authorize the Committee
to direct execution of an instrument providing for the modification of any
outstanding Award, provided no such modification shall confer on the holder of
said Award any right or benefit which could not be conferred on him by the grant
of a new Award at such time, or impair the Award without the consent of the
holder of the Award.
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16. AMENDMENT AND TERMINATION OF THE PLAN.
The Board may from time to time amend the terms of the Plan and, with
respect to any Shares at the time not subject to Awards, suspend or terminate
the Plan. No amendment, suspension or termination of the Plan shall, without
the consent of any affected holders of an Award, alter or impair any rights or
obligations under any Award theretofore granted.
17. CONDITIONS UPON ISSUANCE OF SHARES.
(a) Compliance with Securities Laws. Shares of Common Stock shall not be
issued with respect to any Award unless the issuance and delivery of such Shares
shall comply with all relevant provisions of law, including, without limitation,
the Securities Act of 1933, as amended, the rules and regulations promulgated
thereunder, any applic able state securities law, and the requirements of any
stock exchange upon which the Shares may then be listed.
(b) Special Circumstances. The inability of the Company to obtain approval
from any regulatory body or authority deemed by the Company's counsel to be
necessary to the lawful issuance and sale of any Shares hereunder shall relieve
the Company of any liability in respect of the non-issuance or sale of such
Shares. As a condition to the exercise of an Option or SAR, the Company may
require the person exercising the Option or SAR to make such representations and
warranties as may be necessary to assure the availability of an exemption from
the registration requirements of federal or state securities law.
(c) Committee Discretion. The Committee shall have the discretionary
authority to impose in Agreements such restrictions on Shares as it may deem
appropriate or desirable, including but not limited to the authority to impose a
right of first refusal or to establish repurchase rights or both of these
restrictions.
18. RESERVATION OF SHARES.
The Company, during the term of the Plan, will reserve and keep available a
number of Shares sufficient to satisfy the requirements of the Plan.
19. WITHHOLDING TAX.
The Company's obligation to deliver Shares upon exercise of Options and/or
SARs shall be subject to the Participant's satisfaction of all applicable
federal, state and local income and employment tax withholding obligations. The
Committee, in its discretion, may permit the Participant to satisfy the
obligation, in whole or in part, by irrevocably electing to have the Company
withhold Shares, or to deliver to the Company Shares that he already owns,
having a value equal to the amount required to be withheld. The value of the
Shares to be withheld, or delivered to the Company, shall be based on the Market
Value of the Shares on the date the amount of tax to be withheld is to be
determined. As an alternative, the Company may retain, or sell without notice,
a number of such Shares sufficient to cover the amount required to be withheld.
20. NO EMPLOYMENT OR OTHER RIGHTS.
In no event shall an Employee's or Director's eligibility to participate or
participation in the Plan create or be deemed to create any legal or equitable
right of the Employee, Director, or any other party to continue service with the
Company, the Bank, or any Affiliate of such corporations. Except to the extent
provided in Paragraphs 6(b) and 9(a), no Employee or Director shall have a right
to be granted an Award or, having received an Award, the right to again be
granted an Award. However, an Employee or Director who has been granted an
Award may, if otherwise eligible, be granted an additional Award or Awards.
21. GOVERNING LAW.
The Plan shall be governed by and construed in accordance with the laws of
the State of Maryland, except to the extent that federal law shall be deemed to
apply.
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EXHIBIT 10.2
BCSB BANKCORP, INC.
MANAGEMENT RECOGNITION PLAN
ARTICLE I
ESTABLISHMENT OF THE PLAN
1.01 The Company hereby establishes this Plan upon the terms and
conditions hereinafter stated.
1.02 Through acceptance of their appointment to the Committee, each member
of the Committee hereby accepts his or her appointment hereunder upon the terms
and conditions hereinafter stated.
ARTICLE II
PURPOSE OF THE PLAN
2.01 The purpose of the Plan is to reward and retain personnel of
experience and ability in key positions of responsibility by providing Employees
and Directors of the Company, the Bank, and their Affiliates with a proprietary
interest in the Company, and as compensation for their past contributions to the
Bank, and as an incentive to make such contributions in the future.
ARTICLE III
DEFINITIONS
The following words and phrases when used in this Plan with an initial
capital letter, shall have the meanings set forth below unless the context
clearly indicates otherwise. Wherever appropriate, the masculine pronoun shall
include the feminine pronoun and the singular shall include the plural.
3.01 "Affiliate" shall mean any "parent corporation" or "subsidiary
corporation" of the Company, as such terms are defined in Section 424(e) and
(f), respectively, of the Internal Revenue Code of 1986, as amended.
3.02 "Bank" means Baltimore County Savings Bank, F.S.B.
3.03 "Beneficiary" means the person or persons designated by a Participant
to receive any benefits payable under the Plan in the event of such
Participant's death. Such person or persons shall be designated in writing on
forms provided for this purpose by the Committee and may be changed from time to
time by similar written notice to the Committee. In the absence of a written
designation, the Beneficiary shall be the Participant's surviving spouse, if any
or if none, his estate.
3.04 "Board" means the Board of Directors of the Company.
3.05 "Committee" means the Management Recognition Plan Committee appointed
by the Board pursuant to Article IV hereof.
3.06 "Common Stock" means shares of the common stock of the Company.
3.07 "Company" means BCSB Bankcorp, Inc.
3.08 "Continuous Service" shall mean the absence of any interruption or
termination of service as an Employee or Director of the Company or an
Affiliate. Continuous Service shall not be considered interrupted in the case
of sick leave, military leave or any other leave of absence approved by the
Company in the case of transfers between payroll locations of the Company or
between the Company, an Affiliate or a successor, or in the case of a Director's
performance of services in an emeritus or advisory capacity.
<PAGE>
3.09 "Date of the MHC Reorganization" means the date of the Bank's mutual
holding company reorganization.
3.10 "Director" means a member of the Board.
3.11 "Disability" shall mean a physical or mental condition, which in the
sole and absolute discretion of the Committee, is reasonably expected to be of
indefinite duration and to substantially prevent a Participant from fulfilling
his or her duties or responsibilities to the Company or an Affiliate.
3.12 "Effective Date" means the date on which the Plan first becomes
effective, as determined under Section 8.07 hereof.
3.13 "Employee" means any person who is employed by the Company or an
Affiliate.
3.14 "Non-Employee Director" shall have the meaning provided in Rule 16b-3
of the General Rules and Regulations under the Securities Exchange Act of 1934,
as amended.
3.15 "OTS Award Limitations" shall mean the following percentage
limitations, determined with respect to the total shares reserved for awards
under this Plan: 25% for total Plan Share Awards to any particular Employee, 5%
for total Plan Share Awards to any particular non-Employee Director, and 30% for
total Plan Share Awards to the non-Employee Directors as a group.
3.16 "Participant" means an Employee or Director who holds a Plan Share
Award.
3.17 "Plan" means this BCSB Bankcorp, Inc. Management Recognition Plan.
3.18 "Plan Shares" means shares of Common Stock held in the Trust which
are awarded or issuable to a Participant pursuant to the Plan.
3.19 "Plan Share Award" means a right granted under this Plan to receive
Plan Shares.
3.20 "Plan Share Reserve" means the shares of Common Stock held by the
Trustee pursuant to Sections 5.02 and 5.03.
3.21 "Trust" and "Trust Agreement" mean that agreement entered into
pursuant to the terms hereof between the Company and the Trustee, and "Trust"
means the trust created thereunder.
3.22 "Trustee" means that person(s) or entity appointed by the Board
pursuant to the Trust Agreement to hold legal title to the Plan assets for the
purposes set forth herein.
3.23 "Year of Service" shall mean a full twelve-month period, measured
from the date of a Plan Share Award and each annual anniversary of that date,
during which a Participant's Continuous Service has not terminated for any
reason.
ARTICLE IV
ADMINISTRATION OF THE PLAN
4.01 ROLE AND POWERS OF THE COMMITTEE. The Plan shall be administered
and interpreted by the Committee, which shall consist of not less than two
members of the Board who are Non-Employee Directors. In the absence at any time
of a duly appointed Committee, the Plan shall be administered by those members
of the Board who are Non-Employee Directors, and by the Board if there are less
than two Non-Employee Directors.
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The Committee shall have all of the powers allocated to it in this and
other Sections of the Plan. Except as limited by the express provisions of the
Plan or by resolutions adopted by the Board, the Committee shall have sole and
complete authority and discretion (i) to make Plan Share Awards to such
Employees as the Committee may select, (ii) to determine the form and content of
Plan Share Awards to be issued under the Plan, (iii) to interpret the Plan, (iv)
to prescribe, amend and rescind rules and regulations relating to the Plan, and
(v) to make other determinations necessary or advisable for the administration
of the Plan. The Committee shall have and may exercise such other power and
authority as may be delegated to it by the Board from time to time. Subject to
Section 4.02, the interpretation and construction by the Committee of any
provisions of the Plan or of any Plan Share Award granted hereunder shall be
final and binding. The Committee shall act by vote or written consent of a
majority of its members, and shall report its actions and decisions with respect
to the Plan to the Board at appropriate times, but in no event less than one
time per calendar year. The Committee may recommend to the Board one or more
persons or entity to act as Trustee(s) in accordance with the provisions of this
Plan and the Trust.
4.02 ROLE OF THE BOARD. The members of the Committee shall be appointed
or approved by, and will serve at the pleasure of, the Board. The Board may in
its discretion from time to time remove members from, or add members to, the
Committee. The Board shall have all of the powers allocated to it in this and
other Sections of the Plan, may take any action under or with respect to the
Plan which the Committee is authorized to take, and may reverse or override any
action taken or decision made by the Committee under or with respect to the
Plan, provided, however, that the Board may not revoke any Plan Share Award
already made or impair a participant's vested rights under a Plan Share Award.
Members of the Board who are eligible for or who have been granted Plan Share
Awards (other than pursuant to Section 6.04) may not vote on any matters
affecting the administration of the Plan or the grant of Plan Shares or Plan
Share Awards (although such members may be counted in determining the existence
of a quorum at any meeting of the Board during which actions with regard thereto
are taken). Further, with respect to all actions taken by the Board in regard
to the Plan, such action shall be taken by a majority of the Board where such a
majority of the directors acting in the matter are Non-Employee Directors.
4.03 LIMITATION ON LIABILITY. No member of the Board or the Committee or
the Trustee(s) shall be liable for any determination made in good faith with
respect to the Plan or any Plan Shares or Plan Share Awards granted under it.
If a member of the Board or the Committee or any Trustee is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative, by
reason of anything done or not done by him in such capacity under or with
respect to the Plan, the Company shall indemnify such member, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him or her in connection with such action,
suit or proceeding if he or she acted in good faith and in a manner he or she
reasonably believed to be in the best interests of the Company and its
Affiliates and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful.
ARTICLE V
CONTRIBUTIONS; PLAN SHARE RESERVE
5.01 AMOUNT AND TIMING OF CONTRIBUTIONS. The Board shall determine the
amounts (or the method of computing the amounts) to be contributed by the
Company to the Trust, provided that the Bank may also make contributions to the
Trust. Such amounts shall be paid to the Trustee at the time of contribution.
No contributions to the Trust by Employees shall be permitted.
5.02 INVESTMENT OF TRUST ASSETS; MAXIMUM PLAN SHARE AWARDS. The Trustee
shall invest Trust assets only in accordance with the Trust Agreement; provided
that the Trust shall not purchase, and Plan Share Awards shall not be made with
respect to, more than four percent (4%) of the number of Shares issued on the
Date of the MHC Reorganization. Common Stock purchased by the Trust may be
newly issued shares, treasury shares, or shares repurchased on the open market
and held in a grantor trust.
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<PAGE>
5.03 EFFECT OF ALLOCATIONS, RETURNS AND FORFEITURES UPON PLAN SHARE
RESERVES. Upon the allocation of Plan Share Awards under Section 6.02, the Plan
Share Reserve shall be reduced by the number of Shares subject to the Awards so
allocated. Any Shares subject or attributable to an Award which may not be
earned because of a forfeiture by the Participant pursuant to Section 7.01 shall
be added to the Plan Share Reserve.
ARTICLE VI
ELIGIBILITY; ALLOCATIONS
6.01 ELIGIBILITY. Except as otherwise provided in Section 6.04 hereof,
the Committee shall make Plan Share Awards only to Employees. In selecting
those Employees to whom Plan Share Awards will be granted and the number of
shares covered by such Awards, the Committee shall consider the position, duties
and responsibilities of the eligible Employees, the value of their services to
the Company and its Affiliates, and any other factors the Committee may deem
relevant. Notwithstanding the foregoing, (i) the Committee shall automatically
make the Plan Share Awards specified in Sections 6.04 and 6.05 hereof; and (ii)
no Employee or non-Employee Director shall receive Plan Share Awards in excess
of the OTS Award Limitations. [NOT APPLICABLE IF PLAN IS IMPLEMENTED MORE THAN
ONE YEAR AFTER THE DATE OF THE MHC REORGANIZATION.]
6.02 ALLOCATIONS. The Committee will determine which Employees and
Directors will be granted discretionary Plan Share Awards, and the number of
Shares covered by each Plan Share Award, provided that in no event shall any
Awards be made which will violate the governing instruments of the Bank or its
Affiliates or any applicable federal or state law or regulation. In the event
Plan Shares are forfeited for any reason or additional shares of Common Stock
are purchased by the Trustee, the Committee may, from time to time, determine
which of the Employees referenced in Section 6.01 above will be granted
additional Plan Share Awards to be awarded from the forfeited or acquired Plan
Shares.
6.03 FORM OF ALLOCATION. As promptly as practicable after a determination
is made pursuant to Section 6.02 that a Plan Share Award is to be made, the
Committee shall notify the Participant in writing of the grant of the Award, the
number of Plan Shares covered by the Award, and the terms upon which the Plan
Shares subject to the Award may be earned. The date on which the Committee so
notifies the Participant shall be considered the date of grant of the Plan Share
Awards. The Committee shall maintain records as to all grants of Plan Share
Awards under the Plan.
6.04 AUTOMATIC GRANTS TO NON-EMPLOYEE DIRECTORS. Notwithstanding any
other provisions of this Plan, each Director who is not an Employee but is a
Director on the Effective Date shall receive, on said date, a Plan Share Award
for __________ Shares. Plan Share Awards received under the provisions of this
Section shall become vested and nonforfeitable according to the general rules
set forth in subsections (a), and (b) of Section 7.01, and the Committee shall
have no discretion to alter or accelerate said vesting requirements. Unless
otherwise inapplicable or inconsistent with the provisions of this Section, the
Plan Share Awards to be granted hereunder shall be subject to all other
provisions of this Plan.
6.05 AUTOMATIC GRANTS TO EMPLOYEES. On the Effective Date, each of the
following individuals shall receive a Plan Share Award as to the number of Plan
Shares listed below, provided that such award shall not be made to an individual
who is not an Employee on the Effective Date:
Employee Shares Subject to Plan Share Award
-------- ----------------------------------
Michael J. Dietz _____ %
Gary C. Loraditch _____ %
William M. Loughran _____ %
4
<PAGE>
Plan Share Awards received under the provisions of this Section shall become
vested and nonforfeitable according to the general rules set forth in
subsections (a) and (b) of Section 7.01, and the Committee shall have no
discretion to alter said vesting requirements. Unless otherwise inapplicable or
inconsistent with the provisions of this Section, the Plan Share Awards to be
granted hereunder shall be subject to all other provisions of this Plan.
6.06 ALLOCATIONS NOT REQUIRED. Notwithstanding anything to the contrary
in Sections 6.01 and 6.02, but subject to Sections 6.04 and 6.05, no Employee or
Director shall have any right or entitlement to receive a Plan Share Award
hereunder, such Awards being at the total discretion of the Committee, nor shall
any Employees or Directors as a group have such a right. The Committee may,
with the approval of the Board (or, if so directed by the Board) return all
Common Stock in the Plan Share Reserve to the Company at any time, and cease
issuing Plan Share Awards.
ARTICLE VII
EARNINGS AND DISTRIBUTION OF PLAN SHARES; VOTING RIGHTS
7.01 EARNING PLAN SHARES; FORFEITURES.
(a) GENERAL RULES. Twenty percent (20%) of the Plan Shares subject to a
Plan Share Award shall be earned and become non-forfeitable by a Participant
upon his or her completion of each of five Years of Service. [MAY BE DIFFERENT
IF THE PLAN IS IMPLEMENTED MORE THAN ONE YEAR AFTER THE DATE OF THE MHC
REORGANIZATION.]
(b) EXCEPTION FOR TERMINATIONS DUE TO DEATH OR DISABILITY.
Notwithstanding the general rule contained in Section 7.01(a) above, all Plan
Shares subject to a Plan Share Award held by a Participant whose service with
the Company or an Affiliate terminates due to the Participant's death or
Disability, shall be deemed earned as of the Participant's last day of service
with the Company or an Affiliate and shall be distributed as soon as practicable
thereafter. [IF THE PLAN IS IMPLEMENTED MORE THAN ONE YEAR AFTER THE DATE OF
THE MHC REORGANIZATION, VESTING WOULD ACCELERATE TO 100% UPON A PARTICIPANT'S
RETIREMENT OR TERMINATION OF SERVICE IN CONNECTION WITH A CHANGE IN CONTROL.]
7.02 ACCRUAL OF DIVIDENDS. Whenever Plan Shares are paid to a Participant
or Beneficiary under Section 7.03, such Participant or Beneficiary shall also be
entitled to receive, with respect to each Plan Share paid, an amount equal to
any cash dividends (including special large and nonrecurring dividends,
including one that has the effect of a return of capital to the Company's
stockholders) and a number of shares of Common Stock equal to any stock
dividends, declared and paid with respect to a share of Common Stock between the
date the relevant Plan Share Award was initially granted to such Participant and
the date the Plan Shares are being distributed. There shall also be distributed
an appropriate amount of net earnings, if any, of the Trust with respect to any
cash dividends so paid out.
7.03 DISTRIBUTION OF PLAN SHARES.
(a) TIMING OF DISTRIBUTIONS: GENERAL RULE. Except as provided in
subsections (c), and (d) below, the Trustee shall distribute Plan Shares and
accumulated cash from dividends and interest to the Participant or his
Beneficiary, as the case may be, as soon as practicable after they have been
earned. No fractional shares shall be distributed.
(b) FORM OF DISTRIBUTION. The Trustee shall distribute all Plan Shares,
together with any shares representing stock dividends, in the form of Common
Stock. One share of Common Stock shall be given for each Plan Share earned.
Payments representing cash dividends (and earnings thereon) shall be made in
cash.
5
<PAGE>
(c) WITHHOLDING. The Trustee shall withhold from any cash payment made
under this Plan sufficient amounts to cover any applicable withholding and
employment taxes, and if the amount of such cash payment is not sufficient, the
Trustee shall require the Participant or Beneficiary to pay to the Trustee the
amount required to be withheld as a condition of delivering the Plan Shares.
The Trustee shall pay over to the Company or Affiliate which employs or employed
such Participant any such amount withheld from or paid by the Participant or
Beneficiary.
(d) TIMING: EXCEPTION FOR 10% SHAREHOLDERS. Notwithstanding Subsections
(a) and (b) above, no Plan Shares may be distributed prior to the date which is
five (5) years from the Date of the MHC Reorganization to the extent the
Participant or Beneficiary, as the case may be, would after receipt of such
Shares own in excess of ten percent (10%) of the issued and outstanding shares
of Common Stock unless such action is approved in advance by a majority vote of
non-employee directors of the Board. To the extent this limitation would delay
the date on which a Participant receives Plan Shares, the Participant may elect
to receive from the Trust, in lieu of such Plan Shares, the cash equivalent
thereof. Any Plan Shares remaining undistributed solely by reason of the
operation of this Subsection (d) shall be distributed to the Participant or his
Beneficiary on the date which is five years from the Date of the MHC
Reorganization.
(e) REGULATORY EXCEPTIONS. No Plan Shares shall be distributed unless and
until all of the requirements of all applicable law and regulation shall have
been fully complied with, including the receipt of approval of the Plan by the
stockholders of the Company by such vote, if any, as may be required by
applicable law and regulations.
7.04 VOTING OF PLAN SHARES. All shares of Common Stock held by the Trust
(whether or not subject to a Plan Share Award) shall be voted by the Trustee in
the same proportion as the trustee of the Company's Employee Stock Ownership
Plan votes Common Stock held in the trust associated therewith, and in the
absence of any such voting, shall be voted in the manner directed by the Board.
7.05. DEFERRAL ELECTIONS BY PARTICIPANTS.
(a) ELECTIONS TO DEFER. At any time prior to December 31/st/ of any year
prior to the date on which a Participant becomes vested in any shares subject to
his or her Plan Share Award, a Participant who is a member of a select group of
management or highly compensated employees (within the meaning of the Employees'
Retirement Income Security Act of 1973) may irrevocably elect, on the form
attached hereto as Exhibit "A" (the "Election Form"), to defer the receipt of
all or a percentage of the Plan Shares that would otherwise be transferred to
the Participant upon the vesting of such award (the "Deferred Shares").
(b) RECORDKEEPING; HOLDING OF DEFERRED SHARES. The MRP Committee shall
establish and maintain an individual account in the name of each Participant who
files an Election Form for the purpose of tracking deferred earnings
attributable to cash dividends paid on Deferred Shares (the "Cash Account"). On
the last day of each fiscal year of the Company, the Committee shall credit to
the Participant's Cash Account earnings on the balance of the Cash Account at a
rate equal to the dividend-adjusted total return on Common Stock, as determined
from time to time by the MRP Committee in its sole discretion. The Trustees
shall hold each Participant's Deferred Shares and Deferred Earnings in the Trust
until distribution is required pursuant to the election set forth in the
Participant's Election Form.
(c) DISTRIBUTIONS OF DEFERRED SHARES. The Trustee shall distribute a
Participant's Deferred Shares and Deferred Earnings in accordance with the
Participant's Election Form. All distributions made by the Company and/or the
Trustees pursuant to elections made hereunder shall be subject to applicable
federal, state, and local tax withholding and to such other deductions as shall
at the time of such payment be required under any income tax or other law,
whether of the United States or any other jurisdiction, and, in the case of
payments to a beneficiary, the delivery to the Committee and/or Trustees of all
necessary waivers, qualifications and other documentation. Within 90 days after
receiving notice of a Participant's death, the Trustee shall distribute any
balance of the Participant's Deferred Shares and Deferred Earnings to the
Participant's designated beneficiary, if living, or if such designated
6
<PAGE>
beneficiary is deceased or the Participant failed to designate a beneficiary, to
the Participant's estate. If, on the other hand, a Participant's Continuous
Service terminates for a reason other than the Participant's death, Disability,
early retirement, or normal retirement, the Participant's Deferred Shares and
Deferred Earnings shall be distributed to the Participant in a lump sum
occurring as soon as reasonably practicable. The distribution provisions of a
Participant's Election Form shall become irrevocable on the date that occurs (i)
one year before the Participant's termination of Continuous Service for a reason
other than death, and (ii) on the Participant's death if that terminates the
Participant's Continuous Service.
(d) HARDSHIP WITHDRAWALS. Notwithstanding any other provision of the Plan
or a Participant's Election Form, in the event the Participant suffers an
unforeseeable emergency hardship within the contemplation of this paragraph,
the Participant may apply to the Committee for an immediate distribution of all
or a portion of his Deferred Shares and Deferred Earnings. The hardship must
result from a sudden and unexpected illness or accident of the Participant or a
dependent of the Participant, casualty loss of property, or other similar
conditions beyond the control of the Participant. Examples of purposes which
are not considered hardships include post-secondary school expenses or the
desire to purchase a residence. In no event will a distribution be made to the
extent the hardship could be relieved through reimbursement or compensation by
insurance or otherwise, or by liquidation of the Participant's nonessential
assets to the extent such liquidation would not itself cause a severe financial
hardship. The amount of any distribution hereunder shall be limited to the
amount necessary to relieve the Participant's financial hardship. The
determination of whether a Participant has a qualifying hardship and the amount
which qualifies for distribution, if any, shall be made by the Committee in its
sole discretion. The Committee may require evidence of the purpose and amount
of the need, and may establish such application or other procedures as it deems
appropriate.
(e) RIGHTS TO DEFERRED SHARES AND EARNINGS. A Participant may not assign
his or her claim to Deferred Shares and Deferred Earnings during his or her
lifetime, except in accordance with Section 8.03 of this Plan. A Participant's
right to Deferred Shares and Deferred Earnings shall at all times constitute an
unsecured promise of the Company to pay benefits as they come due. The right of
the Participant or his or her beneficiary to receive benefits hereunder shall be
solely an unsecured claim against the general assets of the Company. Neither
the Participant nor his or her beneficiary shall have any claim against or
rights in any specific assets or other fund of the Company, and any assets in
the Trust shall be deemed general assets of the Company.
ARTICLE VIII
MISCELLANEOUS
8.01 ADJUSTMENTS FOR CAPITAL CHANGES.
(a) RECAPITALIZATIONS; STOCK SPLITS, ETC. The number and kind of shares
which may be purchased under the Plan, and the number and kind of shares subject
to outstanding Plan Share Awards, shall be proportionately adjusted for any
increase, decrease, change or exchange of shares of Common Stock for a different
number or kind of shares or other securities of the Company which results from a
merger, consolidation, recapitalization, reorganization, reclassifi cation,
stock dividend, split-up, combination of shares, or similar event in which the
number or kind of shares is changed without the receipt or payment of
consideration by the Company.
(b) TRANSACTIONS IN WHICH THE COMPANY IS NOT THE SURVIVING ENTITY. In the
event of (i) the liquidation or dissolution of the Company, (ii) a merger or
consolidation in which the Company is not the surviving entity, or (iii) the
sale or disposition of all or substantially all of the Company's assets (any of
the foregoing to be referred to herein as a "Transaction"), all outstanding Plan
Share Awards shall be adjusted for any change or exchange of shares of Common
Stock for a different number or kind of shares or other securities which results
from the Transaction.
(c) CONDITIONS AND RESTRICTIONS ON NEW, ADDITIONAL, OR DIFFERENT SHARES OR
SECURITIES. If, by reason of any adjustment made pursuant to this Section, a
Participant becomes entitled to new, additional, or different shares
7
<PAGE>
of stock or securities, such new, additional, or different shares of stock or
securities shall thereupon be subject to all of the conditions and restrictions
which were applicable to the shares pursuant to the Plan Share Award before the
adjustment was made. In addition, the Committee shall have the discretionary
authority to impose on the Shares subject to Plan Share Awards to Employees such
restrictions as the Committee may deem appropriate or desirable, including but
not limited to a right of first refusal, or repurchase option, or both of these
restrictions.
(d) OTHER ISSUANCES. Except as expressly provided in this Section, the
issuance by the Company or an Affiliate of shares of stock of any class, or of
securities convertible into shares of Common Stock or stock of another class,
for cash or property or for labor or services either upon direct sale or upon
the exercise of rights or warrants to subscribe therefor, shall not affect, and
no adjustment shall be made with respect to, the number or class of shares of
Common Stock then subject to Plan Share Awards or reserved for issuance under
the Plan.
8.02 AMENDMENT AND TERMINATION OF PLAN. The Board may, by resolution, at
any time amend or terminate the Plan; provided that no amendment or termination
of the Plan shall, without the written consent of a Participant, impair any
rights or obligations under a Plan Share Award theretofore granted to the
Participant.
The power to amend or terminate the Plan in accordance with this Section
8.02 shall include the power to direct the Trustee to return to the Company all
or any part of the assets of the Trust, including shares of Common Stock held in
the Plan Share Reserve. However, the termination of the Trust shall not affect
a Participant's right to earn Plan Share Awards and to receive a distribution of
Common Stock relating thereto, including earnings thereon, in accordance with
the terms of this Plan and the grant by the Committee or the Board.
8.03 NONTRANSFERABILITY. Plan Share Awards may not be sold, pledged,
assigned, hypothecated, transferred or disposed of in any manner other than by
will or by the laws of descent and distribution. Notwithstanding the foregoing,
or any other provision of this Plan, a Participant who holds Plan Share Awards
may transfer such Awards to his or her spouse, lineal ascendants, lineal
descendants, or to a duly established trust for the benefit of one or more of
these individuals. Plan Share Awards so transferred may thereafter be
transferred only to the Participant who originally received the grant or to an
individual or trust to whom the Participant could have initially transferred the
Awards pursuant to this Section 8.03. Plan Share Awards which are transferred
pursuant to this Section 8.03 shall be exercisable by the transferee according
to the same terms and conditions as applied to the Participant.
8.04 NO EMPLOYMENT OR OTHER RIGHTS. Neither the Plan nor any grant of a
Plan Share Award or Plan Shares hereunder nor any action taken by the Trustee,
the Committee or the Board in connection with the Plan shall create any right,
either express or implied, on the part of any Employee or Director to continue
in the service of the Company, the Bank, or an Affiliate thereof.
8.05 VOTING AND DIVIDEND RIGHTS. No Participant shall have any voting or
dividend rights or other rights of a stockholder in respect of any Plan Shares
covered by a Plan Share Award prior to the time said Plan Shares are actually
distributed to him.
8.06 GOVERNING LAW. The Plan and Trust shall be governed and construed
under the laws of the State of Maryland to the extent not preempted by Federal
law.
8.07 EFFECTIVE DATE. The Plan shall become effective immediately upon its
approval by a favorable vote of stockholders of the Company who own at least a
majority of the total votes eligible to be cast at a duly called meeting of the
Company's stockholders held in accordance with applicable laws, provided that
the Plan shall not be submitted for such approval within the six-month period
after the Date of the MHC Reorganization. [STOCKHOLDER APPROVAL MAY BE
UNNECESSARY, OR INVOLVE A DIFFERENT VOTE REQUIREMENT, IF THE PLAN IS IMPLEMENTED
MORE THAN ONE YEAR AFTER THE DATE OF THE MHC REORGANIZATION.] In no event shall
Plan Share Awards be made prior to the Effective Date.
8
<PAGE>
8.08 TERM OF PLAN. This Plan shall remain in effect until the earlier of
(i) termination by the Board, or (ii) the distribution of all assets of the
Trust. Termination of the Plan shall not affect any Plan Share Awards
previously granted, and such Awards shall remain valid and in effect until they
have been earned and paid, or by their terms expire or are forfeited.
8.09 TAX STATUS OF TRUST. It is intended that (i) the Trust associated
with the Plan be treated as a grantor trust of the Company under the provisions
of Section 671 et seq. of the Code, as the same may be amended from time to
-- ---
time, and (ii) that in accordance with Revenue Procedure 92-65 (as the same may
be amended from time to time), Participants have the status of general unsecured
creditors of the Company, the Plan constitutes a mere unfunded promise to make
benefit payments in the future, the Plan is unfunded for tax purposes and for
purposes of Title I of the Employee Retirement Income Security Act of 1974, as
amended, and the Trust has been and will continue to be maintained in conformity
with Revenue Procedure 92-64 (as the same may be amended from time to time).
9
<PAGE>
EXHIBIT A
BCSB BANKCORP, INC.
MANAGEMENT RECOGNITION PLAN
_______________________
DEFERRAL ELECTION AGREEMENT
_______________________
AGREEMENT, made this ____ day of ________, 199_, by and between
__________________ (the "Participant"), and BCSB Bankcorp, Inc. (the "Company").
WHEREAS, the Company has established the BCSB Bankcorp, Inc. Management
Recognition Plan (the "Plan"), and the Participant is eligible to participate in
said Plan;
WHEREAS, the Participant is a recipient of Plan Share Awards (the "Awards")
for ______ shares of common stock of the Company, to become vested according to
the terms set forth in Section 7.01 of the Plan; and
WHEREAS, the Participant desires to defer receipt of certain Awards and the
earnings thereon to which the Participant is entitled upon the vesting of such
Awards; and
NOW THEREFORE, the Participant, by the execution hereof, agrees to
participate in the Plan upon the terms and conditions set forth therein, and, in
accordance therewith, makes the following elections:
1. The amount of Awards which the Participant hereby elects to defer is
as follows:
Number of Shares
Vesting Date Deferred
------------ ----------------
2. All amounts deferred pursuant to the Plan after the date of this
Agreement, shall be distributed beginning:
( ) the calendar year immediately following the year in which the
Participant ceases service with the Company.
( ) upon the Participant's attainment of age 55 with 10 or more years of
service.
10
<PAGE>
Management Recognition Plan Deferral Election
Page 11
( ) the later of the calendar year immediately following the year in
which the Participant ceases service with the Company, or
____________, 199_ (a specific date not later than the year in which
the Participant will attain 65 years of age).
( ) the year in which the Participant attains 65 years of age.
3. The Participant hereby elects to have the amount deferred after the
date of this Agreement and any related accumulated earnings distributed as
follows:
( ) annually over a ten-year period.
( ) annually over a ______- year period (must be less than ten years).
( ) in a lump sum.
4. All distributions made pursuant to the Plan and this Agreement will
be made in Plan Shares and in cash to the extent of earnings on Plan Shares.
5. The Participant hereby designates _______________________ to be his
or her beneficiary and to receive the balance of any unpaid deferred
compensation and related earnings.
6. This election shall be irrevocable, except that (a) the beneficiary
designation made in paragraph 4 hereof may be revised at any time and from time
to time, and (b) the elections made in paragraphs 2 and 3 shall only become
irrevocable on the first to occur of the Participant's death, or the date one
year before the Participant's Continuous Service terminates for a reason other
than death. Any changes to the elections made herein by said Participant will be
limited to the range of choices offered herein.
7. The Company agrees to make payment of the amount due the Participant
in accordance with the terms of the Plan and the elections made by the
Participant herein.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands the
day and year first above-written.
PARTICIPANT COMPANY
___________________ ____________________________
By _________________________
Its ________________________
11
<PAGE>
TRUST AGREEMENT
UNDER THE BCSB BANKCORP, INC.
MANAGEMENT RECOGNITION PLAN
_______________
Trust Agreement
_______________
This Agreement made this _____ day of _________, 1997 by and between BCSB
Bankcorp, Inc. (the "Company") and H. Adrian Cox, Frank W. Dunton and Henry V.
Kahl (acting by majority, the "Trustee").
WHEREAS, the Company maintains the BCSB Bankcorp, Inc. Management
Recognition Plan (the "Plan"), and has incurred or expects to incur liability
under the terms of the Plan with respect to the individuals participating in the
Plan ("Participants"); and
WHEREAS, the Company wishes to establish a trust (the "Trust") and to
contribute to the Trust assets that shall be held therein, subject to the claims
of the Company's general creditors in the event of Insolvency, as defined in
Section 3(a) hereof, until paid to Participants and their beneficiaries in such
manner and at such times as specified in the Plan; and
WHEREAS, it is the intention of the parties that this Trust shall
constitute an unfunded arrangement and shall not affect the status of the Plan
as an unfunded plan maintained for the purpose of providing deferred
compensation for a select group of management or highly compensated employees
for purposes of Title I of the Employee Retirement Income Security Act of 1974;
and
WHEREAS, it is the intention of the Company to make contributions to the
Trust to provide itself with a source of funds to assist it in the meeting of
its liabilities under the Plan.
NOW, THEREFORE, the parties do hereby establish this Trust and agree that
the Trust shall be comprised, held and disposed of as follows:
Section 1. Establishment of Trust
----------------------------------
(a) The Company hereby deposits, or will shortly hereafter deposit, with
the Trustee in trust (i) a number of shares of the Company's common stock
("Common Stock") equal to four percent (4%) of the number of shares of Common
Stock issued by the Company in connection with the mutual holding company
reorganization of Baltimore County Savings Bank, F.S.B. (the "Bank"), or (ii) an
amount expected to be sufficient to permit the Trust to purchase said shares.
Said shares or amount shall become the initial principal of the Trust to be
held, administered and disposed of by the Trustee as provided in this Trust
Agreement.
(b) The Trust shall become irrevocable upon the effective date of the Plan.
(c) The Trust is intended to be a grantor trust, of which the Company is
the grantor, within the meaning of subpart E, part I, subchapter J, chapter 1,
subtitle A of the Internal Revenue Code of 1986, as amended (the "Code"), and
shall be construed accordingly.
(d) The principal of the Trust, and any earnings thereon, shall be held
separate and apart from other funds of the Company and shall be used exclusively
for the uses and purposes of Participants and general creditors as herein set
forth. Participants and their beneficiaries shall have no preferred claim on,
or any beneficial ownership interest
<PAGE>
in, any assets of the Trust. Any rights created under the Plan and this Trust
Agreement shall be mere unsecured contractual rights of Participants and their
beneficiaries against the Company. Any assets held by the Trust will be subject
to the claims of the Company's general creditors under federal and state law in
the event of Insolvency, as defined in Section 3(a) herein.
(e) The Company, in its sole discretion, may at any time, or from time to
time, make additional deposits of cash or other property in trust with the
Trustee to augment the principal to be held, administered and disposed of by
Trustee as provided in this Trust Agreement. Neither the Trustee nor any
Participant or beneficiary shall have any right to compel such additional
deposits.
Section 2. Payments to Plan Participants and Their Beneficiaries.
-----------------------------------------------------------------
(a) The Company shall deliver to the Trustee a schedule (the "Payment
Schedule") that indicates the amounts payable in respect of each Participant
(and his or her beneficiaries), that provides a formula or other instructions
acceptable to the Trustee for determining the amounts so payable, the form in
which such amount is to be paid (as provided for or available under the Plan),
and the time of commencement for payment of such amounts. Except as otherwise
provided herein, the Trustee shall make payments to Participants and their
beneficiaries in accordance with such Payment Schedule. The Trustee shall make
provision for the reporting and withholding of any federal, state or local taxes
that may be required to be withheld with respect to the payment of benefits
pursuant to the terms of the Plan and shall pay amounts withheld to the
appropriate taxing authorities or determine that such amounts have been
reported, withheld and paid by the Company.
(b) The entitlement of a Participant or his or her beneficiaries to
benefits under the Plan shall be determined by the Company or such party as it
shall designate under the Plan, and any claim for such benefits shall be
considered and reviewed under the procedures set out in the Plan.
(c) The Company may make payment of benefits directly to Participants or
their beneficiaries as they become due under the terms of the Plan. The Company
shall notify the Trustee of its decision to make payment of benefits directly
prior to the time amounts are payable to Participants or their beneficiaries.
In addition, if the principal of the Trust, and any earnings thereon, are not
sufficient to make payments of benefits in accordance with the terms of the
Plan, the Company shall make the balance of each such payment as it falls due.
The Trustee shall notify the Company where principal and earnings are not
sufficient.
Section 3. Trustee Responsibility Regarding Payments to Trust Beneficiary
--------------------------------------------------------------------------
When Company Is Insolvent.
- -------------------------
(a) The Trustee shall cease payment of benefits to Participants and their
beneficiaries if the Company is Insolvent. The Company shall be considered
"Insolvent" for purposes of this Trust Agreement if (i) the Company is unable to
pay its debts as they become due, or (ii) the Company becomes subject to a
pending proceeding as a debtor under the United States Bankruptcy Code.
(b) At all times during the continuance of this Trust, as provided in
Section 1(d) hereof, the principal and income of the Trust shall be subject to
claims of general creditors of the Company under federal and state law as set
forth below.
(c) The Board of Directors and the Chief Executive Officer of the Company
shall have the duty to inform the Trustee in writing of the Company's
Insolvency. If a person claiming to be a creditor of the Company alleges in
writing to the Trustee that the Company has become Insolvent, the Trustee shall
determine whether the Company is Insolvent and, pending such determination, the
Trustee shall discontinue payment of benefits to Participants or their
beneficiaries.
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<PAGE>
(1) Unless the Trustee has actual knowledge of the Company's
Insolvency, or has received notice from the Company or a person claiming to be a
creditor alleging that the Company is Insolvent, the Trustee shall have no duty
to inquire whether the Company is Insolvent. The Trustee may in all events rely
on such evidence concerning the Company's solvency as may be furnished to the
Trustee and that provides the Trustee with a reasonable basis for making a
determination concerning the Company's solvency.
(2) If at any time the Trustee has determined that the Company is
Insolvent, the Trustee shall discontinue payments to Plan participants or their
beneficiaries, shall liquidate the Trust's investment in Common Stock, and shall
hold the assets of the Trust for the benefit of the Company's general creditors.
Nothing in this Trust Agreement shall in any way diminish any rights of
Participants or their beneficiaries as general creditors of the Company with
respect to benefits due under the Plan or otherwise.
(3) The Trustee shall resume the payment of benefits to Participants
or their beneficiaries in accordance with Section 2 of this Trust Agreement only
after the Trustee has determined that the Company is not Insolvent (or is no
longer Insolvent).
(d) Provided that there are sufficient assets, if the Trustee discontinues
the payment of benefits from the Trust pursuant to Section 3(b) hereof and
subsequently resumes such payments, the first payment following such
discontinuance shall include the aggregate amount of all payments due to
Participants or their beneficiaries under the terms of the Plan for the period
of such discontinuance, less the aggregate amount of any payments made to
Participants or their beneficiaries by the Company in lieu of the payments
provided for hereunder during any such period of discontinuance.
Section 4. Payments to the Company.
-----------------------------------
Except as provided in Section 3 hereof, after the Trust has become
irrevocable, the Company shall have no right or power to direct the Trustee to
return to the Company or to divert to others any of the Trust assets before all
payment of benefits have been made to Plan Participants and their beneficiaries
pursuant to the terms of the Plan.
Section 5. Investment Authority.
--------------------------------
(a) The Trustee shall have sole discretion as to the investment of Trust
assets, except that to the extent reasonably practicable, the Trustee shall
invest all assets of the Trust in Common Stock provided that the Trust shall not
purchase from time to time a number of shares of Common Stock exceeding 4% of
the shares of Common Stock issued in the Bank's mutual holding company
reorganization.
(b) All rights associated with assets of the Trust shall be exercised by
the Trustee or the person designated by the Trustee, and shall in no event be
exercisable by or rest with Participants, except that voting rights with respect
to Common Stock will be exercised in accordance with the terms of the Plan.
(c) Subject to applicable federal and state securities laws, if for any
reason the Trustee will be selling shares of Common Stock, the Trustee shall
sell such shares by (i) giving each Beneficiary 20 business days within which to
purchase, at fair market value, all or part of the shares of Common Stock that
the Trustee holds for the benefit of the Beneficiary, and (ii) to the extent
purchases by Beneficiaries are insufficient to eliminate the Trusts' excess
holdings of Common Stock, to offer to sell, and to sell, all or any part of the
excess shares held by the Trust to the following purchasers, listed here by
order of priority: first, the Company; second, any benefit plan maintained by
the Company or the Bank; third, directors of the Bank; fourth, officers of the
Bank; fifth, members of the general public.
3
<PAGE>
Section 6. - Disposition of Income.
----------------------------------
During the term of this Trust, all income received by the Trust, net of
expenses and taxes, shall be accumulated and reinvested.
Section 7. Accounting by Trustee.
---------------------------------
The Trustee shall keep accurate and detailed records of all investments,
receipts, disbursements, and all other transactions required to be made,
including such specific records as shall be agreed upon in writing between the
Company and the Trustee. Within 60 days following the close of each calendar
year and within 20 days after the removal or resignation of the Trustee, the
Trustee shall deliver to the Company a written account of its administration of
the Trust during such year or during the period from the close of the last
preceding year to the date of such removal or resignation, setting forth all
investments, receipts, disbursements and other transactions effected by it,
including a description of all securities and investments purchased and sold
with the cost or net proceeds of such purchased and sold with the cost or net
proceeds of such purchases or sales (accrued interest paid or receivable being
shown separately), and showing all cash, securities and other property held in
the Trust at the end of such year or as of the date of such removal or
resignation, as the case may be.
Section 8. Responsibility of Trustee.
-------------------------------------
(a) The Trustee shall act with the care, skill, prudence and diligence
under the circumstances then prevailing that a prudent person acting in like
capacity and familiar with such matters would use in the conduct of an
enterprise of a like character and with like aims, provided, however, that the
Trustee shall incur no liability to any person for any action taken pursuant to
a direction, request or approval given by the Company which is contemplated by,
and in conformity, the terms of the Plan or this Trust and is given in writing
by the Company. In the event of a dispute between the Company and a party, the
Trustee may apply to a court of competent jurisdiction to resolve the dispute.
(b) If the Trustee undertakes or defends any litigation arising in
connection with this Trust, the Company agrees to indemnify the Trustee against
Trustee's costs, expenses and liabilities (including, without limitation,
attorneys' fees and expenses) relating thereto and to be primarily liable for
such payments, except in those cases where the Trustee shall have been found by
a court of competent jurisdiction to have acted with gross negligence or willful
misconduct. If the Company does not pay such costs, expenses and liabilities in
a reasonably timely manner, the Trustee may obtain payment from the Trust.
(c) The Trustee may consult with legal counsel with respect to any of its
duties or obligations hereunder.
(d) The Trustee may hire agents, accountants, actuaries, investment
advisors, financial consultants or other professionals to assist it in
performing any of its duties or obligations hereunder.
(e) The Trustee shall have, without exclusion, all powers conferred on
trustees by applicable law, unless expressly provided otherwise herein,
provided, however, that if an insurance policy is held as an asset of the Trust,
the Trustee shall have no power to name a beneficiary of the policy other than
the Trust, to assign the policy (as distinct from conversion] of the policy to a
different form) other than to a successor Trustee, or to loan to any person the
proceeds of any borrowing against such policy.
(f) Notwithstanding any powers granted to the Trustee pursuant to this
Trust Agreement or to applicable law, the Trustee shall not have any power that
could give this Trust the objective of carrying on a business and dividing the
gains therefrom, within the meaning of section 301.7701-2 of the Procedure and
Administrative Regulations promulgated pursuant to the Code.
4
<PAGE>
Section 9. Compensation and Expenses of Trustee.
------------------------------------------------
The Company shall pay all administrative expenses and the Trustee's fees
and expenses relating to the Plan and this Trust. If not so paid, the fees and
expenses shall be paid from the Trust.
Section 10. Resignation and Removal of Trustee.
-----------------------------------------------
The Trustee (or any individual serving as one of the trustees who act by
majority as the Trustee) may resign at any time by written notice to the
Company, which resignation shall be effective 30 days after the Company receives
such notice (unless the Company and the Trustee agree otherwise). The Trustee
(or any individual serving as one of the trustees who act by majority as the
Trustee) may be removed by the Company on 30 days notice or upon shorter notice
accepted by the Trustee.
If the Trustee (or any individual serving as one of the trustees who act by
majority as the Trustee) resigns or is removed, a successor shall be appointed,
in accordance with Section 11 hereof, by the effective date or resignation or
removal under this section. If no such appointment has been made, the Trustee
may apply to a court of competent jurisdiction for appointment of a successor or
for instructions. All expenses of the Trustee in connection with the proceeding
shall be allowed as administrative expenses of the Trust. Upon resignation or
removal of the Trustee and appointment of a successor trustee, all assets shall
subsequently be transferred to the successor trustee. The transfer shall be
completed within 60 days after receipt of notice of resignation, removal or
transfer, unless the Company extends the time limit.
Section 11. Appointment of Successor.
-------------------------------------
If the Trustee resigns or is removed in accordance with Section 10 hereof,
the Company may appoint any other party as a successor to replace the Trustee
upon resignation or removal. The appointment shall be effective when accepted
in writing by the new trustee, who shall have all of the rights and powers of
the former trustee, including ownership rights in the Trust assets. The former
trustee shall execute any instrument necessary or reasonably requested by the
Company or the successor trustee to evidence the transfer.
A successor trustee need not examine the records and acts of any prior
trustee and may retain or dispose of existing Trust assets, subject to Sections
7 and 8 hereof. The successor trustee shall not be responsible for, and the
Company shall indemnify and defend the successor trustee from, any claim or
liability resulting from any action or inaction of any prior trustee or from any
other past event, or any condition existing at the time it becomes successor
trustee.
Section 12. Amendment or Termination.
-------------------------------------
(a) This Trust Agreement may be amended by a written instrument executed by
the Trustee and the Company, provided that no such amendment shall make the
Trust revocable.
(b) The Trust shall not terminate until the date on which Participants and
their beneficiaries are no longer entitled to benefits pursuant to the terms
hereof. Upon termination of the Trust, the Trustee shall return any assets
remaining in the Trust to the Company.
(c) Upon written approval of all Participants (or their beneficiaries if
they are then entitled to payment of benefits), the Company may terminate this
Trust prior to the time all benefit payments under the Plan have been made. All
assets in the Trust at termination shall be returned to the Company.
5
<PAGE>
Section 13. Miscellaneous.
--------------------------
(a) Any provision of this Trust Agreement prohibited by law shall be
ineffective to the extent of any such prohibition, without invalidating the
remaining provisions hereof.
(b) Benefits payable to Participants and their beneficiaries under this
Trust Agreement may not be anticipated, assigned (either at law or in equity),
alienated, pledged, encumbered or subjected to attachment, garnishment, levy,
execution or other legal or equitable process, except pursuant to the terms of
the Plan.
(c) This Trust Agreement shall be governed by and construed in accordance
with the laws of the State of Maryland, to the extent not preempted by federal
law.
(d) The Trustee agrees to be bound by the terms of the Plan, as in effect
from time to time.
(e) The Trustee shall act by vote or written consent of a majority of its
duly appointed members.
IN WITNESS WHEREOF, the Company, by its duly authorized officer, has caused
this Agreement to be executed, and its corporate seal affixed, and the Trustees
have executed this Agreement, this ___ day of _______________, 1997.
ATTEST: BCSB BANKCORP, INC.
_______________________ By: _____________________
Its President
ATTEST:
_______________________ _________________________
H. Adrian Cox, Trustee
_______________________ _________________________
Frank W. Dunton, Trustee
_______________________ _________________________
Henry V. Kahl, Trustee
6
<PAGE>
EXHIBIT 10.3
CHANGE-OF-CONTROL SEVERANCE AGREEMENT
_________________________________
As amended and restated effective
October 22, 1997
_________________________________
THIS AGREEMENT (the "Agreement") made this 22/nd/ day of October, 1997 (the
"Effective Date") amends, restates, and supercedes an agreement entered into on
the ___ day of July, 1995 by and between Baltimore County Savings Bank, F.S.B.
(the "Bank"), and Michael J. Dietz (the "Executive").
WHEREAS, the Executive has heretofore been employed by the Bank as an
executive officer, and desires to continue to be so employed; and the Bank
desires the continuation of such employment by the Executive; and
WHEREAS, the Bank deems it to be in its best interest to provide the
Executive with security in the event of a Change of Control (as defined herein),
and thereby to facilitate his retention and insure an orderly transition
following a Change of Control; and
WHEREAS, the parties desire by the Agreement to set forth their
understanding as to their respective rights and obligations in the event the
Executive's employment terminates or is changed under the circumstances set
forth herein.
NOW, THEREFORE, it is AGREED as follows:
1. Definitions. For purposes of this Agreement, the following terms have
-----------
the meaning set forth below:
(a) "Change in Duties" shall mean any one or more of the following:
(i) a significant adverse change in the status, title, position(s),
responsibilities, or scope of the Executive's authorities or duties from
those applicable to him immediately prior to the date on which a Change of
Control occurs;
(ii) assignment to the Executive of any duties or responsibilities
which are inconsistent with his status, title, or position(s) as in effect
immediately prior to the date on which a Change of Control occurs;
(iii) a material reduction in the Executive's total compensation from
that provided to him immediately prior to the date on which a Change of
Control occurs;
<PAGE>
(iv) a diminution in the Executive's eligibility to participate in
bonus, incentive award, and other compensation plans which provide
opportunities to receive compensation from the opportunities under any such
plans in which he was participating immediately prior to the date on which
a Change of Control occurs;
(v) a change in the location of the Executive's principal place of
employment by the Bank or its subsidiaries and affiliates by more than 30
miles from the location where he was principally employed immediately prior
to the date on which a Change of Control occurs; or
(vi) a reasonable determination by the Board of Directors of the Bank
that, as a result of a Change of Control and change in circumstances
thereafter significantly affecting his position, the Executive is unable to
exercise the authorities, powers, functions or duties attached to his
position immediately prior to the date on which a Change of Control occurs.
(b) When the Bank is in the "mutual" form of organization, a "Change of
Control" shall be deemed to have occurred if:
(i) as a result of, or in connection with, any exchange offer, merger
or other business combination, sale of assets or contested election, any
combination of the foregoing transactions, or any similar transaction, the
persons who were non-employee directors of the Bank before such transaction
cease to constitute a majority of the Board of Directors of the Bank or any
successor to the Bank;
(ii) the Bank transfers substantially all of its assets to another
corporation which is not a wholly-owned subsidiary of the Bank;
(iii) the Bank sells substantially all of the assets of a subsidiary
or affiliate which, at the time of such sale, is the principal employer of
the Executive;
(iv) any "person" including a "group", exclusive of the Board of
Directors of the Bank or any committee thereof, is or becomes the
"beneficial owner", directly or indirectly, of proxies of the Bank
representing twenty-five percent (25%) or more of the combined voting power
of the Bank's members; or
(v) the Bank is merged or consolidated with another corporation and,
as a result of the merger or consolidation, less than seventy percent (70%)
of the outstanding proxies relating to the surviving or resulting
corporation are given, in the aggregate, by the former members of the Bank.
Notwithstanding the foregoing, a "Change of Control" shall not be deemed to
---
occur solely by reason of a transaction in which the Bank converts to the
stock form of organization.
2
<PAGE>
(c) If the Bank shall be in the "stock" form of organization, a "Change of
Control" shall be deemed to have occurred if:
(i) the acquisition of ownership, holding or power to vote more than
25% of the Bank's or the Company's voting stock;
(ii) the acquisition of the ability to control the election of a
majority of the Bank's or the Company's directors;
(iii) the acquisition of a controlling influence over the management
or policies of the Bank or the Company by any person or by persons acting
as a "group" (within the meaning of Section 13(d) of the Securities
Exchange Act of 1934); or
(iv) during any period of two consecutive years, individuals (the
"Continuing Directors") who at the beginning of such period constitute the
Board of Directors of the Bank or the Company (the "Existing Board") cease
for any reason to constitute at least two-thirds thereof, provided that any
individual whose election or nomination for election as a member of the
Existing Board was approved by a vote of at least two-thirds of the
Continuing Directors then in office shall be considered a Continuing
Director.
Notwithstanding the foregoing, in the case of (i), (ii) and (iii) hereof,
ownership or control of the Bank by the Company itself shall not constitute a
Change of Control. For purposes of this paragraph only, the term "person"
refers to an individual or a corporation, partnership, trust, association, joint
venture, pool, syndicate, sole proprietorship, unincorporated organization or
any other form of entity not specifically listed herein. The decision of the
Bank's non-employee directors as to whether or not a Change of Control has
occurred shall be conclusive and binding.
(c.1) "Company" shall mean any holding company that becomes sole owner of
the Bank.
(d) "Covered Period" shall mean a period equal to twelve (12) months before
the occurrence of a Change of Control and eighteen (18) months after the
occurrence of a Change of Control.
(e) "Involuntary Termination" shall mean (i) any involuntary termination,
or (ii) a resignation by the Executive within thirty (30) days following any
Change in Duties; provided, however, that an Involuntary Termination shall not
include either a Termination for Cause, or any termination as a result of death,
disability, or normal retirement on or after attainment of age sixty-five (65)
pursuant to a retirement plan in which the Executive was participating prior to
any Change of Control.
(f) "Termination for Cause" shall include termination because of the
officer or employee's personal dishonesty, incompetence, willful misconduct,
breach of fiduciary duty involving personal profit, intentional failure to
perform stated duties, willful violation of any law,
3
<PAGE>
rule, or regulation (other than traffic violations or similar offenses) or final
cease and desist order, or material breach of any provision of this Agreement or
any other Agreement between Executive and the Bank.
(g) The term "Bank" refers to the Bank and/or any succession in interest or
any assignees or transferees thereof.
2. Term. This Agreement shall remain in effect for the period commencing
----
on the Effective Date and ending on the earlier of (i) the date thirty-six (36)
months after the Effective Date, and (ii) the date on which the Executive
voluntarily terminates employment with the Bank. Additionally, on each annual
anniversary date from the Effective Date, the term of this Agreement may be
extended for an additional one (1) year period beyond the then effective
expiration date provided the Board of Directors of the Bank determines in a duly
adopted resolution that the performance of the Executive has met the Board's
requirements and standards, that it is in the Bank's best interests to extend
this Agreement, and that this Agreement shall be extended.
3. Severance Payment on Change of Control. If there is a Change of
--------------------------------------
Control and if within the Covered Period as defined herein (i) a Change in
---
Duties as defined herein occurs, or (ii) an Involuntary Termination as defined
herein occurs, or (iii) the Executive voluntarily terminates employment for any
reason within the 30-day period beginning on the date of a Change of Control,
then in that event the Executive shall--
(a) be paid an amount equal to 2.99 times the annualized base salary being
paid to the Executive in the immediately preceding twelve (12) month period
(excluding board fees and bonuses), and
(b) receive at the Executive's sole and exclusive election either (i) cash
------
in an amount equal to the cost to the Executive of obtaining all health, life,
disability and other benefits which the Executive would have been eligible to
participate in through the second annual anniversary date of his termination of
employment, based upon the benefit levels substantially equal to those that the
Bank provided for the Executive at the date of the Change of Control, or (ii)
--
continued participation in such Bank benefit plans through the second annual
anniversary date of his termination of employment, but only to the extent the
Executive continues to qualify for participation therein.
4. Funding of Grantor Trust upon Change of Control. Not later than ten
-----------------------------------------------
business days after a Change of Control, the Bank shall (i) deposit in the
Bank's Grantor Trust (the "Trust") an amount equal to the amount payable under
paragraph 3(a), unless the Executive has previously provided a written release
of any claims under this Agreement, and (ii) provide the trustee of the Trust
with a written direction to hold said amount and any investment return thereon
in a segregated account for the benefit of the Executive, and to follow the
procedures set forth in the next paragraph as to the payment of such amounts
from the Trust. Upon the earlier of the Trust's final payment of all amounts
due under the following paragraph or the date 21 months after the
4
<PAGE>
Change of Control, the trustee of the Trust shall pay to the Bank the entire
balance remaining in the segregated account maintained for the benefit of the
Executive. The Executive shall thereafter have no further interest in the Trust.
During the 21-consecutive month period after a Change of Control, the
Executive may provide the trustee of the Trust with a written notice requesting
that the trustee pay to the Executive an amount designated in the notice as
being payable pursuant to this Agreement. Within three business days after
receiving said notice, the trustee of the Trust shall send a copy of the notice
to the Bank via overnight and registered mail return receipt requested. On the
tenth (10th) business day after mailing said notice to the Bank, the trustee of
the Trust shall pay the Executive the amount designated therein in immediately
available funds, unless prior thereto the Bank provides the trustee with a
written notice directing the trustee to withhold such payment. In the latter
event, the trustee shall submit the dispute to non-appealable binding
arbitration for a determination of the amount payable to the Executive pursuant
to this Agreement, and the costs of such arbitration shall be paid by the Bank.
The trustee shall choose the arbitrator to settle the dispute, and such
arbitrator shall be bound by the rules of the American Arbitration Association
in making his determination. The parties and the trustee shall be bound by the
results of the arbitration and, within three days of the determination by the
arbitrator, the trustee shall pay from the Trust the amounts required to be paid
to the Executive and/or the Bank, and in no event shall the trustee be liable to
either party for making the payments as determined by the arbitrator.
5. Amendment and Termination.
-------------------------
(a) Before a Change of Control. The Bank's Board of Directors may, in its
sole discretion, amend this Agreement without the consent of the Executive at
any time prior to a Change of Control; provided, however, no amendment may be
made by the Bank if it operates to reduce the Executive's rights hereunder.
(b) After a Change of Control. This Agreement may not be terminated or
amended by the Bank or its successor following a Change of Control, unless the
Executive consents in writing to be bound thereby.
(c) Termination or Suspension Under Federal Law. Notwithstanding any other
provision of this Agreement to the contrary --
(i) Notwithstanding the foregoing, but only to the extent required
under federal banking law, the benefits payable hereunder to the Executive
shall be reduced to the extent that either (A) the present value of such
benefits exceeds the limitations set forth in Regulatory Bulletin 27a of
the Office of Thrift Supervision ("OTS"), as in effect on the Effective
Date, or (B) such reduction is necessary to avoid subjecting the Bank to
loss of any deductions pursuant to Section 280G of the Internal Revenue
Code of 1986, as amended.
5
<PAGE>
(ii) The Executive shall have no right to receive compensation or
other benefits for any period after Termination for Cause.
(iii) If the Executive is removed and/or permanently prohibited from
participating in the conduct of the Bank's affairs by an order issued under
Sections 8(e)(4) or 8(g)(1) of the Federal Deposit Insurance Act ("FDIA")
(12 U.S.C. 1818(e)(4) or (g)(1)), all obligations of the Bank under this
Agreement shall terminate, as of the effective date of the order, but any
vested rights of the parties shall not be affected.
(iv) If the Bank is in default (as defined in Section 3(x)(1) of
FDIA), all obligations under this Agreement shall terminate as of the date
of default; however, this paragraph shall not affect any vested rights of
the parties.
(v) All obligations under this Agreement shall terminate, except to
the extent that continuation of this Agreement is necessary for the
continued operation of the Bank: (i) by the Director of OTS, or his or her
designee, at the time that the Federal Deposit Insurance Corporation or the
Resolution Trust Corporation enters into an agreement to provide assistance
to or on behalf of the Bank under the authority contained in Section 13(c)
of FDIA; or (ii) by the Director of OTS, or his or her designee, at the
time that the Director of OTS, or his or her designee, approves a
supervisory merger to resolve problems related to operation of the Bank or
when the Bank is determined by the Director of OTS to be in an unsafe or
unsound condition. Such action shall not affect any vested rights of the
parties.
(vi) If a notice served under Section 8(e)(3) or (g)(1) of the FDIA
(12 U.S.C. 1818(e)(3) and (g)(1)) suspends and/or temporarily prohibits the
Executive from participating in the conduct of the Bank's affairs, the
Bank's obligations under this Agreement shall be suspended as of the date
of such service, unless stayed by appropriate proceedings. If the charges
in the notice are dismissed, the Bank shall: (a) pay the Executive any
compensation which was withheld while its contract obligations were
suspended; and (b) reinstate any of its remaining obligations, which were
suspended and which are still due to the Executive from the Bank even after
the Bank makes the payment to the Executive set forth in subparagraph (a)
of this paragraph (c)(vi).
(vii) Any payments made to the Executive pursuant to this Agreement,
or otherwise, are subject to and conditioned upon their compliance with 12
U.S.C. Section 1828(k) and any regulations promulgated thereunder.
6. Administration. Full power and discretionary authority to construe,
--------------
interpret and administer this Agreement shall be vested in the Board of
Directors of the Bank. Decisions of the Board of Directors of the Bank shall be
presumptively final, conclusive and binding on all parties, but shall be subject
to paragraph 6 of this Agreement.
6
<PAGE>
7. Attorney Fees. In the event that any dispute arises between the
-------------
Executive and the Bank as to the terms or interpretation of this Agreement,
whether instituted by formal legal proceed ings or otherwise, including any
action that the Executive takes to enforce the terms of this Agreement or to
defend against any action taken by the Bank, the Executive shall be reimbursed
for all costs and expenses, including reasonable attorneys' fees, arising from
such dispute, proceedings or actions, provided that the Executive shall obtain a
final judgement or settlement substantially in his favor in a court of competent
jurisdiction or in binding arbitration under the rules of the American
Arbitration Board. Such reimbursement shall be paid within ten (10) days of the
Executive's furnishing to the Bank written evidence, which may be in the form,
among other things, of a canceled check or receipt, of any costs or expenses
incurred by the Executive.
8. No Assignment. The Executive's right to receive payments or benefits
-------------
under this Agreement shall not be assignable or transferable whether by pledge,
creation of a security interest or otherwise, other than a transfer by will or
by the laws of descent or distribution as to compensation due hereunder to the
Executive by the Bank prior to the Executive's death. In the event of any
attempted assignment or transfer contrary to this paragraph 8, the Bank shall
have no liability to pay any amount so attempted to be assigned or transferred.
This Agreement shall inure to the benefit of and be enforceable by the
Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees, if, and only if,
compensation is due hereunder to the Executive by the Bank prior to the
Executive's death.
9. Successors. This Agreement shall be binding upon and inure to the
----------
benefit of the Bank, its successor and assigns (including, without limitation,
any company into or with which the Bank may merge or consolidate).
10. Miscellaneous.
-------------
(a) Applicable Law. This contract is entered into under, and shall be
governed for all purposes by, the laws of the State of Maryland, except to the
extent that federal law controls the matter, and, in that event, this Agreement
shall be governed by federal law applicable to any provisions of this Agreement.
(b) Severability of Provisions. If a court of competent jurisdiction
determines that any provision of this Agreement is invalid or unenforceable,
then the invalidity or unenforceability of that provision shall not affect the
validity or enforceability of any other provision of this Agreement and all
other provisions shall remain in full force and effect.
(c) Withholding of Taxes. The Bank may withhold from any benefits payable
under this Agreement all federal, state, city or other taxes as may be required
pursuant to any law, governmental regulation or ruling.
7
<PAGE>
(d) Entire Agreement. This Agreement contains the entire agreement and
understanding of the parties with respect to the subject matter hereof and shall
not be altered or amended except by a writing executed in the same manner as the
Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
and delivered as of the day and year specified in the first paragraph hereof.
ATTEST: BALTIMORE COUNTY SAVINGS BANK, F.S.B.
By
- -------------------------- -------------------------------------
Secretary Its Chairman of the Board
WITNESS:
- -------------------------- -------------------------------------
Michael J. Dietz
8
<PAGE>
CHANGE-OF-CONTROL SEVERANCE AGREEMENT
_________________________________
As amended and restated effective
October 22, 1997
_________________________________
THIS AGREEMENT (the "Agreement") made this 22/nd/ day of October, 1997 (the
"Effective Date") amends, restates, and supercedes an agreement entered into on
the ___ day of July, 1995 by and between Baltimore County Savings Bank, F.S.B.
(the "Bank"), and Gary C. Loraditch, CPA, Esquire (the "Executive").
WHEREAS, the Executive has heretofore been employed by the Bank as an
executive officer, and desires to continue to be so employed; and the Bank
desires the continuation of such employment by the Executive; and
WHEREAS, the Bank deems it to be in its best interest to provide the
Executive with security in the event of a Change of Control (as defined herein),
and thereby to facilitate his retention and insure an orderly transition
following a Change of Control; and
WHEREAS, the parties desire by the Agreement to set forth their
understanding as to their respective rights and obligations in the event the
Executive's employment terminates or is changed under the circumstances set
forth herein.
NOW, THEREFORE, it is AGREED as follows:
1. Definitions. For purposes of this Agreement, the following terms have
-----------
the meaning set forth below:
(a) "Change in Duties" shall mean any one or more of the following:
(i) a significant adverse change in the status, title, position(s),
responsibilities, or scope of the Executive's authorities or duties from
those applicable to him immediately prior to the date on which a Change of
Control occurs;
(ii) assignment to the Executive of any duties or responsibilities
which are inconsistent with his status, title, or position(s) as in effect
immediately prior to the date on which a Change of Control occurs;
(iii) a material reduction in the Executive's total compensation from
that provided to him immediately prior to the date on which a Change of
Control occurs;
1
<PAGE>
(iv) a diminution in the Executive's eligibility to participate in
bonus, incentive award, and other compensation plans which provide
opportunities to receive compensation from the opportunities under any such
plans in which he was participating immediately prior to the date on which
a Change of Control occurs;
(v) a change in the location of the Executive's principal place of
employment by the Bank or its subsidiaries and affiliates by more than 30
miles from the location where he was principally employed immediately prior
to the date on which a Change of Control occurs; or
(vi) a reasonable determination by the Board of Directors of the Bank
that, as a result of a Change of Control and change in circumstances
thereafter significantly affecting his position, the Executive is unable to
exercise the authorities, powers, functions or duties attached to his
position immediately prior to the date on which a Change of Control occurs.
(b) When the Bank is in the "mutual" form of organization, a "Change of
Control" shall be deemed to have occurred if:
(i) as a result of, or in connection with, any exchange offer, merger
or other business combination, sale of assets or contested election, any
combination of the foregoing transactions, or any similar transaction, the
persons who were non-employee directors of the Bank before such transaction
cease to constitute a majority of the Board of Directors of the Bank or any
successor to the Bank;
(ii) the Bank transfers substantially all of its assets to another
corporation which is not a wholly-owned subsidiary of the Bank;
(iii) the Bank sells substantially all of the assets of a subsidiary
or affiliate which, at the time of such sale, is the principal employer of
the Executive;
(iv) any "person" including a "group", exclusive of the Board of
Directors of the Bank or any committee thereof, is or becomes the
"beneficial owner", directly or indirectly, of proxies of the Bank
representing twenty-five percent (25%) or more of the combined voting power
of the Bank's members; or
(v) the Bank is merged or consolidated with another corporation and,
as a result of the merger or consolidation, less than seventy percent (70%)
of the outstanding proxies relating to the surviving or resulting
corporation are given, in the aggregate, by the former members of the Bank.
Notwithstanding the foregoing, a "Change of Control" shall not be deemed to
---
occur solely by reason of a transaction in which the Bank converts to the
stock form of organization.
2
<PAGE>
(c) If the Bank shall be in the "stock" form of organization, a "Change of
Control" shall be deemed to have occurred if:
(i) the acquisition of ownership, holding or power to vote more than
25% of the Bank's or the Company's voting stock;
(ii) the acquisition of the ability to control the election of a
majority of the Bank's or the Company's directors;
(iii) the acquisition of a controlling influence over the management
or policies of the Bank or the Company by any person or by persons acting
as a "group" (within the meaning of Section 13(d) of the Securities
Exchange Act of 1934); or
(iv) during any period of two consecutive years, individuals (the
"Continuing Directors") who at the beginning of such period constitute the
Board of Directors of the Bank or the Company (the "Existing Board") cease
for any reason to constitute at least two-thirds thereof, provided that any
individual whose election or nomination for election as a member of the
Existing Board was approved by a vote of at least two-thirds of the
Continuing Directors then in office shall be considered a Continuing
Director.
Notwithstanding the foregoing, in the case of (i), (ii) and (iii) hereof,
ownership or control of the Bank by the Company itself shall not constitute a
Change of Control. For purposes of this paragraph only, the term "person"
refers to an individual or a corporation, partnership, trust, association, joint
venture, pool, syndicate, sole proprietorship, unincorporated organization or
any other form of entity not specifically listed herein. The decision of the
Bank's non-employee directors as to whether or not a Change of Control has
occurred shall be conclusive and binding.
(c.1) "Company" shall mean any holding company that becomes sole owner of
the Bank.
(d) "Covered Period" shall mean a period equal to twelve (12) months before
the occurrence of a Change of Control and eighteen (18) months after the
occurrence of a Change of Control.
(e) "Involuntary Termination" shall mean (i) any involuntary termination,
or (ii) a resignation by the Executive within thirty (30) days following any
Change in Duties; provided, however, that an Involuntary Termination shall not
include either a Termination for Cause, or any termination as a result of death,
disability, or normal retirement on or after attainment of age sixty-five (65)
pursuant to a retirement plan in which the Executive was participating prior to
any Change of Control.
(f) "Termination for Cause" shall include termination because of the
officer or employee's personal dishonesty, incompetence, willful misconduct,
breach of fiduciary duty involving personal profit, intentional failure to
perform stated duties, willful violation of any law,
3
<PAGE>
rule, or regulation (other than traffic violations or similar offenses) or final
cease and desist order, or material breach of any provision of this Agreement or
any other Agreement between Executive and the Bank.
(g) The term "Bank" refers to the Bank and/or any succession in interest or
any assignees or transferees thereof.
2. Term. This Agreement shall remain in effect for the period commencing
----
on the Effective Date and ending on the earlier of (i) the date thirty-six (36)
months after the Effective Date, and (ii) the date on which the Executive
voluntarily terminates employment with the Bank. Additionally, on each annual
anniversary date from the Effective Date, the term of this Agreement may be
extended for an additional one (1) year period beyond the then effective
expiration date provided the Board of Directors of the Bank determines in a duly
adopted resolution that the performance of the Executive has met the Board's
requirements and standards, that it is in the Bank's best interests to extend
this Agreement, and that this Agreement shall be extended.
3. Severance Payment on Change of Control. If there is a Change of
--------------------------------------
Control and if within the Covered Period as defined herein (i) a Change in
---
Duties as defined herein occurs, or (ii) an Involuntary Termination as defined
herein occurs, or (iii) the Executive voluntarily terminates employment for any
reason within the 30-day period beginning on the date of a Change of Control,
then in that event the Executive shall--
(a) be paid an amount equal to 2.99 times the annualized base salary being
paid to the Executive in the immediately preceding twelve (12) month period
(excluding board fees and bonuses), and
(b) receive at the Executive's sole and exclusive election either (i) cash
------
in an amount equal to the cost to the Executive of obtaining all health, life,
disability and other benefits which the Executive would have been eligible to
participate in through the second annual anniversary date of his termination of
employment, based upon the benefit levels substantially equal to those that the
Bank provided for the Executive at the date of the Change of Control, or (ii)
--
continued participation in such Bank benefit plans through the second annual
anniversary date of his termination of employment, but only to the extent the
Executive continues to qualify for participation therein.
4. Funding of Grantor Trust upon Change of Control. Not later than ten
-----------------------------------------------
business days after a Change of Control, the Bank shall (i) deposit in the
Bank's Grantor Trust (the "Trust") an amount equal to the amount payable under
paragraph 3(a), unless the Executive has previously provided a written release
of any claims under this Agreement, and (ii) provide the trustee of the Trust
with a written direction to hold said amount and any investment return thereon
in a segregated account for the benefit of the Executive, and to follow the
procedures set forth in the next paragraph as to the payment of such amounts
from the Trust. Upon the earlier of the Trust's final payment of all amounts
due under the following paragraph or the date 21 months after the
4
<PAGE>
Change of Control, the trustee of the Trust shall pay to the Bank the entire
balance remaining in the segregated account maintained for the benefit of the
Executive. The Executive shall thereafter have no further interest in the Trust.
During the 21-consecutive month period after a Change of Control, the
Executive may provide the trustee of the Trust with a written notice requesting
that the trustee pay to the Executive an amount designated in the notice as
being payable pursuant to this Agreement. Within three business days after
receiving said notice, the trustee of the Trust shall send a copy of the notice
to the Bank via overnight and registered mail return receipt requested. On the
tenth (10th) business day after mailing said notice to the Bank, the trustee of
the Trust shall pay the Executive the amount designated therein in immediately
available funds, unless prior thereto the Bank provides the trustee with a
written notice directing the trustee to withhold such payment. In the latter
event, the trustee shall submit the dispute to non-appealable binding
arbitration for a determination of the amount payable to the Executive pursuant
to this Agreement, and the costs of such arbitration shall be paid by the Bank.
The trustee shall choose the arbitrator to settle the dispute, and such
arbitrator shall be bound by the rules of the American Arbitration Association
in making his determination. The parties and the trustee shall be bound by the
results of the arbitration and, within three days of the determination by the
arbitrator, the trustee shall pay from the Trust the amounts required to be paid
to the Executive and/or the Bank, and in no event shall the trustee be liable to
either party for making the payments as determined by the arbitrator.
5. Amendment and Termination.
-------------------------
(a) Before a Change of Control. The Bank's Board of Directors may, in its
sole discretion, amend this Agreement without the consent of the Executive at
any time prior to a Change of Control; provided, however, no amendment may be
made by the Bank if it operates to reduce the Executive's rights hereunder.
(b) After a Change of Control. This Agreement may not be terminated or
amended by the Bank or its successor following a Change of Control, unless the
Executive consents in writing to be bound thereby.
(c) Termination or Suspension Under Federal Law. Notwithstanding any other
provision of this Agreement to the contrary --
(i) Notwithstanding the foregoing, but only to the extent required
under federal banking law, the benefits payable hereunder to the Executive
shall be reduced to the extent that either (A) the present value of such
benefits exceeds the limitations set forth in Regulatory Bulletin 27a of
the Office of Thrift Supervision ("OTS"), as in effect on the Effective
Date, or (B) such reduction is necessary to avoid subjecting the Bank to
loss of any deductions pursuant to Section 280G of the Internal Revenue
Code of 1986, as amended.
5
<PAGE>
(ii) The Executive shall have no right to receive compensation or
other benefits for any period after Termination for Cause.
(iii) If the Executive is removed and/or permanently prohibited from
participating in the conduct of the Bank's affairs by an order issued under
Sections 8(e)(4) or 8(g)(1) of the Federal Deposit Insurance Act ("FDIA")
(12 U.S.C. 1818(e)(4) or (g)(1)), all obligations of the Bank under this
Agreement shall terminate, as of the effective date of the order, but any
vested rights of the parties shall not be affected.
(iv) If the Bank is in default (as defined in Section 3(x)(1) of
FDIA), all obligations under this Agreement shall terminate as of the date
of default; however, this paragraph shall not affect any vested rights of
the parties.
(v) All obligations under this Agreement shall terminate, except to
the extent that continuation of this Agreement is necessary for the
continued operation of the Bank: (i) by the Director of OTS, or his or her
designee, at the time that the Federal Deposit Insurance Corporation or the
Resolution Trust Corporation enters into an agreement to provide assistance
to or on behalf of the Bank under the authority contained in Section 13(c)
of FDIA; or (ii) by the Director of OTS, or his or her designee, at the
time that the Director of OTS, or his or her designee, approves a
supervisory merger to resolve problems related to operation of the Bank or
when the Bank is determined by the Director of OTS to be in an unsafe or
unsound condition. Such action shall not affect any vested rights of the
parties.
(vi) If a notice served under Section 8(e)(3) or (g)(1) of the FDIA
(12 U.S.C. 1818(e)(3) and (g)(1)) suspends and/or temporarily prohibits the
Executive from participating in the conduct of the Bank's affairs, the
Bank's obligations under this Agreement shall be suspended as of the date
of such service, unless stayed by appropriate proceedings. If the charges
in the notice are dismissed, the Bank shall: (a) pay the Executive any
compensation which was withheld while its contract obligations were
suspended; and (b) reinstate any of its remaining obligations, which were
suspended and which are still due to the Executive from the Bank even after
the Bank makes the payment to the Executive set forth in subparagraph (a)
of this paragraph (c)(vi).
(vii) Any payments made to the Executive pursuant to this Agreement,
or otherwise, are subject to and conditioned upon their compliance with 12
U.S.C. Section 1828(k) and any regulations promulgated thereunder.
6. Administration. Full power and discretionary authority to construe,
--------------
interpret and administer this Agreement shall be vested in the Board of
Directors of the Bank. Decisions of the Board of Directors of the Bank shall be
presumptively final, conclusive and binding on all parties, but shall be subject
to paragraph 6 of this Agreement.
6
<PAGE>
7. Attorney Fees. In the event that any dispute arises between the
-------------
Executive and the Bank as to the terms or interpretation of this Agreement,
whether instituted by formal legal proceed ings or otherwise, including any
action that the Executive takes to enforce the terms of this Agreement or to
defend against any action taken by the Bank, the Executive shall be reimbursed
for all costs and expenses, including reasonable attorneys' fees, arising from
such dispute, proceedings or actions, provided that the Executive shall obtain a
final judgement or settlement substantially in his favor in a court of competent
jurisdiction or in binding arbitration under the rules of the American
Arbitration Board. Such reimbursement shall be paid within ten (10) days of the
Executive's furnishing to the Bank written evidence, which may be in the form,
among other things, of a canceled check or receipt, of any costs or expenses
incurred by the Executive.
8. No Assignment. The Executive's right to receive payments or benefits
-------------
under this Agreement shall not be assignable or transferable whether by pledge,
creation of a security interest or otherwise, other than a transfer by will or
by the laws of descent or distribution as to compensation due hereunder to the
Executive by the Bank prior to the Executive's death. In the event of any
attempted assignment or transfer contrary to this paragraph 8, the Bank shall
have no liability to pay any amount so attempted to be assigned or transferred.
This Agreement shall inure to the benefit of and be enforceable by the
Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees, if, and only if,
compensation is due hereunder to the Executive by the Bank prior to the
Executive's death.
9. Successors. This Agreement shall be binding upon and inure to the
----------
benefit of the Bank, its successor and assigns (including, without limitation,
any company into or with which the Bank may merge or consolidate).
10. Miscellaneous.
-------------
(a) Applicable Law. This contract is entered into under, and shall be
governed for all purposes by, the laws of the State of Maryland, except to the
extent that federal law controls the matter, and, in that event, this Agreement
shall be governed by federal law applicable to any provisions of this Agreement.
(b) Severability of Provisions. If a court of competent jurisdiction
determines that any provision of this Agreement is invalid or unenforceable,
then the invalidity or unenforceability of that provision shall not affect the
validity or enforceability of any other provision of this Agreement and all
other provisions shall remain in full force and effect.
(c) Withholding of Taxes. The Bank may withhold from any benefits payable
under this Agreement all federal, state, city or other taxes as may be required
pursuant to any law, governmental regulation or ruling.
7
<PAGE>
(d) Entire Agreement. This Agreement contains the entire agreement and
understanding of the parties with respect to the subject matter hereof and shall
not be altered or amended except by a writing executed in the same manner as the
Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
and delivered as of the day and year specified in the first paragraph hereof.
ATTEST: BALTIMORE COUNTY SAVINGS BANK, F.S.B.
By
- ---------------------------- -------------------------------------
Secretary Its Chairman of the Board
WITNESS:
- ---------------------------- -------------------------------------
Gary C. Loraditch
8
<PAGE>
CHANGE-OF-CONTROL SEVERANCE AGREEMENT
_________________________________
As amended and restated effective
October 22, 1997
_________________________________
THIS AGREEMENT (the "Agreement") made this 22/nd/ day of October, 1997 (the
"Effective Date") amends, restates, and supercedes an agreement entered into on
the ___ day of July, 1995 by and between Baltimore County Savings Bank, F.S.B.
(the "Bank"), and William M. Loughran (the "Executive").
WHEREAS, the Executive has heretofore been employed by the Bank as an
executive officer, and desires to continue to be so employed; and the Bank
desires the continuation of such employment by the Executive; and
WHEREAS, the Bank deems it to be in its best interest to provide the
Executive with security in the event of a Change of Control (as defined herein),
and thereby to facilitate his retention and insure an orderly transition
following a Change of Control; and
WHEREAS, the parties desire by the Agreement to set forth their
understanding as to their respective rights and obligations in the event the
Executive's employment terminates or is changed under the circumstances set
forth herein.
NOW, THEREFORE, it is AGREED as follows:
1. Definitions. For purposes of this Agreement, the following terms have
-----------
the meaning set forth below:
(a) "Change in Duties" shall mean any one or more of the following:
(i) a significant adverse change in the status, title, position(s),
responsibilities, or scope of the Executive's authorities or duties from
those applicable to him immediately prior to the date on which a Change of
Control occurs;
(ii) assignment to the Executive of any duties or responsibilities
which are inconsistent with his status, title, or position(s) as in effect
immediately prior to the date on which a Change of Control occurs;
(iii) a material reduction in the Executive's total compensation from
that provided to him immediately prior to the date on which a Change of
Control occurs;
1
<PAGE>
(iv) a diminution in the Executive's eligibility to participate in
bonus, incentive award, and other compensation plans which provide
opportunities to receive compensation from the opportunities under any such
plans in which he was participating immediately prior to the date on which
a Change of Control occurs;
(v) a change in the location of the Executive's principal place of
employment by the Bank or its subsidiaries and affiliates by more than 30
miles from the location where he was principally employed immediately prior
to the date on which a Change of Control occurs; or
(vi) a reasonable determination by the Board of Directors of the Bank
that, as a result of a Change of Control and change in circumstances
thereafter significantly affecting his position, the Executive is unable to
exercise the authorities, powers, functions or duties attached to his
position immediately prior to the date on which a Change of Control occurs.
(b) When the Bank is in the "mutual" form of organization, a "Change of
Control" shall be deemed to have occurred if:
(i) as a result of, or in connection with, any exchange offer, merger
or other business combination, sale of assets or contested election, any
combination of the foregoing transactions, or any similar transaction, the
persons who were non-employee directors of the Bank before such transaction
cease to constitute a majority of the Board of Directors of the Bank or any
successor to the Bank;
(ii) the Bank transfers substantially all of its assets to another
corporation which is not a wholly-owned subsidiary of the Bank;
(iii) the Bank sells substantially all of the assets of a subsidiary
or affiliate which, at the time of such sale, is the principal employer of
the Executive;
(iv) any "person" including a "group", exclusive of the Board of
Directors of the Bank or any committee thereof, is or becomes the
"beneficial owner", directly or indirectly, of proxies of the Bank
representing twenty-five percent (25%) or more of the combined voting power
of the Bank's members; or
(v) the Bank is merged or consolidated with another corporation and,
as a result of the merger or consolidation, less than seventy percent (70%)
of the outstanding proxies relating to the surviving or resulting
corporation are given, in the aggregate, by the former members of the Bank.
Notwithstanding the foregoing, a "Change of Control" shall not be deemed to
---
occur solely by reason of a transaction in which the Bank converts to the
stock form of organization.
2
<PAGE>
(c) If the Bank shall be in the "stock" form of organization, a "Change of
Control" shall be deemed to have occurred if:
(i) the acquisition of ownership, holding or power to vote more than
25% of the Bank's or the Company's voting stock;
(ii) the acquisition of the ability to control the election of a
majority of the Bank's or the Company's directors;
(iii) the acquisition of a controlling influence over the management
or policies of the Bank or the Company by any person or by persons acting
as a "group" (within the meaning of Section 13(d) of the Securities
Exchange Act of 1934); or
(iv) during any period of two consecutive years, individuals (the
"Continuing Directors") who at the beginning of such period constitute the
Board of Directors of the Bank or the Company (the "Existing Board") cease
for any reason to constitute at least two-thirds thereof, provided that any
individual whose election or nomination for election as a member of the
Existing Board was approved by a vote of at least two-thirds of the
Continuing Directors then in office shall be considered a Continuing
Director.
Notwithstanding the foregoing, in the case of (i), (ii) and (iii) hereof,
ownership or control of the Bank by the Company itself shall not constitute a
Change of Control. For purposes of this paragraph only, the term "person"
refers to an individual or a corporation, partnership, trust, association, joint
venture, pool, syndicate, sole proprietorship, unincorporated organization or
any other form of entity not specifically listed herein. The decision of the
Bank's non-employee directors as to whether or not a Change of Control has
occurred shall be conclusive and binding.
(c.1) "Company" shall mean any holding company that becomes sole owner of
the Bank.
(d) "Covered Period" shall mean a period equal to twelve (12) months before
the occurrence of a Change of Control and eighteen (18) months after the
occurrence of a Change of Control.
(e) "Involuntary Termination" shall mean (i) any involuntary termination,
or (ii) a resignation by the Executive within thirty (30) days following any
Change in Duties; provided, however, that an Involuntary Termination shall not
include either a Termination for Cause, or any termination as a result of death,
disability, or normal retirement on or after attainment of age sixty-five (65)
pursuant to a retirement plan in which the Executive was participating prior to
any Change of Control.
(f) "Termination for Cause" shall include termination because of the
officer or employee's personal dishonesty, incompetence, willful misconduct,
breach of fiduciary duty involving personal profit, intentional failure to
perform stated duties, willful violation of any law,
3
<PAGE>
rule, or regulation (other than traffic violations or similar offenses) or final
cease and desist order, or material breach of any provision of this Agreement or
any other Agreement between Executive and the Bank.
(g) The term "Bank" refers to the Bank and/or any succession in interest or
any assignees or transferees thereof.
2. Term. This Agreement shall remain in effect for the period commencing
----
on the Effective Date and ending on the earlier of (i) the date thirty-six (36)
months after the Effective Date, and (ii) the date on which the Executive
voluntarily terminates employment with the Bank. Additionally, on each annual
anniversary date from the Effective Date, the term of this Agreement may be
extended for an additional one (1) year period beyond the then effective
expiration date provided the Board of Directors of the Bank determines in a duly
adopted resolution that the performance of the Executive has met the Board's
requirements and standards, that it is in the Bank's best interests to extend
this Agreement, and that this Agreement shall be extended.
3. Severance Payment on Change of Control. If there is a Change of
--------------------------------------
Control and if within the Covered Period as defined herein (i) a Change in
---
Duties as defined herein occurs, or (ii) an Involuntary Termination as defined
herein occurs, or (iii) the Executive voluntarily terminates employment for any
reason within the 30-day period beginning on the date of a Change of Control,
then in that event the Executive shall--
(a) be paid an amount equal to 2.99 times the annualized base salary being
paid to the Executive in the immediately preceding twelve (12) month period
(excluding board fees and bonuses), and
(b) receive at the Executive's sole and exclusive election either (i) cash
------
in an amount equal to the cost to the Executive of obtaining all health, life,
disability and other benefits which the Executive would have been eligible to
participate in through the second annual anniversary date of his termination of
employment, based upon the benefit levels substantially equal to those that the
Bank provided for the Executive at the date of the Change of Control, or (ii)
--
continued participation in such Bank benefit plans through the second annual
anniversary date of his termination of employment, but only to the extent the
Executive continues to qualify for participation therein.
4. Funding of Grantor Trust upon Change of Control. Not later than ten
-----------------------------------------------
business days after a Change of Control, the Bank shall (i) deposit in the
Bank's Grantor Trust (the "Trust") an amount equal to the amount payable under
paragraph 3(a), unless the Executive has previously provided a written release
of any claims under this Agreement, and (ii) provide the trustee of the Trust
with a written direction to hold said amount and any investment return thereon
in a segregated account for the benefit of the Executive, and to follow the
procedures set forth in the next paragraph as to the payment of such amounts
from the Trust. Upon the earlier of the Trust's final payment of all amounts
due under the following paragraph or the date 21 months after the
4
<PAGE>
Change of Control, the trustee of the Trust shall pay to the Bank the entire
balance remaining in the segregated account maintained for the benefit of the
Executive. The Executive shall thereafter have no further interest in the Trust.
During the 21-consecutive month period after a Change of Control, the
Executive may provide the trustee of the Trust with a written notice requesting
that the trustee pay to the Executive an amount designated in the notice as
being payable pursuant to this Agreement. Within three business days after
receiving said notice, the trustee of the Trust shall send a copy of the notice
to the Bank via overnight and registered mail return receipt requested. On the
tenth (10th) business day after mailing said notice to the Bank, the trustee of
the Trust shall pay the Executive the amount designated therein in immediately
available funds, unless prior thereto the Bank provides the trustee with a
written notice directing the trustee to withhold such payment. In the latter
event, the trustee shall submit the dispute to non-appealable binding
arbitration for a determination of the amount payable to the Executive pursuant
to this Agreement, and the costs of such arbitration shall be paid by the Bank.
The trustee shall choose the arbitrator to settle the dispute, and such
arbitrator shall be bound by the rules of the American Arbitration Association
in making his determination. The parties and the trustee shall be bound by the
results of the arbitration and, within three days of the determination by the
arbitrator, the trustee shall pay from the Trust the amounts required to be paid
to the Executive and/or the Bank, and in no event shall the trustee be liable to
either party for making the payments as determined by the arbitrator.
5. Amendment and Termination.
-------------------------
(a) Before a Change of Control. The Bank's Board of Directors may, in its
sole discretion, amend this Agreement without the consent of the Executive at
any time prior to a Change of Control; provided, however, no amendment may be
made by the Bank if it operates to reduce the Executive's rights hereunder.
(b) After a Change of Control. This Agreement may not be terminated or
amended by the Bank or its successor following a Change of Control, unless the
Executive consents in writing to be bound thereby.
(c) Termination or Suspension Under Federal Law. Notwithstanding any other
provision of this Agreement to the contrary --
(i) Notwithstanding the foregoing, but only to the extent required
under federal banking law, the benefits payable hereunder to the Executive
shall be reduced to the extent that either (A) the present value of such
benefits exceeds the limitations set forth in Regulatory Bulletin 27a of
the Office of Thrift Supervision ("OTS"), as in effect on the Effective
Date, or (B) such reduction is necessary to avoid subjecting the Bank to
loss of any deductions pursuant to Section 280G of the Internal Revenue
Code of 1986, as amended.
5
<PAGE>
(ii) The Executive shall have no right to receive compensation or
other benefits for any period after Termination for Cause.
(iii) If the Executive is removed and/or permanently prohibited from
participating in the conduct of the Bank's affairs by an order issued under
Sections 8(e)(4) or 8(g)(1) of the Federal Deposit Insurance Act ("FDIA")
(12 U.S.C. 1818(e)(4) or (g)(1)), all obligations of the Bank under this
Agreement shall terminate, as of the effective date of the order, but any
vested rights of the parties shall not be affected.
(iv) If the Bank is in default (as defined in Section 3(x)(1) of
FDIA), all obligations under this Agreement shall terminate as of the date
of default; however, this paragraph shall not affect any vested rights of
the parties.
(v) All obligations under this Agreement shall terminate, except to
the extent that continuation of this Agreement is necessary for the
continued operation of the Bank: (i) by the Director of OTS, or his or her
designee, at the time that the Federal Deposit Insurance Corporation or the
Resolution Trust Corporation enters into an agreement to provide assistance
to or on behalf of the Bank under the authority contained in Section 13(c)
of FDIA; or (ii) by the Director of OTS, or his or her designee, at the
time that the Director of OTS, or his or her designee, approves a
supervisory merger to resolve problems related to operation of the Bank or
when the Bank is determined by the Director of OTS to be in an unsafe or
unsound condition. Such action shall not affect any vested rights of the
parties.
(vi) If a notice served under Section 8(e)(3) or (g)(1) of the FDIA
(12 U.S.C. 1818(e)(3) and (g)(1)) suspends and/or temporarily prohibits the
Executive from participating in the conduct of the Bank's affairs, the
Bank's obligations under this Agreement shall be suspended as of the date
of such service, unless stayed by appropriate proceedings. If the charges
in the notice are dismissed, the Bank shall: (a) pay the Executive any
compensation which was withheld while its contract obligations were
suspended; and (b) reinstate any of its remaining obligations, which were
suspended and which are still due to the Executive from the Bank even after
the Bank makes the payment to the Executive set forth in subparagraph (a)
of this paragraph (c)(vi).
(vii) Any payments made to the Executive pursuant to this Agreement,
or otherwise, are subject to and conditioned upon their compliance with 12
U.S.C. Section 1828(k) and any regulations promulgated thereunder.
6. Administration. Full power and discretionary authority to construe,
--------------
interpret and administer this Agreement shall be vested in the Board of
Directors of the Bank. Decisions of the Board of Directors of the Bank shall be
presumptively final, conclusive and binding on all parties, but shall be subject
to paragraph 6 of this Agreement.
6
<PAGE>
7. Attorney Fees. In the event that any dispute arises between the
-------------
Executive and the Bank as to the terms or interpretation of this Agreement,
whether instituted by formal legal proceed ings or otherwise, including any
action that the Executive takes to enforce the terms of this Agreement or to
defend against any action taken by the Bank, the Executive shall be reimbursed
for all costs and expenses, including reasonable attorneys' fees, arising from
such dispute, proceedings or actions, provided that the Executive shall obtain a
final judgement or settlement substantially in his favor in a court of competent
jurisdiction or in binding arbitration under the rules of the American
Arbitration Board. Such reimbursement shall be paid within ten (10) days of the
Executive's furnishing to the Bank written evidence, which may be in the form,
among other things, of a canceled check or receipt, of any costs or expenses
incurred by the Executive.
8. No Assignment. The Executive's right to receive payments or benefits
-------------
under this Agreement shall not be assignable or transferable whether by pledge,
creation of a security interest or otherwise, other than a transfer by will or
by the laws of descent or distribution as to compensation due hereunder to the
Executive by the Bank prior to the Executive's death. In the event of any
attempted assignment or transfer contrary to this paragraph 8, the Bank shall
have no liability to pay any amount so attempted to be assigned or transferred.
This Agreement shall inure to the benefit of and be enforceable by the
Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees, if, and only if,
compensation is due hereunder to the Executive by the Bank prior to the
Executive's death.
9. Successors. This Agreement shall be binding upon and inure to the
----------
benefit of the Bank, its successor and assigns (including, without limitation,
any company into or with which the Bank may merge or consolidate).
10. Miscellaneous.
-------------
(a) Applicable Law. This contract is entered into under, and shall be
governed for all purposes by, the laws of the State of Maryland, except to the
extent that federal law controls the matter, and, in that event, this Agreement
shall be governed by federal law applicable to any provisions of this Agreement.
(b) Severability of Provisions. If a court of competent jurisdiction
determines that any provision of this Agreement is invalid or unenforceable,
then the invalidity or unenforceability of that provision shall not affect the
validity or enforceability of any other provision of this Agreement and all
other provisions shall remain in full force and effect.
(c) Withholding of Taxes. The Bank may withhold from any benefits payable
under this Agreement all federal, state, city or other taxes as may be required
pursuant to any law, governmental regulation or ruling.
7
<PAGE>
(d) Entire Agreement. This Agreement contains the entire agreement and
understanding of the parties with respect to the subject matter hereof and shall
not be altered or amended except by a writing executed in the same manner as the
Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
and delivered as of the day and year specified in the first paragraph hereof.
ATTEST: BALTIMORE COUNTY SAVINGS BANK, F.S.B.
By
- ---------------------------- -------------------------------------
Secretary Its Chairman of the Board
WITNESS:
- ---------------------------- -------------------------------------
William M. Loughran
8
<PAGE>
EXHIBIT 10.4
BALTIMORE COUNTY SAVINGS BANK, F.S.B.
DEFERRED COMPENSATION PLAN
The Board of Directors of Baltimore County Savings Bank, F.S.B. hereby
restates its Directors' Retirement Plan, effective October 22, 1997. The Plan
was originally effective on July 1, 1995, and has been restated in order (1) to
attract, retain, and motivate Directors, and (2) to encourage the long-term
financial success of the Bank through a performance-based deferred compensation
program.
ARTICLE I
DEFINITIONS
-----------
The following words and phrases, when used in the Plan with an initial
capital letter, shall have the meanings set forth below unless the context
clearly indicates otherwise.
"Account" shall mean a bookkeeping account maintained by the Bank in the
name of the Participant.
"Administrator" shall mean any officer or Director of the Bank whom the
Board authorizes to administer the Plan.
"Affiliate" shall mean any "parent corporation" or "subsidiary corporation"
of the Bank, as the terms are defined in Section 424(e) and (f), respectively,
of the Internal Revenue Code of 1986, as amended.
"Bank" shall mean Baltimore County Savings Bank, F.S.B., and any successor
to its interest.
"Beneficiary" shall mean the person or persons whom a Participant may
designate as the beneficiary of the Participant's Benefits under Articles II and
III. A Participant's election of a Beneficiary shall be made on the
Distribution Election Form, shall be revocable by the Participant during his or
her lifetime, and shall be effective only upon its delivery to, and acceptance
by, an executive officer of the Bank and acceptance by the Board, which
acceptance shall be presumed unless, within ten business days of delivery of the
Participant's election, the executive officer provides the Participant with a
written notice detailing the reasons for its rejection. Beneficiary
designations made under the Bank's Incentive Compensation Plan shall be honored
for purposes of this Plan, until and unless a valid designation occurs
----- ------
hereunder. In the event of no such designation, "Beneficiary" shall mean the
Participants's Surviving Spouse, or estate if the Participant has no Surviving
Spouse.
"Benefits" shall mean any and all benefits that are or may become payable
under Article III of the Plan.
1
<PAGE>
"Board" shall mean the Board of Directors of the Bank.
"Change in Control" shall mean any of the following events:
(a) When the Bank is in the "mutual" form of organization, a "Change in
Control" shall be deemed to have occurred if: (i) as a result of, or in
connection with, any exchange offer, merger or other business combination, sale
of assets or contested election, any combination of the foregoing transactions,
or any similar transaction, the persons who were Directors of the Bank before
such transaction cease to constitute a majority of the Board of Directors of the
Bank or any successor to the Bank, (ii) the Bank transfers substantially all of
its assets to another corporation which is not an Affiliate of the Bank, (iii)
the Bank sells substantially all of the assets of an Affiliate which accounted
for 50% or more of the controlled group's assets immediately prior to such sale,
(iv) any "person" including a "group", exclusive of the Board of Directors of
the Bank or any committee thereof, is or becomes the "beneficial owner",
directly or indirectly, of proxies of the Bank representing twenty-five percent
(25%) or more of the combined voting power of the Bank's members, or (v) the
Bank is merged or consolidated with another corporation and, as a result of the
merger or consolidation, less than seventy percent (70%) of the outstanding
proxies relating to the surviving or resulting corporation are given, in the
aggregate, by the former members of the Bank.
(b) If the Bank shall be in the "stock" form of organization, a "Change in
Control" shall mean any one of the following events: (i) the acquisition of
ownership, holding or power to vote more than 25% of the voting stock of the
Bank or the Company thereof, (ii) the acquisition of the ability to control the
election of a majority of the Bank's or the Company's Directors, (iii) the
acquisition of a controlling influence over the management or policies of the
Bank or of the Company by any person or by persons acting as a "group" (within
the meaning of Section 13(d) of the Securities Exchange Act of 1934), or (iv)
during any period of two consecutive years, individuals (the "Continuing
Directors") who at the beginning of such period constitute the Board of
Directors of the Bank or of the Company (the "Existing Board") cease for any
reason to constitute at least two-thirds thereof, provided that any individual
whose election or nomination for election as a member of the Existing Board was
approved by a vote of at least two-thirds of the Continuing Directors then in
office shall be considered a Continuing Director. For purposes of this
paragraph only, the term "person" refers to an individual or a corporation,
partnership, trust, association, joint venture, pool, syndicate, sole
proprietorship, unincorporated organization or any other form of entity not
specifically listed herein.
Notwithstanding the foregoing, a "Change in Control" shall not be deemed to
---
occur solely by reason of a transaction in which the Bank converts to the stock
form of organization, or creates an independent holding company in connection
therewith. The decision of the Board as to whether a Change in Control has
occurred shall be conclusive and binding.
"Company" shall mean any holding company that becomes the sole owner of the
Bank.
2
<PAGE>
"Common Stock" shall mean the common stock of the Bank, or of the Company
if it is the sole owner of the Bank's common stock.
"Deferral Election Form" shall mean the form attached as Exhibit "A."
"Director" shall mean a member of the Board.
"Distribution Election Form" shall mean the form attached hereto as Exhibit
"B."
"Effective Date" shall mean the date on which the Plan first becomes
effective, as referenced in the opening paragraph of this document.
"Employee" shall mean any person who is employed by the Bank.
"Investment Election Form" shall mean the form attached as Exhibit "C."
"Participant" shall mean (i) an individual who serves as a Director of the
Bank on or after the Effective Date, regardless of whether or not the Director
is an Employee, and (ii) any Employee whom the Board has specifically selected
for participation in the Plan, provided, that an Employee shall be eligible for
Plan participation only if the Employee is a member of a select group of the
Bank's or the Company's management or highly compensated employees for purposes
of Title I of the Employee Retirement Income Security Act of 1974, as amended
from time to time.
"Plan" shall mean this Baltimore County Savings Bank, F.S.B. Deferred
Compensation Plan.
"Plan Year" shall mean the Bank's fiscal year.
"Surviving Spouse" means the husband or wife of a Director at the time of
the Director's death, provided they are not then divorced or legally separated.
"Trust" shall mean the trust created under the Trust Agreement.
"Trust Agreement" shall mean the agreement entered into between the Bank
and the Trustee, pursuant to the terms hereof.
"Trustee" shall mean the person(s) or entity appointed by the Board
pursuant to the Trust Agreement to hold legal title to the Plan assets for the
purposes set forth herein.
3
<PAGE>
ARTICLE II
CREDITS TO ACCOUNTS
-------------------
On the Effective Date. The following Directors shall have their Accounts
credited on the Effective Date with the following amounts, with "Past Deferrals"
referring to credits made under the Bank's Incentive Compensation Plan through
October 31, 1997:
<TABLE>
<CAPTION>
Deferrals
Participant (Through 10/31/97) Retirement Credit Total Credit
----------- ------------------ ----------------- ------------
<S> <C> <C> <C>
Rohe 65,616.82 $80,000 145,616.82
Dietz 64,451.76 $80,000 144,451.76
Dunton 53,299.67 $80,000 133,299.67
Loraditch 0.00 $38,000 38,000.00
Loughran 0.00 $38,000 38,000.00
Cox 11,387.01 $56,667 68,054.01
Kahl 13,220.40 $47,333 60,553.40
Magsamen 11,578.84 $80,000 91,578.84
Meyers 21,813.85 $80,000 101,813.85
Panzer 66,612.20 $38,000 104,612.20
</TABLE>
Future Credits. On each September 30 beginning with 1998, each Participant
who is a Director on such date and who has between five and 16 years of service
as a Board Director, shall have his or her Account credited with $3,000. No
Participant may receive more than 16 years of credits to his or her Account. A
Participant who, after the Effective Date, first completes five years of service
as a Director, shall have his or her Account credited with $17,500 on the
September 30 following completion of five years of service.
Elective Deferrals. Prior to each Plan Year, each non-Employee Director
may elect to defer the receipt of all or part of their future fees (including
retainers), and each other Participant may elect to defer up to 25% of salary or
100% of bonus compensation. Such elections shall be (i) made on the Deferral
Election Form, and (ii) effective on the October 1st following their acceptance
by the Administrator, provided that elections made within 30 days of either the
------
Effective Date, or a Participant's initial service with the Bank as an Employee
--
or a Director, shall be effective as of the first day of the month following
their acceptance by the Administrator. Any such elections shall be irrevocable
until the end of the Plan Year in which they are made, except that the Board may
permit suspension of a Participant's deferral election in the event of
"hardship" within the meaning of Article III.
Investment Return. From the date of any credits through distribution under
the terms of the Plan, each Participant's Account shall be credited with a rate
of return based on the Participant's selection from the choices presented on the
Investment Election Form (and in the absence of a valid election, based on the
interest rate paid by the Bank on one-year certificates of deposit as of the
preceding October 1/st/). If a Participant has, before the Effective Date,
selected
4
<PAGE>
a measure for the rate of return on compensation deferred through the Bank's
Incentive Compensation Plan, such election shall be honored and remain in effect
until a superseding election becomes effective.
Short-swing Profit Rule. If a Participant elects to have his or her
Account appreciate or depreciate based on the Common Stock fund, the
effectiveness of any investment election that the Participant makes shall be
deferred until the next following date on which said election would not result
in an "opposite way" transaction for purposes of SEC Rule 16b-3. For purposes
of this paragraph, an "opposite way" transaction shall be defined as an election
that affects a "sale" of the Common Stock by a Participant within six months of
an election that affects a "purchase" (and vice versa), whether under this Plan
or another plan maintained by the Company or the Bank. This six-month "opposite
way" rule will not apply, however, if the Participant elects to receive a
distribution in connection with his or her death or termination of employment.
Vesting. Amounts credited to Participant's Accounts shall be fully vested
at all times.
ARTICLE III
DISTRIBUTION FROM ACCOUNTS; ELECTION FORMS
------------------------------------------
General Rule. Account balances shall be paid in five substantially equal
annual installments beginning during the first quarter of the calendar year a
Participant ceases to be a Director or Employee for any reason. Any subsequent
payments shall be made by the last day of the first quarter of each subsequent
calendar year until the Participant has received the entire amount of his or her
Account. If Common Stock is outstanding at the time of a Participant's
termination of service, the Participant may elect on the Distribution Election
Form to receive his or her distribution in cash or Common Stock (but only to the
extent that shares of Common Stock are then held in the Trust for the
Participant's benefit.) Notwithstanding the foregoing, (i) a Participant may
elect on his or her Distribution Election Form to have his or her Account paid
in a single lump sum distribution or in annual payments over a period of less
than ten years, and (ii) to the extent required under federal banking law, the
amounts otherwise payable to a Participant shall be reduced to the extent that
on the date of a Participant's termination of employment, such reduction is
necessary to avoid subjecting the Bank to liability under Section 280G of the
Internal Revenue Code of 1986, as amended.
Death Benefits. If a Participant dies before receiving all Benefits
payable pursuant to the preceding paragraph, then the remaining balance of the
Participant's Account shall be distributed in a lump sum payment of cash and
Common Stock (if applicable) to the Participant's designated Beneficiary not
later than the first day of the second month following the date of the
Participant's death; provided that a Participant may specify on the Distribution
Election Form a distribution period that effectuates the annual installment
payments selected by the Participant (with payments made as though the
Participant survived to collect all benefits and retired on the date of his or
her death if payments had not previously commenced).
5
<PAGE>
Hardship. If the Participant or a member of the Participant's immediate
family (or a legal dependent of the Participant) should suffer one or more of
the following unforeseen hardships, the Participant may apply to the Board for a
withdrawal of all or part of his or her Account:
(i) extraordinary medical expenses, or
--
(ii) other unforeseeable and severe financial hardships that the Bank's
Board of Directors may generally recognize.
The Board shall have sole and complete discretion over whether or not to
grant a Participant's request for a hardship withdrawal, provided that (i) the
Board shall make its decisions in a uniform and nondiscriminatory manner, and
(ii) the Participant who requests a withdrawal shall abstain from participation
in, and voting on, such request. If the Board approves a withdrawal, the Bank
shall pay the approved amount to the Participant as soon as practicable, and
shall treat said amount as constituting a pro rata reduction in any deemed
investment fund for the Participant's Account (unless the Participant's
application for a withdrawal specifies its payment from a particular fund).
Elections. To be effective, a Participant's initial Distribution Election
Form must be submitted either (i) more than one year before the date on which
------
the Participant's service as a Director or Employee terminates for any reason,
or (ii) within 30 days of the Plan's Effective Date or the Participant's initial
- --
service with the Bank as a Director or an Employee. Distribution elections made
pursuant to this Article III shall become irrevocable one year before the
Participant first becomes entitled to receive a distribution pursuant to this
Article III. Nevertheless, Beneficiary designations made pursuant to executed
Distribution Election Forms shall be revocable during the Participant's lifetime
and the Participant may, by submitting an effective superseding Distribution
Election Form at any time or from time to time, prospectively change the
designated Beneficiary and the manner of payment to a Beneficiary.
ARTICLE IV
SOURCE OF BENEFITS
------------------
General Rule. The rights of the Participants under this Plan and of their
Beneficiaries (if any) shall be solely those of unsecured creditors of the Bank.
Benefits shall constitute an unfunded, unsecured promise by the Bank to pay such
payments in the future, as and to the extent such Benefits become payable.
Benefits shall be paid from the general assets of the Bank, and no person shall,
by virtue of this Plan, have any interest in such assets, other than as an
unsecured creditor of the Bank. For any fiscal year during which a Trust is
maintained, (i) the Trustee shall inform the Board annually prior to the
commencement of each fiscal year as to the manner in which such Trust assets
shall be invested, and (ii) the Board shall, as soon as practicable after the
end of each fiscal year of the Bank, provide the Trustee with a schedule
specifying the amounts payable to each Participant, and the date for making such
payments.
6
<PAGE>
Change in Control. In the event of a Change in Control, the Bank shall
contribute to the Trust an amount sufficient to provide the Trust with assets
having an overall value equivalent to the value of the aggregate Account
balances under the Plan.
7
<PAGE>
EXHIBIT "A"
BALTIMORE COUNTY SAVINGS BANK, F.S.B.
DEFERRED COMPENSATION PLAN
_______________________________
DEFERRAL ELECTION FORM
_______________________________
AGREEMENT, made this ___ day of _________, 199_, by and between ___________
(the "Participant"), and Baltimore County Savings Bank, F.S.B. (the "Bank").
WHEREAS, the Bank has established the Baltimore County Savings Bank, F.S.B.
Deferred Compensation Plan (the "Plan"), and the Participant is eligible to
participate in said Plan.
NOW THEREFORE, it is mutually agreed as follows:
1. The Participant, by the execution hereof, agrees to participate in the
Plan upon the terms and conditions set forth therein, and, in accordance
therewith, elects to defer the receipt of --
[_] ______% of the Participant's salary and ______% of any cash
bonuses awarded to the Participant.
[_] ______% of the Participant's annual retainer for services as a
director of the Bank, and ______% of any other fees that the Participant
receives for services as a director of the Bank.
2. This election will supersede any prior election and will take effect
as soon as practicable hereafter, unless the Participant checks this space
________ thereby designating the next October 1/st/ as this election's
effective date.
3. This election will continue in force until either the September 30
------
following a superseding election by the Participant in a writing sent to the
Bank or until the Participant ceases service with the Bank, or until the Plan is
-- --
terminated by appropriate corporate action, whichever shall first occur.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands the
day and year first above-written.
Witnessed by: PARTICIPANT
_____________________ _____________________________________________________
Witnessed by: BALTIMORE COUNTY SAVINGS BANK, F.S.B.
By
_____________________ __________________________________________________
A duly authorized Administrator of the Plan
<PAGE>
EXHIBIT "B"
BALTIMORE COUNTY SAVINGS BANK, F.S.B.
DEFERRED COMPENSATION PLAN
_______________________________
DISTRIBUTION ELECTION FORM
_______________________________
AGREEMENT, made this ____ day of ________, 19__, by and between the
undersigned participant (the "Participant") in the Baltimore County Savings
Bank, F.S.B. Deferred Compensation Plan (the "Plan"), and Baltimore County
Savings Bank, F.S.B. (the "Bank") with respect to distribution of the
Participant's benefits under the Plan.
NOW THEREFORE, it is mutually agreed as follows:
1. Form of Payment Generally. The Participant, by the execution
-------------------------
hereof, agrees to participate in the Plan upon the terms and conditions set
forth therein, and, in accordance therewith, elects to have his or her Account
distributed as follows:
[_] in one lump sum payment.
[_] in substantially equal annual payments over a period of _____
years (no more than 10).
2. Form of Payment to Beneficiary. In the event of the Participant's
-------------------------------
death, his or her Account shall be distributed --
[_] in one lump sum payment.
[_] in accordance with the payment schedule selected in paragraph
1 hereof (with payments made as though the Participant
survived to collect all benefits, and as though the
Participant terminated service on the date of his or her
death, if payments had not already begun).
3. Medium of Payment. Any benefits payable to the Participant shall
-----------------
be paid in --
[_] cash only.
[_] cash and any shares of common stock of the Bank or its
holding company (if one is formed) that are held in the
Plan's grantor trust for the Participant's benefit.
<PAGE>
Deferred Compensation Plan
Distribution Election Form
Page 2
4. Designation of Beneficiary. In the event of the Participant's death
--------------------------
before he or she has collected all of the benefits payable under the Plan, the
Participant hereby directs that any survivorship benefits payable under Article
III of the Plan be distributed to the beneficiary or beneficiaries designated
under subparagraphs a and b of this paragraph 4 in the manner elected pursuant
to paragraph 2 above:
a. Primary Beneficiary. The Participant hereby designates the person(s)
-------------------
named below to be his or her primary beneficiary and to receive the balance of
any unpaid benefits under the Plan.
<TABLE>
<CAPTION>
===========================================================
Name of Mailing Address Percentage of
Primary Beneficiary Death Benefit
------------------- --------------- -------------
<S> <C> <C>
%
------------------- --------------- -------------
%
=================== =============== =============
</TABLE>
b. Contingent Beneficiary. In the event that the primary beneficiary or
----------------------
beneficiaries named above are not living at the time of the Participant's death,
the Participant hereby designates the following person(s) to be his or her
contingent beneficiary for purposes of the Plan:
<TABLE>
<CAPTION>
==============================================================
Name of Mailing Address Percentage of
Contingent Beneficiary Death Benefit
---------------------- --------------- -------------
<S> <C> <C>
%
---------------------- --------------- -------------
%
====================== =============== =============
</TABLE>
5. Effect of Election. The elections made in paragraphs 1 and 3 hereof
------------------
shall become irrevocable one year prior to the Participant's termination of
service as a director or employee. The Participant may, by submitting an
effective superseding Distribution Election Form at any time and from time to
time, prospectively change the beneficiary designation and the manner of payment
to a beneficiary. Such elections shall, however, become irrevocable upon the
Participant's death.
<PAGE>
Deferred Compensation Plan
Distribution Election Form
Page 3
6. Mutual Commitments. The Bank agrees to make payment of all amounts
------------------
due the Participant in accordance with the terms of the Plan and the elections
made by the Participant herein. The Participant agrees to be bound by the terms
of the Plan, as in effect on the date hereof or properly amended hereafter.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands the
day and year first above-written.
Witnessed by: PARTICIPANT
- ------------------- -----------------------------------------------------
Participant
Witnessed by: BANK
- ------------------- BALTIMORE COUNTY SAVINGS BANK, F.S.B.
By
--------------------------------------------------
A duly authorized Plan Administrator
<PAGE>
EXHIBIT "C"
BALTIMORE COUNTY SAVINGS BANK, F.S.B.
DEFERRED COMPENSATION PLAN
_______________________________
INVESTMENT ELECTION FORM
_______________________________
WHEREAS, Baltimore County Savings Bank, F.S.B. (the "Bank") has established
the Baltimore County Savings Bank, F.S.B. Deferred Compensation Plan (the
"Plan"), and the undersigned participant therein is eligible to make an
investment election pursuant to Article II of said Plan.
NOW THEREFORE, the Participant hereby elects as follows:
1. The Participant, by the execution hereof, agrees to participate in the
Plan upon the terms and conditions set forth therein, and in accordance
therewith, directs that any amounts credited to the Participant's account under
the Plan will appreciate or depreciate from the effective date hereof as though
they were invested as follows:
___% in one-year certificates of deposit of the Bank.
___% in shares of the common stock of the Bank or its holding
company if one is formed (with credit for a dividend-
adjusted rate of return), provided that one year
--------
certificates of deposit shall measure the return credited
for periods before common stock becomes publicly available.
2. The investment election made in the prior paragraph shall be effective
on the first day of the next following calendar quarter, and shall remain in
effect until the September 30th that immediately follows the Bank's receipt of a
properly executed superseding investment election by the Participant.
IN WITNESS WHEREOF, the Participant has executed this form on the ___ day
of ________ 19__.
Witnessed by: PARTICIPANT
_______________________ __________________________________________________
<PAGE>
EXHIBIT 10.5
BALTIMORE COUNTY SAVINGS BANK, FSB
INCENTIVE COMPENSATION PLAN
___________________
BASIC PLAN DOCUMENT
___________________
<PAGE>
BALTIMORE COUNTY SAVINGS BANK, FSB
INCENTIVE COMPENSATION PLAN
___________________________
BASIC PLAN DOCUMENT
___________________________
Table of Contents
Page
ARTICLE I. General Provisions.................... 1
ARTICLE II. Definitions........................... 1
ARTICLE III. Eligibility and Participation......... 4
ARTICLE IV. Benefits.............................. 4
ARTICLE V. Deferred Compensation................. 8
ARTICLE VI. Plan Administration................... 9
ARTICLE VII. Amendment and Termination............. 10
ARTICLE VIII. General Provisions.................... 10
<PAGE>
BALTIMORE COUNTY SAVINGS BANK, FSB
INCENTIVE COMPENSATION PLAN
___________________
BASIC PLAN DOCUMENT
___________________
ARTICLE I. GENERAL PROVISIONS
1.01 Purpose. This Basic Plan Document and the Adoption Agreement
-------
executed by the Employer together establish the Plan, which is being implemented
and maintained for the purpose of providing select Directors and Key Employees
with incentive compensation as selected in the Adoption Agreement in the form of
Bonuses, Stock Options, and Restricted Stock in the event the Employer meets
certain performance goals indicative of its profitability and stability in
comparison to other financial institutions in its Peer Group.
1.02 Construction. The Employer intends that the Plan be an unfunded
------------
plan maintained primarily for the purpose of providing Incentive Awards, and
that the Plan not constitute an "employee benefit plan" within the meaning of
---
ERISA. Notwithstanding the foregoing, it is intended that Article V of the Plan
shall be maintained primarily for the purpose of providing deferred compensation
for a select group of management or highly compensated employees within the
meaning of Section 201(2) of ERISA. The Plan shall be administered, construed,
and interpreted in a manner consistent with the purpose and intent set forth in
this Section.
1.03 Effective Date. The Plan shall become effective on the date
--------------
specified in the Adoption Agreement.
ARTICLE II. DEFINITIONS
Unless the context clearly requires otherwise, the terms defined in this
Article II shall, for all purposes of this Plan, have the respective meanings
specified in this Article II.
-1-
<PAGE>
2.01 "Adoption Agreement" means the Adoption Agreement executed by the
------------------
Employer.
2.02 "Basic Plan Document" means this Basic Plan Document associated
-------------------
with the Baltimore County Savings Bank, FSB Incentive Compensation Plan.
2.03 "Beneficiary" means the person or persons designated as a
-----------
Participant's beneficiary or beneficiaries in accordance with Section 4.08
hereof or a Participant's deferred compensation agreement.
2.04 "Board" means the Employer's Board of Directors.
-----
2.05 "Bonuses" mean cash bonuses payable to Participants pursuant to
-------
Section 4.01 hereof.
2.06 "CAMEL Rating" means the most recent CAMEL rating given for its
------------
safety and soundness.
2.07 "Cause" means personal dishonesty, incompetence, willful
-----
misconduct, breach of duty involving personal profits, intentional failure to
perform stated duties, willful violation of a material provision of any law,
rule or regulation (other than traffic violations or similar offense), or a
material violation of a final cease-and-desist order or any other action which
results in a substantial financial loss to the Employer. A determination of
"Cause" shall be made by the Committee within its sole discretion.
2.08 [Reserved for Future Use].
2.09 "Code" means the Internal Revenue Code of 1986, as amended from
----
time to time. References to a Code section shall include any comparable section
or sections of future legislation that amends, supplements or supersedes such
section.
2.10 "Committee" means the committee specified in the Adoption
---------
Agreement. In the absence at any time of a duly appointed committee, the Plan
shall be administered by those members of the Employer's Board who are
"disinterested persons" within the meaning of Rule 16b-3.
-2-
<PAGE>
2.11 "Common Stock" means the common stock identified in the Adoption
------------
Agreement.
2.12 "Compensation" means (i) in the case of an Employee, the
------------
Employee's base salary for the Plan Year, as in effect on the last day of the
Plan Year, and (ii) in the case of a Director who is not an Employee, the total
fees that the Director receives for service on the Board during the Plan Year.
2.13 "CRA" means the rating that the Employer or its primary banking
---
subsidiary receives for compliance with the Community Reinvestment Act, as
amended from time to time, and for any particular Plan Year shall mean the most
recent CRA Rating as of the last day of the Plan Year.
2.14 "Director" means any member of the Board.
--------
2.15 "Disability" means a physical or mental condition that is
----------
expected to be of indefinite duration and to substantially impair the ability of
a Participant to fulfill his duties to the Employer.
2.16 "Efficiency Ratio" means the ratio of the Employer's non-interest
----------------
expense to the sum of its net interest income and non-interest income.
2.17 "Eligible Director", "Eligible Employee", and "Eligible Key
----------------- ----------------- ------------
Employee" shall have the meaning set forth in the Adoption Agreement.
- --------
2.18 "Employee" means any individual who performs service for any
--------
Employer and who is treated as an employee for payroll tax purposes.
2.19 "Employer" has the meaning set forth in the Adoption Agreement.
--------
2.20 "ERISA" means the Employee Retirement Income Security Act of
-----
1974, as amended from time to time.
2.21 "Factors" mean, collectively, the factors identified in the
-------
Adoption Agreement as being determinant of the Multiplier. When used in the
singular, Factor means any Factor identified in the Adoption Agreement.
------
-3-
<PAGE>
2.22 "Incentive Awards" mean any benefits provided pursuant to Article
----------------
IV hereof, as modified by the Adoption Agreement.
2.23 "Market Value" means the fair market value of a Share on the date
------------
of an Incentive Award, and shall be determined by the Committee in its
discretion, provided that --
(i) if the Common Stock is listed on a national securities exchange
(including the Nasdaq National Market System or SmallCap Market), Market
Value means the average of the highest and lowest selling prices on the
exchange on the most recent date on which a sale occurred; and
(ii) if the Common Stock is traded otherwise than on a national
securities exchange but bid and asked prices are available, Market Value
means the average of its bid and asked price on the most recent date on
which there was a bid and asked price.
2.24 "Multiplier" shall, for any Plan Year, be determined in
----------
accordance with Part IV of the Adoption Agreement. The Committee shall
calculate the Multiplier as soon as practicable after the end of each Plan
Year, and shall use such financial reports as are then reasonably available
(including Peer Group data for the 12-month period ending one calendar quarter
before the Plan Year end). Notwithstanding the foregoing, the Committee may in
its discretion adjust the Employer's financial results to take into account (as
well as to disregard) extraordinary financial events such as an acquisition of
another company.
2.25 "NPL" means nonperforming loans (loans over 90 days delinquent
---
and real estate owned) as a percentage of total assets, as determined by the
Committee in accordance with generally accepted accounting principles.
2.26 "Option" a stock option that is granted pursuant to Section 4.03
------
hereof.
2.27 "Participant" means an individual who has received an Incentive
-----------
Award pursuant to Article IV hereof or has made a deferred compensation election
pursuant to Article V hereof.
-4-
<PAGE>
2.28 "Participant Determination Date" has the meaning set forth in the
------------------------------
Adoption Agreement.
2.29 "Peer Group" means the group of financial institutions identified
----------
in the Adoption Agreement.
2.30 "Plan" means the Employer's Incentive Compensation Plan, as
----
established by the Employer's execution of the Adoption Agreement.
2.31 "Restricted Stock Award" means an award pursuant to Section 4.02
----------------------
hereof.
2.32 "ROA" means return-on-assets, as determined by the Committee in
---
accordance with generally accepted accounting principles.
2.33 "ROE" means return-on-equity, as determined by the Committee in
---
accordance with generally accepted accounting principles.
2.34 "Share" means one share of Common Stock.
-----
2.35 "Year of Service" means the number of full 12-month periods,
---------------
measured from the date of an Incentive Award and each anniversary of that date
during which a Participant has remained in the service of the Employer.
ARTICLE III. ELIGIBILITY AND PARTICIPATION
The Committee shall make determinations of eligibility and participation in
accordance with the Adoption Agreement.
ARTICLE IV. BENEFITS
As soon as practicable after the end of the Plan Year, the Committee shall
make the Incentive Awards provided for in this Article IV.
4.01 Bonuses. In accordance with the Adoption Agreement, the
-------
Committee shall determine the Bonuses payable to Eligible Directors and Eligible
Key Employees, and shall promptly notify the Employer of the Bonuses to be paid
-5-
<PAGE>
to such individuals. Notwithstanding the foregoing, the Committee shall
proportionately reduce the Bonuses paid hereunder for the Plan Year to the
extent necessary to ensure that (i) the aggregate amount paid as Bonuses does
not jeopardize the status of the Employer (or its primary banking subsidiary) as
a well-capitalized institution, or (ii) such reduction is necessary to ensure
that no Participant receives overall compensation that is excessive under
applicable safety and soundness standards.
4.02 Restricted Stock Award. In accordance with the Adoption
----------------------
Agreement, the Committee shall make Restricted Stock Awards to Eligible
Directors and Eligible Key Employees, and shall promptly provide each recipient
of an award with a notice thereof.
(a) General Vesting Rule. The Shares subject to a Restricted Stock
Award shall become vested and nonforfeitable according to the schedule set forth
in the Adoption Agreement. The Employer shall deliver to the Committee all
Shares subject to Restricted Stock Awards, and the Committee shall hold such
Shares in escrow until they are transferred to Participants in accordance with
this Section. In this regard, the relationship of the Committee to the Employer
shall be that of agent to principal.
(b) Exception for Termination due to Death or Disability.
Notwithstanding the vesting schedule set forth in the Adoption Agreement, all
Shares subject to a Participant's Restricted Stock Award shall become fully
(100%) vested upon the Participant's termination of service with the Employer
due to his death or Disability. Such Shares shall be transferred to the
Participant (or, in the event of his death, his Beneficiary) as soon as
practicable after the event that accelerates vesting hereunder.
(c) Accrual of Dividends. Whenever the Committee transfers Shares to
a Participant or Beneficiary under this Section, such Participant or Beneficiary
shall also be entitled to receive, with respect to each Share transferred, both
an amount equal to any cash dividends declared and paid between the date the
relevant Restricted Stock Award was initially granted to the Participant and the
date the Shares are being transferred. The Participant shall also receive the
net earnings, if any, that are attributable to any cash dividends so paid out.
-6-
<PAGE>
(d) Timing of Distributions. The Committee shall transfer the Shares
subject to a Restricted Stock Award to the Participant or his Beneficiary, as
the case may be, as soon as practicable after the later of (i) the date they
have become fully vested and nonforfeitable, or (ii) the date of distribution
that the Participant elects in writing on a form and in a manner that is both
acceptable to the Committee and delivered to the Committee within the 30-day
period after the Participant receives the Restricted Stock Award covering such
Shares. Any election that a Participant makes hereunder shall be irrevocable.
(e) Form of Distribution. Whenever a Participant becomes entitled to
receive Shares in accordance herewith, the Committee shall transfer such Shares,
together with any Shares representing stock dividends, in the form of Common
Stock. One Share of Common Stock shall be given for each Share earned.
Payments representing cash dividends (and earnings thereon) shall be made in
cash.
(f) Voting of Shares held in Escrow. After a Restricted Stock Award
has been granted hereunder, the Committee shall vote the Shares subject thereto
in the manner directed by the Board, and otherwise in the manner determined by
the Committee in its sole discretion.
4.03 Stock Options. In accordance with the Adoption Agreement, the
-------------
Committee shall grant Options to Eligible Directors and Eligible Key Employees,
and shall promptly provide each recipient of an Option with a stock option
agreement specifying the terms and conditions of the Option; provided that each
Option shall have an exercise price per Share equal to its Market Value on the
date of the grant, shall become exercisable in accordance with the schedule set
forth in the Adoption Agreement, and shall expire on the earlier of ten years
after the date of its grant, and --
(a) two years after a Participant's service with the Employer
terminates due to his death;
(b) immediately upon the Participant's termination of service for
Cause;
(c) three months after a Participant's service with the Employer
terminates for a reason other than death or Cause.
-7-
<PAGE>
Notwithstanding the vesting schedule set forth in the Adoption Agreement,
all Shares subject to a Participant's Restricted Stock Award shall become fully
(100%) vested upon the Participant's termination of service with the Employer
due to his death or Disability.
4.04 Revocation for Cause. Notwithstanding anything herein to the
--------------------
contrary, if the Participant is discharged from service with the Employer for
Cause or is discovered after termination of service to have engaged in conduct
that would have justified termination for Cause, the Committee may immediately
revoke, rescind, and terminate any Incentive Award made under this Plan to the
extent a Participant has not actually been paid a Bonus, exercised an Option, or
received Shares upon the vesting of a Restricted Stock Award.
4.05 Duty of the Committee. The Committee shall have no
---------------------
responsibility to Participants other than (i) to inform the Employer, as soon as
practicable after the end of each Plan Year, in writing, as to the Bonuses to be
provided, (ii) to provide Eligible Directors and Eligible Key Employees with
stock option agreements and Restricted Stock Awards if so elected in the
Adoption Agreement, and (iii) to follow such reasonable directions as the
Employer shall make as to the provision of such Incentive Awards to
Participants.
4.06 Minority, Disability, or Incompetency. If any Incentive Award
-------------------------------------
becomes payable or transferable under this Plan to a minor, to a person under
legal disability or to a person not adjudicated incompetent but who the
Committee in its discretion determines to be incapable by reason of illness or
mental or physical disability of managing his financial affairs, the Committee
may direct that such Incentive Award be paid or transferred to the legal
representative or custodian of such person or to any relative or friend of such
person, or that such amount be paid directly for such person's support and
maintenance. Payments so made in good faith shall completely discharge the
Committee and the Employer of any and all obligations and liabilities with
respect to such Incentive Awards.
4.07 Designation of Beneficiary. A Participant may file with the
--------------------------
Committee a written designation of a Beneficiary who is to receive his or her
vested benefits in the event of the Participant's death prior to his or her
collection of said benefits. Such designation of Beneficiary may be changed at
any time by written notice to the Committee. The designation last filed with
the Committee shall be controlling. In
-8-
<PAGE>
the event of the death of a Participant and in the absence of a beneficiary
validly designated under the Plan who is living at the time of the Participant's
death, the Participant's estate shall be deemed to be the Beneficiary for
purposes of this Plan.
4.08 Source of Benefits. To the extent required under the Adoption
------------------
Agreement, the Employer shall pay Bonuses out of its general assets, provided
that the Board may in its discretion establish and fund a grantor trust meeting
the requirements of Revenue Procedure 92-64, as amended or revised from time to
time. Nothing contained in the Plan itself shall constitute, or be treated as,
a trust or create any fiduciary relationship (other than the Committee's
retention of Shares in escrow pursuant to Section 4.02) . Except to the extent
provided in Section 4.02 the Employer, shall not be under any obligation to
segregate any assets for the purpose of providing Incentive Awards, and no
person or entity which is entitled to payment under the terms of the Plan shall
have any claim, right, security interest, or other interest in any fund, trust,
account, insurance contract, or asset of the Employer. To the extent that a
Participant or any other person acquires a right to receive any Benefit under
the Plan, such right shall be limited to that of a recipient of an unfunded,
unsecured promise to pay amounts in the future and the Participant's (or other
person's) position with respect to such amounts shall be that of a general
unsecured creditor.
4.09 Shares Subject to the Plan. If items V(b) or V(c) of the Adoption
--------------------------
Agreement are selected, then except as otherwise required hereunder, the
aggregate number of Shares deliverable to Participants pursuant to the Plan
shall not exceed the number of Shares designated in the Adoption Agreement. Such
Shares may either be authorized but unissued Shares or Shares held in treasury.
The number and kind of shares which may be purchased or issued under the Plan,
and the number and kind of shares subject to outstanding Incentive Awards, shall
be equitably adjusted for any increase, decrease, change, or exchange of Shares
for a different number or kind of shares or other securities of the Bank or
another company which results from a merger, consolidation, recapitalization,
reorganization, reclassification, stock dividend, split-up, combination of
shares, or similar event in which the number or kind of shares is changed
(including a transaction in which the Employer is not the surviving entity). In
addition, the Committee shall have the discretionary authority to impose on the
Shares subject to Incentive Awards such restrictions as the Committee may deem
appropriate or desirable, including but not limited to a right of first refusal,
or repurchase option, or both of these restrictions.
-9-
<PAGE>
If an Option should expire, become unexercisable or be forfeited for any
reason without having been exercised in full, or if a Restricted Stock Award
should be forfeited for any reason, the Shares subject to such Options or
Restricted Stock Award shall, unless the Plan shall have been terminated, be
available for the grant of additional Options or Restricted Stock Awards under
the Plan.
ARTICLE V. DEFERRED COMPENSATION
This Article of the Plan establishes a deferred compensation program for
Participants, subject to the terms and conditions provided in this Basic Plan
Document and in the Adoption Agreement. In addition, the terms and conditions
of the Deferred Compensation attached as Exhibit "A" are incorporated herein by
reference, and may not be changed except through affirmative Board action in
accordance with Article VII hereof.
5.01 General Deferral Procedure. In accordance with this Article, the
--------------------------
individuals specified in the Adoption Agreement may elect, within 30 days of
becoming a Participant or in advance of any October 1st, to defer all or any
portion of the fees and/or compensation otherwise payable to him from any
Employer, in cash, for any Plan Year in which the Plan is in effect. Deferred
amounts shall be credited by the Employer at the end of each month, in
accordance with the terms of the deferred compensation agreement entered into
between the Participants and the Employer that would otherwise pay the
Participant cash compensation.
The funds so deferred shall be credited monthly by the Employer to a
bookkeeping account ("Deferral Account") in the name of each Participant
according to the terms of the Participant's deferred compensation agreement. In
addition to the funds deferred monthly and credited to the Deferral Accounts of
Participants, the Employer shall adjust each Account at the end of each Plan
Year (i) to credit the Participant's Deferral Account with the appreciation or
depreciation that would have occurred if the Deferral Account had been invested
in the manner that the Participant selects in the deferred compensation
agreement from among the measures selected by the Employer in the Adoption
Agreement.
5.02 Distributions to Participants. A Participant's Deferral Account
-----------------------------
shall be paid, in cash, in accordance with those terms set forth in his deferred
compensation
-10-
<PAGE>
agreement which are applicable to the deferred amounts. If a Participant should
die before receiving all deferred compensation benefits payable under this
Article, then such payment(s) shall be made to the Participant's Beneficiary.
5.03 Agreements. Deferred compensation agreements made hereunder
----------
shall be prospective only and shall be irrevocable with respect to amounts
deferred pursuant thereto, except that a Participant may at any time and from
time to time (i) change the Beneficiary designated therein, (ii) prospectively
change the investment selection applicable to his Deferral Account, and/or (iii)
file a deferred compensation agreement which supersedes a prior deferred
compensation agreement as to amounts deferred on or after the October 1st which
coincides with or next follows execution of the superseding agreement. In
addition, a Participant may at any time file a written notice with the Employer
pursuant to which the Participant ceases future accruals as soon as practicable
after the Employer receives such notice.
ARTICLE VI. PLAN ADMINISTRATION
6.01 The Committee. In its sole and absolute discretion, which
-------------
discretion when exercised shall be final and binding on all parties affected
thereby, the Committee shall have the authority and the responsibility to
control the administration and operation of the Plan in accordance with its
terms including, without limiting the generality of the foregoing, the powers
and duties: (i) to interpret, apply, and administer the Plan, to decide all
questions of eligibility, participation, status, benefits, and rights of
Participants and Beneficiaries under the Plan; (ii) to establish and amend such
rules and procedures as it deems necessary or appropriate to the proper
administration of the Plan; (iii) to employ or retain such agents as it deems
necessary or advisable to assist in the administration of the Plan, and to
delegate to the extent permitted by applicable law such powers and duties as it
deems necessary or advisable; (iv) to prepare and file all statements, returns,
and reports required to be filed by the Plan with any agency of government; (v)
to comply with all requirements of applicable state and federal law including
applicable securities, labor, and tax law; and (vi) to perform all functions
otherwise assigned to it under the terms of the Plan.
6.02 Claims Procedure. Claims for Benefits under the Plan shall be
----------------
filed in writing with the Committee. Written notice of the Committee's
disposition of a claim generally shall be furnished to the claimant within 60
days after the application
-11-
<PAGE>
therefor is filed. However, if special circumstances exist of which the
Committee notifies the claimant within such 60 day period, the Committee may
extend such period to the extent necessary, but in no event beyond 180 days
after the claim is filed. In the event the claim is denied, the reasons for
the denial shall be specifically set forth in writing, pertinent provisions of
the Plan shall be cited and, where appropriate, an explanation as to how the
claimant can perfect the claim will be provided. Any claimant who has been
denied a Benefit shall be entitled, upon request to the Committee, to appeal the
denial of his claim within 60 days following the Committee's determination
described in the preceding sentence. Upon such appeal, the claimant, or his
representative, shall be entitled to examine pertinent documents, submit issues
and comments in writing to the Committee, and meet with the Committee. The
Committee shall review its decision and issue a final decision to the claimant
in writing, generally within 60 days following such appeal. However, if special
circumstances exist of which the Committee notifies the claimant within such 60
day period, the Committee may extend such period to the extent necessary, but in
no event beyond 120 days following such appeal.
ARTICLE VII. AMENDMENT AND TERMINATION
The Employer, acting by its Board, reserves the right at any time to
terminate or amend the Plan in any manner and for any reason; provided, that no
amendment or termination shall, without the consent of the Participant or, if
applicable, the Beneficiary, adversely affect such Participant's or
Beneficiary's rights with respect to Benefits accrued as of the date of such
amendment or termination.
ARTICLE VIII. GENERAL PROVISIONS
8.01 Prohibition Against Alienation. Benefits payable to a
------------------------------
Participant or Beneficiary under the terms of this Plan shall not be subject in
any manner to alienation, anticipation, sale, transfer, assignment, pledge,
hypothecation, attachment, receivership, or encumbrance of any kind, nor shall
it pass to any trustee in bankruptcy or be reached or applied by any legal
process for the payment of any obligations of the Participant or Beneficiary,
except at such times and in such manner as provided in this Plan.
8.02 No Enlargement of Employment Rights. Nothing contained in this
-----------------------------------
Plan shall give or be construed as giving any Employee or Director the right to
be
-12-
<PAGE>
retained in the service of any Employer, or shall interfere with the right of
any Employer to discharge or otherwise terminate any Employee's or Director's
service at any time.
8.03 Gender. Whenever any masculine terminology is used in this Plan,
------
it shall be taken to include the feminine, unless the context otherwise
indicates.
8.04 Applicable Law. This Plan shall be construed and regulated, and
--------------
its validity and effect and the rights hereunder of all parties interested shall
at all times be determined, in accordance with the laws of the State of
Maryland, except to the extent such state law is preempted by federal law.
8.05 Titles and Headings. The titles and headings included herein are
-------------------
included for convenience only and shall not be construed as in any way affecting
or modifying the text of this Plan, which text shall control.
8.06 Withholding. The Committee and each Employer reserve the right
-----------
to withhold from payments of Bonuses and other Incentive Awards such amounts of
income, payroll, and other taxes as it deems advisable or required, and if the
amount of such cash payment is not sufficient, the Committee or any Employer may
require that the Participant or Beneficiary pay the amount required to be
withheld as a condition of delivering Bonuses or other Incentive Awards.
-13-
<PAGE>
Exhibit "A"
BALTIMORE COUNTY SAVINGS BANK, FSB
INCENTIVE COMPENSATION PLAN
_______________________________
Deferred Compensation Agreement
_______________________________
AGREEMENT, made this ____ day of ________, 199_, by and between
_______________ (the "Participant"), and Baltimore County Savings Bank, FSB (the
"Employer").
WHEREAS, the Baltimore County Savings Bank, FSB has established the
Baltimore County Savings Bank, FSB Incentive Compensation Plan (the "Plan"), and
the Participant is eligible to make a deferred compensation election pursuant to
Article V of said Plan;
NOW THEREFORE, it is mutually agreed as follows:
1. The Participant, by the execution hereof, agrees to participate in the
Plan upon the terms and conditions set forth therein, and, in accordance
therewith, makes the following elections:
a. The amount of base fees/salary which the Participant hereby
elects to defer is ______ percent (____%) of the amount otherwise earned from
the date of this Agreement forward. The amount of cash bonuses payable under
the Plan which the Participant hereby elects to defer is ______ percent (____%)
of the amount otherwise earned from the date of this Agreement forward.
b. Until distributed to the Participant, the amounts deferred
pursuant hereto shall appreciate or depreciate for each Plan Year as though they
were invested as follows:
___% in a fund having the highest interest rate which the Bank
pays on certificates of deposit having a term of one year.
___% in a fund having a rate of return equal to the percentage
designated in the Adoption Agreement (1.5%) times the
Multiplier.
<PAGE>
Deferred Compensation Agreement
Page 2
c. The amounts deferred and any related accumulated income on such
deferrals shall be distributed, in cash, beginning on the first day of the month
following the Participant's ____ termination of service with the Employer, ____
attainment of age _____, OR ____ the later to occur of these events.
d. The Participant hereby elects to have the amount deferred
hereunder and earnings attributable thereto be distributed as follows: ____ one
lump sum, or ____ substantially equal annual (____ monthly) payments over a
period of ___ years.
2. The Participant hereby designates the person(s) named below to be his
or her primary beneficiary and to receive the balance of any unpaid deferred
compensation and related earnings.
<TABLE>
<CAPTION>
==================================================
Name of Primary Mailing Address Percentage of
Beneficiary Death Benefit
--------------------------------------------------
<S> <C> <C>
____%
--------------------------------------------------
____%
==================================================
</TABLE>
In the event that the primary beneficiary or beneficiaries named above are
not living at the time of the Participant's death, the Participant hereby
designates the following person(s) to be his or her contingent beneficiary
for purposes of the Plan:
Name: (1) __________________ (2)______________________
Address: __________________ ______________________
__________________ ______________________
% of Death Benefit: ____% ____%
<PAGE>
Deferred Compensation Agreement
Page 3
3. With respect to amounts deferred while this Agreement is in effect,
the elections made hereunder shall be irrevocable, except that a Participant may
at any time and from time to time prospectively change (i) the investment
election made in paragraph 1.b. hereof, and (ii) the beneficiary designation
made in paragraph 2 hereof. A Participant may at any time file a new agreement
that supersedes this Agreement with respect to amounts earned from the date of
the superseding agreement forward.
4. The Employer agrees to make payment of the amount due the Participant
in accordance with the terms of the Plan and the elections made by the
Participant herein.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands the
day and year first above-written.
Witnessed by: PARTICIPANT
- ------------------------------------- ----------------------------------------
Print Name: Participant
-------------------------
Witnessed by: EMPLOYER
- ------------------------------------- BALTIMORE COUNTY SAVINGS BANK, FSB
Print Name:
-------------------------
By
--------------------------
Its President
<PAGE>
BALTIMORE COUNTY SAVINGS BANK, FSB
INCENTIVE COMPENSATION PLAN
___________________________
ADOPTION AGREEMENT
___________________________
The Employer named below is hereby establishing an incentive compensation
plan having the terms and conditions set forth in the attached Basic Plan
Document, as modified by the elections made in this Adoption Agreement. The
Employer recognizes and affirms that by leaving any box or line blank in this
Adoption Agreement, the Employer has rejected the choice associated therewith.
I. GENERAL INFORMATION ABOUT THE PLAN
A. The name of this Plan is the Baltimore County Savings Bank, FSB
Incentive Compensation Plan (the "Plan").
B. The effective date of the Plan is October 1, 1994 (the "Effective
Date").
C. The fiscal year for the Plan is the 12-month period ending September 30
(the "Plan Year"), with the initial Plan Year beginning on the Effective
Date and ending on September 30, 1995.
D. The Plan is contingent upon its approval by --
1. [ ] The Employer's primary banking regulator.
2. [ ] a stockholder vote sufficient to satisfy the requirements of
[ ] SEC Rule 16b-3, and/or [ ] Section 422 of the Code.
3. [ X ] None of the above.
E. The Employer's Peer Group shall consist of publicly-traded [ ]
commercial banks [ X ] thrift institutions having --
1. [ ] their headquarters in Maryland and X contiguous states.
---
2. [ X ] an asset size between $100 million and $300 million.
3. [ X ] their headquarters in the United States.
<PAGE>
II. GENERAL INFORMATION ABOUT THE EMPLOYER
A. The employer sponsoring the Plan is Baltimore County Savings Bank, FSB
(the "Employer").
B. The address of the Employer is 4111 East Joppa Road, Baltimore,
Maryland 21128.
C. The Employer's taxpayer identification number is 52-0791958.
D. The telephone number of the Employer is (410) 256-5000, and its
facsimile number is (410) 529-0147.
F. The Employer directs that the following individual receive information
about the Plan: Gary Loraditch, Esquire, Vice President, Secretary and
Treasurer.
G. The committee (the "Committee") responsible for administering and
interpreting the Plan shall --
1. [ ] consist of the following individuals: _______________________,
_________________________, and ______________________.
2. [ X ] be the Employer's Pension and Compensation Committee, as
appointed by the Bank's Board of Directors (the "Board") from
time to time.
H. The common stock to be reserved for issuance under the Plan shall
be N/A shares of common stock, par value $___ per share, of N/A
----------- -----
(the "Common Stock").
III. ELIGIBILITY AND PARTICIPATION
A. For each Plan Year, an individual will participate in the Plan if he or
she falls within any one of the following classes on a Participant
Determination Date:
1. [ X ] Member of the Board (whether or not he or she is an employee)
("Eligible Directors").
2. [ X ] Key Employees designated by the Board for fiscal years
beginning after 1995 ("Eligible Key Employees").
3. [ ] Employees who are normally scheduled, on a Participant
Determination Date, to work more than ___ hours per week
("Eligible Employees").
<PAGE>
B. The following date or dates will constitute Participant Determination
Dates:
1. [ ] The first day of the Plan Year.
2. [ X ] The last day of the Plan Year.
3. [ ] Service is required on both of the above dates.
C. Notwithstanding the choices made in Items III. A. and III. B. hereof
the following persons or classes of persons shall be ineligible to participate
in the Plan: ___________________________________________________________________
____________________________________________________________________________.
IV. CALCULATION OF THE MULTIPLIER
A. For each Plan Year, the Multiplier will equal the lesser of 10.0 or the
sum of --
1. 100% of the ROA Factor.
---
2. 100% of the ROE Factor.
---
3. 100% of the NPL Factor.
---
4. 100% of the Efficiency Factor.
---
5. 50% of the CRA Rating Factor.
---
6. 50% for the CAMEL Rating Factor.
---
7. 50% of the Deposit Factor.
---
8. 50% Other: Compliance Rating Factor.
---
B. The ROA Factor will equal the ratio of (i) the Employer's ROA for the
calendar year ending within the Plan Year, to (ii) the average ROA, for
the same calendar year, of other companies in the Employer's Peer
Group.
C. The ROE Factor will equal the ratio of (i) the Employer's ROE for the
calendar year ending within the Plan Year, to (ii) the average ROE, for
the same calendar year, of other companies in the Employer's Peer
Group.
D. The NPL Factor will equal the ratio of (i) the average NPL, for the
calendar year ending within the Plan Year, of other companies in the
Employer's Peer Group, to (ii) the Employer's NPL for the same calendar
year.
<PAGE>
E. The Efficiency Factor will equal the ratio of (i) the average
Efficiency Ratio, for the calendar year ending within the Plan Year, of
other companies in the Employer's Peer Group, to (ii) the Employer's
Efficiency Ratio for the same calendar year.
F. The CRA Rating Factor will be determined according to the following
schedule:
1. 120% for an "Outstanding" CRA Rating.
2. 100% for a "Satisfactory" CRA Rating.
3. 0% for a "Needs Improvement" CRA Rating.
4. -100% for an "Unsatisfactory" CRA Rating.
G. The CAMEL Rating Factor will be determined according to the following
schedule:
1. 120% for a CAMEL Rating of 1.
2. 100% for a CAMEL Rating of 2.
3. -100% for a CAMEL Rating below 2.
H. The Compliance Rating Factor will be determined according to the
following schedule:
1. 120% for a Compliance Rating of 1 ("Outstanding").
2. 100% for a Compliance Rating of 2 ("Satisfactory").
3. -100% for a Compliance Rating of 3 ("Unsatisfactory").
I. The Deposit Factor will equal the ratio of the Employer's total deposits
on the last day of the Plan Year to its total deposits on the first day
of the Plan Year.
J. Notwithstanding the foregoing, if a ratio referred to in Items IV.B.
through IV.E. is less than 80% for any Plan Year, the corresponding
Factor shall be zero.
V. INCENTIVE AWARDS
A. For each Plan Year, Bonuses will be paid in accordance with Section 4.01
and the following elections:
1. [ X ] Each Eligible Director will receive a Bonus equal to 2.5% of
his or her Compensation times the Multiplier.
<PAGE>
2. [ X ] Each Eligible Key Employee will receive a Bonus equal to 2.5%
of his or her Compensation times the Multiplier.
3. [ ] Each Eligible Employee will receive a Bonus equal to ___% of
his or her Compensation times the Multiplier.
4. [ ] In the discretion of the Committee, but based upon a bonus pool
at least equal to $_______ times the Multiplier, with the
Employer's President and _____________________ being entitled
to at least _____% and _____%, respectively, of such bonus
pool.
B. For each Plan Year, Restricted Stock Awards will be made in accordance
with Section 4.02 and the following elections:
1. [ ] Each Eligible Director will receive a Restricted Stock Award of
Shares having a Market Value on the date of the award equal to
___% of the Bonus he or she receives for the Plan Year.
2. [ ] Each Eligible Key Employee will receive a Restricted Stock
Award of Shares having a Market Value on the date of the award
equal to ___% of the Bonus he or she receives for the Plan
Year.
3. Each Restricted Stock Award shall become vested at the rate of ___%
per Year of Service, provided that vesting will accelerate to 100%
upon a Change in Control or the Participant's termination of service
with the Employer due to his death, Disability or retirement at or
after age __.
C. For each Plan Year, Options will be granted in accordance with Section
4.03 and the following elections:
1. [ ] Each Eligible Director will receive an Option to purchase a
number of Shares equal to ___% of the number of Shares subject
to the Participant's Restricted Stock Award for the Plan Year.
2. [ ] Each Eligible Key Employee will receive an Option to purchase a
number of Shares equal to ___% of the number of Shares subject
to the Participant's Restricted Stock Award for the Plan Year.
3. Each Option will become exercisable at the rate of ___% per Year of
Service, but will become immediately exercisable upon termination of
the Participant's service due to death, Disability, or retirement or
after age _______.
<PAGE>
VI. DEFERRED COMPENSATION
A. Who may make deferred compensation elections in accordance with
Article V of the Basic Plan Document?
1. [ X ] Directors (including Directors who are Employees).
2. [ ] The following Key Employees: _______________
____________________________________________.
B. What investments may Participants select for the rate of return on their
deferred compensation?
1. [ X ] The Multiplier times 1.5% percent, or
2. [ X ] The highest interest rate being paid by the Employer on
12-month certificates of deposit.
3. [ ] The rate of return on Common Stock.
4. [ ] Other:______________________________________.
C. How does this deferred compensation program affect any existing deferred
compensation program maintained by the Employer?
1. [ X ] There is no existing non-qualified deferred compensation
program.
2. [ ] The existing non-qualified deferred compensation program will
be amended and restated as of __________ ___, 19___, and
thereafter governed by Article V of the Basic Plan Document.
3. [ ] The existing deferred compensation program will remain in
effect, but only for amounts deferred prior to __________ ___,
19___.
D. How will fee deferrals subject to Article V of the Plan be held until
distributed to Participants?
1. [ X ] As part of the Employer's general assets.
2. [ ] In a grantor ("rabbi") trust.
<PAGE>
VII. MISCELLANEOUS PROVISION
A. Section _____ of this Adoption Agreement shall be modified in the
following manner:
________________________________________________________________________________
________________________________________________________________________________
WHEREFORE, on this ____ day of June, 1995, the Employer hereby executes
this Adoption Agreement, and thereby establishes the Plan upon the terms and
conditions set forth herein and in the Basic Plan Document.
BALTIMORE COUNTY SAVINGS BANK, FSB
By:
---------------------------------------------
Its President
Witness:
- ---------------------------------- [SEAL]
<PAGE>
EXHIBIT 23.2
ANDERSON ASSOCIATES, LLP
Certified Public Accountants
7621 Fitch Lane
Baltimore, Maryland 21236
410-882-8050
CONSENT
We consent to the use in Baltimore County Savings Bank, F.S.B.'s
applications on 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.
/s/ Anderson Associates LLP
ANDERSON ASSOCIATES, LLP
January 21, 1998
Baltimore, Maryland
<PAGE>
[LETTERHEAD OF RP FINANCIAL, LC. APPEARS HERE]
Exhibit 23.3
January 23, 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
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BALTIMORE
COUNTY SAVINGS BANK, F.S.B. AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> SEP-30-1997 SEP-30-1996
<PERIOD-START> OCT-01-1996 OCT-01-1995
<PERIOD-END> SEP-30-1997 SEP-30-1996
<CASH> 3,909,276 4,785,532
<INT-BEARING-DEPOSITS> 8,206,119 9,064,700
<FED-FUNDS-SOLD> 7,102,231 6,224,501
<TRADING-ASSETS> 0 0
<INVESTMENTS-HELD-FOR-SALE> 0 101,376
<INVESTMENTS-CARRYING> 67,512,541 76,069,274
<INVESTMENTS-MARKET> 67,133,512 75,532,610
<LOANS> 158,676,168 154,560,174
<ALLOWANCE> 977,639 926,491
<TOTAL-ASSETS> 251,738,224 258,885,267
<DEPOSITS> 224,656,081 233,310,599
<SHORT-TERM> 0 0
<LIABILITIES-OTHER> 2,290,516 2,743,999
<LONG-TERM> 0 0
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 23,858,449 21,912,991
<TOTAL-LIABILITIES-AND-EQUITY> 251,738,224 258,885,267
<INTEREST-LOAN> 13,239,659 13,094,010
<INTEREST-INVEST> 5,305,772 4,748,012
<INTEREST-OTHER> 912,078 1,222,199
<INTEREST-TOTAL> 19,457,509 19,064,221
<INTEREST-DEPOSIT> 10,312,464 10,620,571
<INTEREST-EXPENSE> 10,322,938 10,635,917
<INTEREST-INCOME-NET> 9,134,571 8,428,304
<LOAN-LOSSES> 285,942 433,742
<SECURITIES-GAINS> 51,376 (194,390)
<EXPENSE-OTHER> 6,257,240 7,152,839
<INCOME-PRETAX> 3,277,906 1,915,529
<INCOME-PRE-EXTRAORDINARY> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1,976,933 1,203,820
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
<YIELD-ACTUAL> 7.81 7.88
<LOANS-NON> 1,843,000 2,287,000
<LOANS-PAST> 0 0
<LOANS-TROUBLED> 0 0
<LOANS-PROBLEM> 0 0
<ALLOWANCE-OPEN> 926,491 787,959
<CHARGE-OFFS> 392,963 397,544
<RECOVERIES> 158,169 102,334
<ALLOWANCE-CLOSE> 977,639 926,491
<ALLOWANCE-DOMESTIC> 977,639 926,491
<ALLOWANCE-FOREIGN> 0 0
<ALLOWANCE-UNALLOCATED> 0 0
</TABLE>
<PAGE>
Exhibit 99.1
BCSB
Bankcorp, Inc.
Stock Order Form
---------------------------------------
EXPIRATION DATE
BALTIMORE COUNTY for Stock Order
SAVINGS BANK, FSB Forms:
4111 E. JOPPA ROAD, , 1998
SUITE 300 BALTIMORE, , Eastern
MD 21236 (410) Time
- --------------------------------------------------------------------------------
IMPORTANT--PLEASE NOTE: A properly completed original Stock Order Form must
be used to subscribe for common stock. Faxes or copies of this form are not
required to be accepted. Please read the Stock Ownership Guide and Stock
Order Form Instructions as you complete this Form.
- --------------------------------------------------------------------------------
The minimum number of shares that
(1) NUMBER OF SHARES may be subscribed for is 25 shares
SUBSCRIPTION PRICE and the maximum purchase by any
purchaser or by any purchasers
exercising subscription rights
through a single account is
shares. No purchaser, together with
any Associate, as defined in the
Prospectus may purchase more than
shares. The maximum purchase
limits are subject to possible
change.
(2) TOTAL PAYMENT DUE
$10.00
X =
[_]
(3) EMPLOYEE/OFFICER/DIRECTOR INFORMATION (6) PURCHASER INFORMATION
Eligible Account Holder --
Check here if you are a director, Check here if you were a
officer or employee of Baltimore County depositor of at least $50.00
Savings or a member of such person's at Baltimore County Savings
immediate family. on September 30, 1996. Enter
information below for all
deposit accounts that you had
at Baltimore County on
September 30, 1996.
A. [_]
- -------------------------------------------
Check Amount
[_] (4) METHOD OF PAYMENT/CHECK
Supplemental Eligible Account
Holder--Check here if you
were a depositor of at least
$50.00 at Baltimore County
Savings on , 199 but
are not an Eligible Account
Holder. Enter information
below for all deposit
accounts that you had at
Baltimore County Savings on
, 199 .
$ B. [_]
Enclosed is a check,
bank draft or money
order made payable to
BCSB Bankcorp, Inc.
in the amount of:
- ------------------------------------------- Other Member -- Check here if
you were a depositor or loan
customer of Baltimore County
Savings on , 1998, but
you were not an Eligible
Account Holder or
Supplemental Eligible Account
Holder. Enter information for
all deposit accounts or loans
that you had at Baltimore
County Savings on ,
1998.
C. [_]
[_] (5) METHOD OF PAYMENT/WITHDRAWAL
The undersigned authorizes withdrawal
from the following account(s) at
Baltimore County Savings. There is no
penalty for early withdrawal for
purposes of this payment.
--------------------------------------
Account Number(s) Withdrawal Account Title (Names on
Amount(s) Accounts)
Account
Number(s)
-------------------------------------- ----------------------------------
-------------------------------------- ----------------------------------
-------------------------------------- ----------------------------------
--------------------------------------
PLEASE NOTE: FAILURE TO LIST
Total Withdrawal ------------------ ALL YOUR ACCOUNTS MAY RESULT IN
Amount THE LOSS OF PART OR ALL OF YOUR
SUBSCRIPTION RIGHTS. IF
ADDITIONAL SPACE IS NEEDED,
PLEASE UTILIZE THE BACK OF THIS
STOCK ORDER FORM.
Check here if you are a
permanent resident of
Baltimore or Harford County,
Maryland.
(7) [_]
- --------------------------------------------------------------------------------
(8) STOCK REGISTRATION/FORM OF STOCK OWNERSHIP
[_] Individual [_] Joint Tenants
[_] Tenants in Common
[_] Fiduciary (i.e. trust, estate, etc.)
[_] Corporation or Partnership
[_] Uniform Transfer to Minors Act
[_] Other ________________
Social Security # or
Tax ID
(9) NAME(S) IN WHICH STOCK IS TO BE REGISTERED (PLEASE PRINT CLEARLY)
Name(s) continued Social Security # or
Tax ID
Street Address City State Zip Code
-------------
(10) TELEPHONE Evening
INFORMATION Daytime County of Residence
( ) ( )
- --------------------------------------------------------------------------------
(11) NASD AFFILIATION
[_] (12) ASSOCIATE--ACTING
IN CONCERT
[_]
Check here if you are a member of the National Check here, and
Association of Securities Dealers, Inc. ("NASD"), complete the reverse
a person associated with an NASD member, a member side of this Form, if
of the immediate family of any such person to you or any associate
whose support such person contributes, directly (as defined on the
or indirectly, or the holder of an account in reverse side of this
which an NASD member or person associated with an Form) or persons
NASD member has a beneficial interest. To comply acting in concert
with conditions under which an exemption from the with you have
NASD's Interpretation With Respect to Free-Riding submitted other
and Withholding is available, you agree, if you orders for shares in
have checked the NASD Affiliation box, (i) not to the Subscription
sell, transfer or hypothecate the stock for a and/or Community
period of 90 days following issuance, and (ii) to Offerings.
report this subscription in writing to the
applicable NASD member within one day of payment
therefor.
- --------------------------------------------------------------------------------
(13) ACKNOWLEDGMENT
To be effective, this fully completed Stock Order Form must be actually
received by Baltimore County Savings, no later than .m., Eastern Time,
on , 1998, unless extended; otherwise this Stock Order Form and all
subscription rights will be void. Completed Stock Order Forms, together with
the required payment or withdrawal authorization, may be delivered to
Baltimore County Savings or may be mailed to the Post Office Box indicated
on the enclosed business reply envelope. All rights exercisable hereunder
are not transferable and shares purchased upon exercise of such rights must
be purchased for the account of the person exercising such rights.
It is understood that this Stock Order Form will be accepted in accordance
with, and subject to, the terms and conditions of the Plan of Reorganization
from a Mutual Savings Bank to a Mutual Holding Company and Subsidiary
Holding Company Formation and Plan of Stock Issuance of Baltimore County
Savings described in the accompanying Prospectus. If the Plan is not
approved by the depositors of Baltimore County Savings at a Special Meeting
to be held on , 1998, or any adjournment thereof, all orders will be
cancelled and funds received as payment, with accrued interest, will be
returned promptly.
The undersigned agrees that after receipt by BCSB Bankcorp, Inc., this Stock
Order Form may not be modified, withdrawn or cancelled (unless the offering
is not completed within 45 days after the completion of the Subscription
Offering) without BCSB Bankcorp, Inc. consent, and if authorization to
withdraw from deposit accounts at Baltimore County Savings has been given as
payment for shares, the amount authorized for withdrawal shall not otherwise
be available for withdrawal by the undersigned.
Under penalty of perjury, I certify that the Social Security or Tax ID
Number and the other information provided under number 9 of this Stock Order
Form are true, correct and complete, that I am not subject to back-up
withholding, that I am purchasing for my own account and that there is no
agreement or understanding regarding the transfer of my subscription rights
or the sale or transfer of these shares.
Applicable Regulations prohibit any person from transferring or entering
into any agreement directly or indirectly to transfer, the legal or
beneficial ownership of conversion subscription rights, or the underlying
securities to the account of another. Baltimore County Savings and BCSB
Bankcorp, Inc. may pursue any and all legal and equitable remedies in the
event they become aware of the transfer of subscription rights and will not
honor orders known by them to involve such transfer.
I acknowledge that the common stock offered is not a savings or deposit
account and is not insured by the Savings Association Insurance Fund, the
Bank Insurance Fund, the Federal Deposit Insurance Corporation, or any other
government agency, may lose value and is not guaranteed by BCSB Bankcorp,
Inc.
SIGNATURE DATE SIGNATURE DATE DATE REC'D _________
A VALID STOCK ORDER FORM MUST BE SIGNED AND DATED TWICE: BELOW AND ON THE
FORM OF CERTIFICATION ON THE REVERSE HEREOF.
CATEGORY ___________
ORDER # __ BATCH ___
A SIGNED FORM OF CERTIFICATION MUST ACCOMPANY ALL STOCK ORDER FORMS
(SEE REVERSE SIDE)
DEPOSIT ____________
<PAGE>
ITEM (6)A, B, C--(CONTINUED)
Account Title (Names on Account Account Title (Names on Account
Accounts) Number(s) Accounts) Number(s)
- -------------------------------------- --------------------------------------
- -------------------------------------- --------------------------------------
- -------------------------------------- --------------------------------------
- -------------------------------------- --------------------------------------
ITEM (12)--(CONTINUED)
List below all other orders "Associate" is defined as: (i) any
submitted by you or your corporation or organization (other than
Associates (as defined) or by Baltimore County Savings Bank, F.S.B., BCSB
persons acting in concert with Bankcorp, Inc., Baltimore County Savings
you. Bank, M.H.C. or a majority-owned subsidiary
of any of these entities) of which such
person is an officer or partner or is,
directly or indirectly, the beneficial owner
of 10% or more of any class of equity
securities; (ii) any trust or other estate
in which such person has a substantial
beneficial interest or as to which such
person serves as a trustee or in a similar
fiduciary capacity; except such term will
not include any tax-qualified employee stock
benefit plan in which such person has a
substantial beneficial interest or serves as
a trustee in a similar Fiduciary capacity;
and (iii) any relative or spouse of such
person, or any relative of such spouse, who
has the same home as such person or who is a
director of Baltimore County Savings Bank,
F.S.B., BCSB Bankcorp, Inc., Baltimore
County Savings Bank, M.H.C. or any
subsidiaries thereof.
Number of
Name(s) listed on Shares
other Stock Order Ordered
Forms
- --------------------------------
- --------------------------------
- --------------------------------
- --------------------------------
- --------------------------------
A VALID STOCK ORDER FORM MUST BE SIGNED AND DATED BELOW AND ON THE FRONT OF
THIS FORM.
FORM OF CERTIFICATION
I/WE ACKNOWLEDGE THAT THIS SECURITY IS NOT A DEPOSIT OR ACCOUNT AND IS NOT
FEDERALLY INSURED, AND IS NOT GUARANTEED BY BALTIMORE COUNTY SAVINGS BANK,
F.S.B. (THE "BANK") OR BY THE FEDERAL GOVERNMENT.
If anyone asserts that this security is federally insured or guaranteed, or
is as safe as an insured deposit, I should call the Office of Thrift
Supervision Regional Director, Richard M. Riccobono at (404) 888-0771.
I/We further certify that, before purchasing the common stock, $0.01 value
per share, of BCSB Bankcorp, Inc., the proposed holding company for
Baltimore County Savings Bank, F.S.B., I/we received a Prospectus dated
, 1998 (the "Prospectus").
The Prospectus that I/we received contains disclosure concerning the nature
of the security being offered and describes the risks involved in the
investment, including but not limited to:
1. Risk of Loss of Principal (page )
2. Control of Company by the MHC and Its Members and Board of
Directors (page )
3. Anticipated Low Return on Equity Following Stock Issuance (page )
4. Uncertainty as to Existence of Growth Opportunities (page )
5. Strong Competition Within the Bank's Market Area (page )
6. Risks Related to Certain Types of Lending and Credit
Enhancements (page )
7. Establishment of the Foundation (page )
8. Potentially Adverse Impact of Interest Rates and Economic
Conditions (page )
9. Charter, Bylaw and Statutory Provisions That Could Discourage
Hostile Acquisitions of Control (page )
10. Effect of Regulatory Changes on Operations (page )
11. Possible Year 2000 Computer Program Problems (page )
12. Valuation Not Indicative of Future Price of Common Stock____(page )
13. Possible Negative Income Tax Consequences of Distribution of
Subscription Rights_________________________________________(page )
14. Possible Dilutive Effect of MRP and Stock Options___________(page )
15. Potential Cost of ESOP and MRP______________________________(page )
16. Absence of Market for Common Stock__________________________(page )
Signature Date Signature Date
------------------------------------ ---------------------------------------
------------------------------------ ---------------------------------------
Name (Please Print) Name (Please Print)
------------------------------------ ---------------------------------------
------------------------------------ ---------------------------------------
<PAGE>
BCSB BANKCORP, INC.
- -------------------------------------------------------------------------------
SUBSCRIPTION AND COMMUNITY OFFERING STOCKOWNERSHIP GUIDE AND STOCK
ORDER FORM INSTRUCTIONS
- -------------------------------------------------------------------------------
- ---------------------
STOCK OWNERSHIP GUIDE
- ---------------------
INDIVIDUAL
Include the first name, middle initial and last name of the shareholder. Avoid
the use of two initials. Please omit words that do not affect ownership
rights, such as "Mrs.", "Mr.", "Dr.", "special account", "single person", etc.
JOINT TENANTS WITH RIGHT OF SURVIVORSHIP
Joint tenants with right of survivorship may be specified to identify two or
more owners. When stock is held by joint tenants with right of survivorship,
ownership is intended to pass automatically to the surviving joint tenant(s)
upon the death of any joint tenant. All parties must agree to the transfer or
sale of shares held by joint tenants.
TENANTS IN COMMON
Tenants in common may also be specified to identify two or more owners. When
stock is held by tenants in common, upon the death of one co-tenant, ownership
of the stock will be held by the surviving co-tenant(s) and by the heirs of
the deceased co-tenant. All parties must agree to the transfer or sale of
shares held by tenants in common.
UNIFORM TRANSFER TO MINORS
Stock may be held in the name of a custodian for a minor under the Uniform
Transfer to Minors Acts of each state. There may be only one custodian and one
minor designated on a stock certificate. The standard abbreviation for
Custodian is "CUST", while the Uniform Transfer to Minors Act is "Unif Tran
Min Act". Standard U.S. Postal Service state abbreviations should be used to
describe the appropriate state. For example, stock held by John Doe as
custodian for Susan Doe under the Maryland Uniform Transfer to Minors Act will
be abbreviated John Doe, CUST Susan Doe Unif Tran Min Act, MD (use minor's
social security number).
FIDUCIARIES
Information provided with respect to stock to be held in a fiduciary capacity
must contain the following:
* The name(s) of the fiduciary. If an individual, list the first name, middle
initial and last name. If a corporation, list the full corporate title
(name). If an individual and a corporation, list the corporation's title
before the individual.
* The fiduciary capacity, such as administrator, executor, personal
representative, conservator, trustee, committee, etc.
* A copy and description of the document governing the fiduciary
relationship, such as living trust agreement or court order. Without
documentation establishing a fiduciary relationship, your stock may not be
registered in a fiduciary capacity.
* The date of the document governing the relationship except that the date of
a trust created by a will need not be included in the description.
* The name of the maker, donor or testator and the name of the beneficiary.
An example of fiduciary ownership of stock in the case of a trust is: John
Doe, Trustee Under Agreement Dated 10-1-87 for Susan Doe.
You may mail your completed Stock Order Form in the envelope that has been
provided, or you may deliver your Stock Order Form to a Baltimore County
Savings office. In order to purchase stock in the Subscription or Community
Offering, your Stock Order Form, properly completed, and payment in full (or
withdrawal authorization) at the Subscription Price of $10.00 per share must
be received by BCSB Bankcorp, Inc. no later than , Eastern Time, on ,
1998, unless such date is extended, or your Stock Order Form will become void.
Stock Order Forms shall be deemed received only upon actual receipt by BCSB
Bankcorp, Inc. or at a Baltimore County Savings office.
If you need further assistance, please call the Stock Information Center at
(410) . We will be pleased to help you with the completion of your Stock
Order Form or answer any questions you may have.
ITEM INSTRUCTIONS
ITEMS 1 AND 2--
Fill in the number of shares that you wish to purchase and the total payment
due. The amount due is determined by multiplying the number of shares
purchased by the Subscription Price of $10.00 per share. The minimum purchase
is shares. The maximum purchase by (i) any person or entity or (ii) persons
or entities exercising subscription rights through a single account, is
shares. In addition, no person or entity, or group of persons acting in
concert, together with any Associate (as defined in the Prospectus), may
subscribe for more than shares.
BCSB Bankcorp, Inc. and Baltimore County Savings have the right to reject the
order of any subscriber who (i) submits false or misleading information on a
Stock Order Form or otherwise, (ii) attempts to purchase shares in violation
of the Plan of Reorganization or applicable law, or (iii) fails to cooperate
with attempts to verify information with respect to subscription rights.
ITEM 3--
Please check this box if you are a director, officer or employee of Baltimore
County Savings or a member of such person's immediate family.
ITEM 4--
Payment for shares may be made in cash (only if delivered by you in person) or
by check, bank draft or money order made payable to BCSB Bankcorp, Inc. Your
funds will earn interest at the Baltimore County Savings' current passbook
savings rate until the Reorganization is completed or terminated. DO NOT MAIL
CASH TO PURCHASE STOCK! PAYMENT MAY NOT BE MADE BY WIRE TRANSFER. Please check
this box if your method of payment is by cash, check, bank draft or money
order.
ITEM 5--
If you pay for your stock by a withdrawal from a Baltimore County Savings
deposit account, insert the account number(s) and the amount of your
withdrawal authorization for each account. The total amount withdrawn should
equal the amount of your stock purchase. Your order will be rejected if, on
the date your order is received, the accounts designated by you do not contain
sufficient funds to complete your purchase. There will be no penalty assessed
for early withdrawals from certificate accounts used for stock purchases. This
form of payment may not be used if your account is an Individual Retirement
Account. If you wish to use your IRA currently at Baltimore County Savings,
you must call the Stock Information Center prior to , 1998 and complete
all paperwork required.
ITEM 6--
a. Please check this box if you were a depositor of Baltimore County Savings
on September 30, 1996 (the Eligibility Record Date). You must list the full
title and account numbers of all accounts you had on this date in order to
insure proper identification of your subscription rights and preferences.
b. Please check this box if you were a depositor of Baltimore County Savings
on , 199 (the Supplemental Eligibility Record Date). You must list the
full title and account numbers of all accounts you had on this date in order
to insure proper identification of your subscription rights and preferences.
c. Please check this box if you were a depositor or loan customer of Baltimore
County Savings on , 1998, but did not check Box a, or Box b. You must
list the full title and account numbers of all accounts and loans you had on
this date in order to insure proper identification of your subscription rights
and preferences.
ITEM 7--
Please check this box if your permanent residence is located in Baltimore or
Harford County, Maryland.
ITEMS 8, 9, AND 10--
The stock transfer industry has developed a uniform system of shareholder
registrations that we will use in the issuance of your common stock. Please
complete items 8, 9 and 10 as fully and accurately as possible, and be certain
to supply your social security number or tax identification number and your
daytime and evening telephone number(s). We will need to call you if we cannot
execute your order as given. If you have any questions or concerns regarding
the registration of your stock, please consult your legal advisor. Stock
ownership must be registered in one of the ways described under "Stock
Ownership Guide."
ITEM 11--
Please check this box if you are a member of the NASD or if this item
otherwise applies to you.
ITEMS 12 AND 13--
Please sign and date the Stock Order Form at the TWO places where indicated.
Review the Stock Order Form carefully before you sign, including the
acknowledgement. Normally, one signature is required. An additional signature
is required only when payment is to be made by withdrawal from a deposit
account that requires multiple signatures to withdraw funds. If you have any
remaining questions, or if you would like assistance in completing your Stock
Order Form, you may call the Stock Information Center. The Stock Information
Center phone number is (410) .
<PAGE>
FORM OF CERTIFICATION
I/WE ACKNOWLEDGE THAT THIS SECURITY IS NOT A DEPOSIT OR ACCOUNT AND IS
NOT FEDERALLY INSURED, AND IS NOT GUARANTEED BY BALTIMORE COUNTY SAVINGS BANK,
F.S.B. (THE "BANK") OR BY THE FEDERAL GOVERNMENT.
If anyone asserts that this security is federally insured or
guaranteed, or is as safe as an insured deposit, I should call the Office of
Thrift Supervision Regional Director, Richard M. Riccobono at (404) 888-0771.
I/We further certify that, before purchasing the common stock, par
value $.01 per share, of BCSB Bankcorp, Inc., the proposed holding company for
Baltimore County Savings Bank, F.S.B., I/we received a Prospectus dated
__________, 1998 (the "Prospectus").
The Prospectus that I/we received contains disclosure concerning the
nature of the security being offered and describes the risks involved in the
investment, including but not limited to:
<TABLE>
<S> <C> <C>
1. Risk of Loss of Principal (page 16)
2. Control of the Company by the MHC and Its Members and Board of Directors (page 16)
3. Anticipated Low Return on Equity Following Stock Issuance (page 16)
4. Uncertainty as to Existence of Growth Opportunities (page 17)
5. Strong Competition Within the Bank's Market Area (page 17)
6. Risks Related to Certain Types of Lending and Credit Enhancements (page 17)
7. Establishment of the Foundation (page 18)
8. Potentially Adverse Impact of Interest Rates and Economic Conditions (page 18)
9. Charter, Bylaw and Statutory Provisions That Could Discourage Hostile
Acquisitions of Control (page 20)
10. Effect of Regulatory Changes on Operations (page 21)
11. Possible Year 2000 Computer Program Problems (page 21)
12. Valuation Not Indicative of Future Price of Common Stock (page 21)
13. Possible Negative Income Tax Consequences of Distribution of
Subscription Rights (page 21)
14. Possible Dilutive Effect of MRP and Stock Options (page 21)
15. Potential Cost of ESOP and MRP (page 22)
16. Absence of Market for Common Stock (page 22)
</TABLE>
PRINT NAME:
----------------------------------
SIGNATURE:
-----------------------------------
DATE:
----------------------------------------
PRINT NAME:
----------------------------------
SIGNATURE:
-----------------------------------
DATE:
----------------------------------------
<PAGE>
REVOCABLE PROXY
(SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
BALTIMORE COUNTY SAVINGS BANK, F.S.B.
FOR A SPECIAL MEETING OF MEMBERS
TO BE HELD ON __________, 1998)
The undersigned member of Baltimore County Savings Bank, F.S.B. (the
"Bank") hereby appoints ___________________, ___________________ and
___________________, or any one of them, with full powers of substitution, as
attorneys-in-fact and agents for and in the name of the undersigned, to vote
such votes as the undersigned may be entitled to cast at the Special Meeting of
Members (the "Meeting") of Baltimore County Savings Bank, F.S.B. to be held at
the main office of the Bank located at 4111 E. Joppa Road, Suite 300, Baltimore,
Maryland, on _________, __________, 1998, at __:__ _.m., Eastern Time, and at
any adjournments thereof. They are authorized to cast all votes to which the
undersigned is entitled, as follows:
<TABLE>
<CAPTION>
FOR AGAINST
--- -------
<S> <C> <C> <C>
1. Adoption of the Plan of Reorganization from Mutual Savings Bank
to Mutual Holding Company and Subsidiary Holding Company
Formation, dated October 22, 1997 and amended as of January 14, [_] [_]
1998, providing for the reorganization of the Bank
from a federally chartered mutual savings bank to a federally
chartered stock savings bank (the "Bank") as a wholly owned
subsidiary of BCSB Bankcorp, Inc., a to-be-formed Federal
corporation, which in turn will be a majority-owned subsidiary of
Baltimore County Savings Bank, M.H.C., a mutual holding company,
and the related transactions provided for in such plan, including
the adoption of an amended Charter and Bylaws for the Bank.
2. Establishment of the Baltimore County Savings Bank Foundation [_] [_]
</TABLE>
In their discretion, on any other matters that may lawfully come before the
meeting.
NOTE: The Board of Directors is not aware of any other matter that may come
before the Meeting.
<PAGE>
THIS PROXY WILL BE VOTED FOR THE PLAN IF
NO CHOICE IS MADE HEREON
Should the undersigned be present and elect to vote at said Meeting or at any
adjournment thereof and, after notification to the Secretary of Baltimore County
Savings Bank, F.S.B. at said Meeting of the member's decision to terminate this
Proxy, then the power of said attorneys-in-fact or agents shall be deemed
terminated and of no further force and effect. The undersigned hereby revokes
any and all proxies heretofore given.
The undersigned acknowledges receipt of a Notice of Special Meeting of the
Members of Baltimore County Savings Bank, F.S.B. to be held on __________, 1998
and a Proxy Statement dated __________, 1998 and a Prospectus dated __________,
1998 prior to the execution of this Proxy.
-------------------------------------------
Date
-------------------------------------------
Signature
Note: Only one signature is required in the
case of a joint account.
<PAGE>
Exhibit 99.2
BCSB Bankcorp, Inc.
Proposed Holding Company for
Baltimore County Savings Bank, F.S.B.
Baltimore, Maryland
Proposed Marketing Materials
<PAGE>
Marketing Materials for
BCSB Bankcorp, Inc.
Baltimore, Maryland
Table of Contents
-----------------
I. Press Release
A. Explanation
B. Schedule
C. Distribution List
D. Press Release Examples
II. Advertisements
A. Explanation
B. Schedule
C. Advertisement Examples
III. Question and Answer Brochure
A. Explanation
B. Quantity and Method of Distribution
C. Example
IV. Officer and Director Support Brochure
A. Explanation
B. Method of Distribution
C. Example
V. IRA Mailing
A. Explanation
B. Quantity and Method of Distribution
C. IRA Mailing Example
VI. Counter Cards and Lobby Posters
A. Explanation
B. Quantity
VII. Invitations
A. Explanation
B. Quantity - Method of Distribution
C. Examples
VIII. Letters
A. Explanation
B. Method of Distribution
C. Examples
<PAGE>
IX. Proxygram
A. Explanation
B. Example
<PAGE>
I. Press Releases
A. Explanation
In an effort to assure that all customers, community members and other
interested investors receive prompt accurate information in a simultaneous
manner, the Bank will forward press releases to area newspapers, radio
stations, etc. at various points during the Reorganization and Stock
Issuance process.
Only press releases approved by Issuer's Counsel and the OTS will be
forwarded for publication in any manner.
B. Schedule
1. Approval of the Reorganization and Stock Issuance
2. Close of Stock Offering
<PAGE>
National and Local Distribution List
------------------------------------
The Bank should provide a supplemental distribution list that includes all local
newspapers that it considers to be within its market area.
(TO BE PROVIDED)
<PAGE>
Press Release FOR IMMEDIATE RELEASE
---------------------
For More Information Contact:
Michael J. Dietz
President and Chief Executive Officer
Baltimore County Savings Bank, F.S.B.
(410) 256-5000
BALTIMORE COUNTY SAVINGS BANK, F.S.B.
-------------------------------------
REORGANIZATION FROM MUTUAL SAVINGS BANK TO MUTUAL HOLDING
---------------------------------------------------------
COMPANY APPROVED
----------------
Michael J. Dietz, President and Chief Executive Officer of Baltimore County
Savings Bank, F.S.B. (the "Bank"), Baltimore, Maryland, announced today that the
Bank has received approval from the Office of Thrift Supervision to reorganize
from the mutual form of ownership to the mutual holding company form of
organization. As part of the Reorganization, the Bank will become a wholly
owned subsidiary of BCSB Bankcorp, Inc. (the "Company").
Pursuant to a Plan of Stock Issuance, the Company is offering up to
2,052,750 shares, subject to adjustment, of its common stock, at a price of
$10.00 per share. The stock will be offered on a priority basis to depositors of
the bank as of September 30, 1996, the Company's Employee Stock Ownership Plan
and depositors of the Bank as of December 31, 1997. Concurrent with the
Subscription Offering, and subject to availability, stock will be offered to
persons who reside in Baltimore and Harford Counties, Maryland. The
Subscription and Community Offering (together, the "Offering") will be managed
by Trident Securities, Inc. of Raleigh, North Carolina. Prospectuses
describing, among other things, the terms of the Offering will be mailed to
eligible depositors of the Bank on or about ___________, 1998.
<PAGE>
As a result of the reorganization, the Bank will operate as a subsidiary of
BCSB Bankcorp. According to Mr. Dietz, "Our day to day operations will not
change as a result of the reorganization and deposits will continue to be
insured by the FDIC up to the applicable legal limits."
In connection with the reorganization and stock issuance, the Company
intends to establish a charitable foundation. The Bank and Company will create
the Baltimore County Savings Bank Foundation (the "Foundation"), which will be
incorporated under Maryland law as a non-stock corporation. The Foundation will
be dedicated to charitable and educational purposes within Baltimore and Harford
Counties in Maryland.
Customers or members of the community with questions concerning the
reorganization should call the Stock Information Center at (410) 256-0460, or
visit the Bank's main office at 55 East Avenue in Baltimore.
This is neither an offer to sell nor a solicitation of an offer to buy the stock
of BCSB Bankcorp, Inc. The offer is made only by the Prospectus. The shares of
Common Stock are not deposits or savings accounts and will not be insured by the
---
Federal Deposit Insurance Corporation or any other government agency.
<PAGE>
Press Release FOR IMMEDIATE RELEASE
---------------------
For More Information Contact:
Michael J. Dietz
President and Chief Executive Officer
Baltimore County Savings Bank, F.S.B.
(410) 256-5000
BCSB BANKCORP, INC. COMPLETES REORGANIZATION AND STOCK SALE
-----------------------------------------------------------
Baltimore, Maryland - (_______, 1998) Michael J. Dietz, President and
Chief Executive Officer of Baltimore County Savings Bank, F.S.B. (the "Bank"),
announced today that BCSB Bankcorp, Inc. (the "Company"), the holding company
for the Bank, will complete its stock offering on _________, 1998 in connection
with the Bank's reorganization from the mutual form of organization to the
mutual holding company form of organization as a wholly owned subsidiary of the
Company. __________ shares were sold at $10.00 per share in connection with the
stock offering.
On ________, 1998, the Bank's Plan of Reorganization and the establishment
of a charitable foundation were approved by the Bank's voting depositors at a
special meeting of the Bank's members..
Mr. Dietz indicated that the board of directors of the Bank want to express
their thanks for the response to the stock offering and that the Bank looks
forward to continuing to serve the needs of its customers and the community as a
stock institution. The offering was managed Trident Securities, Inc. The stock
is expected to commence trading on the Nasdaq National Market System under the
symbol "BCSB" on ___________, 1998.
<PAGE>
II. Advertisements
A. Explanation
The intended use of the attached advertisement "A" is to notify the Bank's
customers and members of the local community that the Reorganization and
Stock Issuance offering is underway.
The intended use of advertisement "B" is to remind the Bank's customers and
members of the local community of the closing date of the stock offering.
B. Media Schedule
1. Advertisement A - To be run immediately following regulatory approval
and run as often as weekly thereafter.
2. Advertisement B - To be run during the last week of the subscription
offering.
The Bank may, depending upon the response from customers and the community,
choose to run fewer ads or no ads at all.
<PAGE>
Advertisement (A)
- --------------------------------------------------------------------------------
This announcement is neither an offer to sell nor a solicitation of an offer to
buy these securities. The offer is made only by the Prospectus. These shares
have not been approved or disapproved by the Securities and Exchange Commission
or the Office of Thrift Supervision, nor has such commission or office passed
upon the accuracy or adequacy of the prospectus. Any representation to the
contrary is unlawful.
New Issue
- ---------
_______, 1998
________ Shares
These shares are being offered pursuant
to a Plan of Reorganization and Stock Issuance whereby
Baltimore County Savings Bank, F.S.B.
Baltimore, Maryland will
reorganize from the mutual form of ownership
to the mutual holding company form of organization
and become a wholly owned subsidiary of
BCSB Bankcorp, Inc.
Common Stock
---------------
Price $10.00 Per Share
---------------
Trident Securities, Inc.
For a copy of the prospectus call (410) ________.
Copies of the Prospectus may be obtained in any State in which this announcement
- --------------------------------------------------------------------------------
<PAGE>
Advertisement (B)
- --------------------------------------------------------------------------------
ATTENTION: BALTIMORE COUNTY SAVINGS BANK, F.S.B.'S ELIGIBLE
DEPOSITORS AND MEMBERS OF OUR LOCAL COMMUNITY
_____________, IS THE DEADLINE TO
ORDER STOCK OF BCSB BANKCORP, INC.
Eligible depositors of Baltimore County Savings Bank, F.S.B.
and members of our local community have the opportunity
to invest in Baltimore County Savings Bank, F.S.B. by subscribing
for common stock in its proposed holding company
BCSB BANKCORP, INC.
A Prospectus relating to these securities is
available at our office or by calling our
Stock Information Center at (410) _____________.
This announcement is not an offer to sell or a solicitation of
an offer to buy the stock of BCSB Bankcorp, Inc. The offer is made only by the
Prospectus. The shares of Common Stock are not deposits or savings accounts and
will not be insured by the Federal Deposit Insurance Corporation or any other
government agency.
- --------------------------------------------------------------------------------
<PAGE>
III. Question and Answer Brochure
A. Explanation
The Question and Answer brochure is an essential marketing piece in any
Reorganization and Stock Issuance. It serves to answer some of the most
commonly asked questions in "plain, everyday language". Although most of
the answers are taken verbatim from the Prospectus, it saves a prospective
investor from searching for the answer to a simple question.
B. Method of Distribution
There are four primary methods of distribution of the Question and Answer
brochure. However, regardless of the method the brochures are always
accompanied by a Prospectus.
1. A Question and Answer brochure is sent out in the initial mailing to
all eligible account holders of the Bank.
2. Question and Answer brochures are available at the Bank.
3. Question and Answer brochures are distributed in information packets
at community meetings.
4. Question and Answer brochures are sent out in a standard information
packet to all interested investors who phone the Stock Information
Center requesting information.
<PAGE>
Questions and Answers Concerning
The Plan of Reorganization and The Plan of Stock Issuance
Baltimore County Savings Bank, F.S.B.
Baltimore, Maryland
Questions and Answers Regarding the Subscription and Community Offering
Mutual Holding Company Reorganization
Baltimore County Savings Bank, F.S.B.'s Board of Directors have unanimously
adopted a Plan of Reorganization pursuant to which Baltimore County Savings
Bank, F.S.B. (the "Bank") will reorganize from a federally chartered mutual
savings bank into a federally chartered stock savings bank. As part of the
Reorganization, the Bank will become a wholly owned subsidiary of a stock
holding company (the "Holding Company") and the Holding Company will become a
subsidiary of a mutual holding company, Baltimore County Savings Bank, M.H.C.
(the "Mutual Holding Company"). In conjunction with this Reorganization, the
Holding Company will offer up to 49% of its common stock in a stock offering to
the depositors of the Bank. The remaining stock, which will not constitute less
than a majority of the common stock, will be owned by the Mutual Holding
Company.
The Reorganization is subject to approval by the Bank's depositors and the
appropriate regulatory authorities. Complete details on the Reorganization are
contained in the Prospectus and Proxy Statement.
1. Q. What will be the effect of the Reorganization?
The Bank will create a Holding Company named BCSB Bankcorp, Inc. (the
"Company") and the Mutual Holding Company as part of the
Reorganization. BCSB Bankcorp, Inc. will own 100% of the Bank's stock.
. The Mutual Holding Company will own no less than 51% of the
stock of BCSB Bancorp.
. Stockholders will own no more than 49% of BCSB Bancorp.
. Qualifying depositors will receive subscription rights to
purchase stock in BCSB Bancorp.
2. Q. What is the reason for the Reorganization and Stock Issuance?
A. The Board of Directors of Baltimore County Savings Bank, F.S.B. has
studied the issue of mutual holding company reorganizations for quite
some time. With the many regulatory changes our industry faces today,
the Board felt that being in the mutual holding company form of
ownership provided us with greater regulatory and capital structure
flexibility to meet our future challenges.
<PAGE>
The Reorganization will permit the Holding Company to issue capital
stock, which is a source of capital not available to mutual savings
banks. If the Bank elected to undertake a standard conversion,
applicable regulations would have required a greater amount of stock
to be sold, resulting in the raising of an amount of capital that
could not be effectively utilized by the Bank.
The Reorganization will also provide the Bank with additional
flexibility to structure and finance the expansion of it's operations
including the possible acquisition of other financial institutions. At
the same time, Baltimore County Savings Bank, F.S.B.'s mutual form of
ownership and it's desire to remain an independent savings bank will
be preserved. It is very important to the Bank to remain a community-
oriented institution focused on providing a high quality of service to
our customers.
3. Q. Will the Reorganization have any effect on my savings account or loan
account with the Bank?
A. No. Customers will be served in the same offices by the same staff.
The Reorganization will not affect the amount, interest rate or
withdrawal rights of deposit accounts, which will continue to be
insured by the Federal Deposit Insurance Corporation to the maximum
legal limit. Likewise, the loan accounts and rights of borrowers will
not be affected.
4. Q. Will there be changes in directors, officers or employees of the Bank
as a result of the Reorganization?
A. No. Officers and employees of the Bank will continue in their current
capacities. The directors of the Bank will serve as the initial
directors of the Holding Company.
5. Q. Does the Company anticipate paying cash dividends on the Holding
Company's common stock?
A. BCSB Bancorp intends to pay cash dividends at an initial annual rate
of $.50 per share. The Holding Company's ability to pay dividends will
depend on the net proceeds retained from the Offering and on dividends
received from the Bank, which is subject to various regulatory
restrictions on the payment of dividends.
6. Q. How will the proceeds from the Offering be used?
A. Net proceeds from the sale of the Stock are estimated to be between
$14.5 million and $19.8 million. The Holding Company plans to
contribute to the Bank 50% of the net proceeds from the Offering and
retain the remainder of the net proceeds. The Holding Company intends
to use a portion of the net proceeds retained by it to make a loan
directly to an employee stock ownership plan (the "ESOP") to enable
the ESOP to purchase 8% of the common stock. The proceeds retained by
the Holding
<PAGE>
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. Funds retained
by the Holding Company may be used to support the future expansion of
operations and for other business or investment purposes, including
the acquisition of other financial institutions and/or branch offices,
although there are no current plans, arrangements, understandings or
agreements regarding such expansion or acquisitions. Subject to
applicable limitations, such funds also may be used in the future to
repurchase shares of common stock. Funds contributed to the Bank from
the Holding Company will be used for general business purposes. The
proceeds will be used to support the Bank's lending and investment
activities and thereby enhance the Bank's capabilities to service the
borrowing and other financial needs of the communities it serves. 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.
7. Q. How will the community benefit from the Reorganization?
A. In conjunction with the Reorganization, the Board of Directors expects
to create a community foundation dedicated to the promotion of
charitable purposes including community development, grants or
donations to support housing assistance, not-for-profit community
groups and other similar community minded projects and organizations.
The Holding Company expects to contribute to the Foundation 75,000
shares of its Common Stock, with an estimated value of $750,000 based
on the offering price of $10.00 per share in the Offering. The
foundation, which is subject to regulatory approval, is being created
by the Bank to share the Bank's success with the local communities it
serves.
VOTING - YOUR VOTE IS IMPORTANT
Baltimore County Savings Bank, F.S.B.'s Depositors (as defined below) are being
asked to approve the Plan of Reorganization, which was adopted by the Board of
Directors of the Bank and approved by federal regulators. A copy of the Plan of
Reorganization may be obtained from any Bank office or by calling the Stock
Information Center.
Voting on the Plan does not affect deposit or loan accounts at the Bank, and
does not obligate depositors to purchase stock in the Offering.
8. Q. Which customers of the Bank are being asked to vote on the Plan?
A. Depositors of the Bank, as of the Voting Record Date, will be eligible
to vote on the Plan. The Voting Depositors have been provided with
Proxy Cards and Proxy Statements describing the Plan.
<PAGE>
Each depositor, as of the Voting Record Date, will be entitled to cast
one vote for each $100 or fraction thereof of the withdrawable value
of any savings accounts in the Bank as of _____________, 1998, the
Voting Record Date. Depositors eligible to vote are called "Voting
Depositors". In addition, a member who had a loan from the Bank as of
June 16, 1987 shall have one additional vote for the period of time
the loan is in existence. The maximum number of votes eligible to be
cast by any member may not exceed 1,000. Approval of the Plan of
Reorganization requires the affirmative vote of a majority of the
total votes eligible to be cast.
The Board of Directors urge Depositors to vote FOR the Plan of
Reorganization. Not voting will have the same effect as a vote against
the Plan of Reorganization. Without sufficient favorable votes, the
Reorganization cannot be completed. In that event, funds submitted by
investors in connection with the Offering would be promptly returned,
with interest.
9. Q. How do I vote by proxy?
A. Please read the Proxy Statement that you receive. You may vote by
completing, signing and returning the Proxy Card in the Proxy Return
Envelope provided. Please respond promptly.
10. Q. Why have I received more than one Proxy Card?
A. If you have more than one deposit account at the Bank, you could
-----
receive more than one informational packet and each packet should
contain a separate Proxy Card, depending on the ownership structure of
your accounts. PLEASE VOTE, SIGN AND PROMPTLY RETURN ALL PROXY CARDS.
11. Q. Am I obligated to purchase stock if I vote in favor of the Plan?
A. No. Voting in no way obligates you to subscribe for stock. To
subscribe for stock, you must submit your order on a separate order
form along with the appropriate payment.
THE Offering
Investment in common stock involves certain risks. Before making an investment
decision, please carefully read the enclosed Prospectus, including the section
entitled "Risk Factors."
12. Q. Who may purchase Stock in the Offering?
A. The Offering consist of (i) a Subscription Offering to certain past
and current depositors of the Bank and (ii) Community Offering,
initially, to certain residents of Baltimore and Harford Counties in
Maryland.
<PAGE>
The common stock is being offered in the following order of priority:
(i) depositors of the Bank with account balances of $100 or more as of
the close of business on September 30, 1996 ("Eligible Account
Holders"); (ii) the ESOP; and (iii) depositors of the Bank with
account balances of $100 or more as of the close of business on
________ __, 199_ ("Supplemental Eligible Account Holders"); and (iv)
members of the Bank as of the Voting Record Date..
To the extent that shares remain available for purchase, a 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.
The right of any person to purchase shares in the Community Offering,
if any, is subject to the absolute right of the Board to accept or
reject such purchases in whole or in part. Preference will be given in
the Community Offering to permanent residents of Baltimore and Harford
Counties.
13. Q. What is the price per share?
A. The shares of Conversion Stock are being offered at a Purchase Price
of $10 per share. All subscribers will pay the same price per share.
14. Q. When must one place an order for shares of stock?
A. Eligible depositors wishing to exercise their subscription rights must
return a completed Stock Order Form to BALTIMORE COUNTY SAVINGS BANK,
F.S.B., together with full payment or appropriate instructions
authorizing a withdrawal from a BALTIMORE COUNTY SAVINGS BANK, F.S.B.
deposit account, on or prior to the close of the Subscription Offering
which will be 12:00 noon, Eastern time on _________, 1998, the
expiration date of the Subscription Offering.
15. Q. How does one pay for stock during the offering?
A. First, one may pay for stock with cash (if delivered in person to a
BALTIMORE COUNTY SAVINGS BANK, F.S.B. office) or by check or money
order. Subscription funds will earn interest at the Bank's passbook
rate from the day the Bank receives them until the completion or
termination of the Reorganization.
Second, one may authorize the bank to withdraw funds from a BALTIMORE
COUNTY SAVINGS BANK, F.S.B. savings account or certificate of deposit
without early withdrawal penalty. These funds will continue to earn
interest at the rate in effect for the account until completion of the
offering at which time funds will be withdrawn for the stock purchase.
Funds remaining in this account (if any) will continue to earn at the
contractual rate unless the withdrawal reduces the account balance
below the applicable minimum in which case the depositor will receive
interest at the passbook rate. A hold will be placed on the
depositor's account for the amount specified for stock payment. Such
subscribers will not have access to these funds from the day the
<PAGE>
Bank receives the stock order until the completion or termination of
the Reorganization.
16. Q. How many shares of stock will be offered?
A. BCSB Bankcorp is offering between 1,517,250 and 2,052,750 shares of
its common stock at a price of $10.00 per share.
17. Q. What is the minimum and maximum number of shares which may be
subscribed for during the offering period?
A. The minimum number of shares that may be purchased is 25 shares. The
maximum number of shares will not exceed a total aggregate purchase
price equal to about 1% of the offering. The exact amount will be
determined after completion of the appraisal.
18. Q. Must one pay a commission on the stock subscribed for during this
offering?
A. No. Subscribers will not pay a commission on stock purchased in the
Subscription Offering, the Community Offering, if any, or Syndicated
Community Offering, if any.
19. Q. Will subscribers receive interest on funds submitted for stock
subscriptions?
A. Yes. BALTIMORE COUNTY SAVINGS BANK, F.S.B. will pay its current
passbook rate from the date funds are received (with a completed Stock
Order Form) during the Subscription and Community Offering until
completion of the Reorganization and Stock Issuance.
20. Q. How much stock do the directors and executive officers of BALTIMORE
COUNTY SAVINGS BANK, F.S.B. intend to subscribe for through the
Subscription Offering?
A. Directors and executive officers intend to subscribe for $1.2 million
in stock. The purchase price paid by directors and officers will be
the same as that paid by customers and the general public.
21. Q. Are the Subscription Rights transferable to another party?
A. No. Pursuant to federal regulations, Subscription Rights granted to
Eligible Account Holders and Supplemental Eligible Account Holders may
be exercised only by the person(s) to whom they are granted. Any
person found to be transferring or selling Subscription Rights will be
subject to forfeiture of such rights and other penalties.
<PAGE>
22. Q. If a depositor closed an account several months ago will they still be
eligible to subscribe for stock?
A. If they were an account holder with at least $100 on deposit on
September 30, 1996, the Eligibility Record Date, or the Supplemental
Eligibility Record Date, they may be eligible to subscribe for stock
regardless of whether or not they continue to hold a BALTIMORE COUNTY
SAVINGS BANK, F.S.B. account.
23. Q. May one obtain a loan from BALTIMORE COUNTY SAVINGS BANK, F.S.B. using
stock as collateral to pay for shares?
A. No. Federal regulations do not allow the Bank to make loans for this
purpose, but other financial institutions may make a loan for this
purpose.
24. Q. Will the FDIC (Federal Deposit Insurance Corporation) insure the
shares of stock?
A. No. The shares will not be insured by the FDIC. No stock is insured.
However, the FDIC will continue to insure savings accounts and
certificates of deposit up to the applicable limits allowed by law.
25. Q. Will there be a market for the stock following the conversion?
A. BALTIMORE COUNTY SAVINGS BANK, F.S.B. has never issued stock before,
and consequently there is no established market for its common stock.
The Bank intends to seek approval to have the common stock listed on
the NASDAQ National Market System. Trident Securities, Inc. intends to
make a market in the common stock. However, purchasers of common stock
should recognize that no assurance can be given that an active and
liquid trading market will develop or, if developed, will be
maintained.
26. Q. Can one purchase stock using funds in a BALTIMORE COUNTY SAVINGS BANK,
F.S.B. IRA account?
A. If one wishes to utilize Individual Retirement Account deposits held
at BALTIMORE COUNTY SAVINGS BANK, F.S.B. to subscribe for stock,
potential subscribers are encouraged to call the BALTIMORE COUNTY
SAVINGS BANK, F.S.B. Stock Information Center for assistance. There
will be no early withdrawal or IRS penalties incurred by these
transactions, but additional paperwork will be necessary. The deadline
for using a Baltimore County Savings Bank IRA will be one week prior
to the expiration of the offering.
27. Q. How does one obtain further information concerning the stock offering?
<PAGE>
A. All interested investors are invited to call the Stock Information
Center for further information or for a copy of the Prospectus, Stock
Order Form, Proxy Statement and Proxy Card. The Stock Information
Center will be set up so that it can assist customers in their
purchase of stock and answer their questions concerning the
Reorganization and Stock Issuance.
THIS INFORMATION DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF
AN OFFER TO BUY BCSB BANKCORP, INC. COMMON STOCK. OFFERS TO BUY OR TO SELL MAY
BE MADE ONLY BY THE PROSPECTUS. IF YOU ARE CONSIDERING PURCHASING STOCK, YOU
SHOULD READ THE PROSPECTUS PRIOR TO MAKING AN INVESTMENT DECISION. COPIES OF
THE PROSPECTUS MAY BE OBTAINED BY CALLING THE STOCK INFORMATION CENTER AT (410)
256-0460.
THE SHARES OF BCSB BANKCORP, INC. COMMON STOCK BEING OFFERED IN THE
OFFERING AND THE EXCHANGE ARE NOT SAVINGS OR DEPOSIT ACCOUNTS AND ARE NOT
INSURED BY THE SAVINGS ASSOCIATION INSURANCE FUND OF THE FEDERAL DEPOSIT
INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY.
<PAGE>
IV. Officer and Director Brochure
A. Explanation
An Officer and Director Brochure merely highlights in brochure form the
purchase commitments shown in the Prospectus.
B. Quantity
An Officer and Director brochure is proposed to be sent out in the initial
mailing to all the customers and stockholders of the Bank along with the
Prospectus. Alternatively, the information contained in this brochure may
be combined with the Question and Answer brochure.
<PAGE>
DIRECTOR AND EXECUTIVE OFFICER
INTENDED PURCHASES
<TABLE>
<CAPTION>
Number of Percent
Name Aggregate Purchase Price Shares at Midpoint
- ---- ------------------------ ------ -----------
<S> <C> <C> <C>
H. Adrian Cox $10.00 10,600 .6%
Michael J. Dietz $10.00 20,000 1.1
Frank W. Dunton $10.00 18,359 1.0
Henry V. Kahl $10.00 6,833 .4
Gary C. Loraditch $10.00 15,000 .8
William M. Loughran $10.00 7,500 .4
George Magsamen $10.00 8,000 .4
Martin Meyers $10.00 8,000 .4
John J. Panzer $10.00 17,500 1.0
P. Louis Rohe, Jr. $10.00 10,700 .6
All directors and $10.00 122,492 1,224,920
executive officers of
the Bank as a
group (10 persons)
</TABLE>
<PAGE>
V. IRA Mailing
A. Explanation
A special IRA mailing is proposed to be sent to all IRA customers of the
Bank in order to alert the customers that funds held in an IRA can be used
to purchase stock. Since this transaction is not as simple as designating
funds from a certificate of deposit like a normal stock purchase, this
letter informs the customer that this process is slightly more detailed and
involves a personal visit to the Bank.
B. Quantity
One IRA letter is proposed to be mailed to each IRA customer of the Bank.
These letters would be mailed following regulatory approval of the
Reorganization and Stock Issuance and after each customer or stockholder
has received the initial mailing containing a Proxy Statement and a
Prospectus.
C. Example - See following page.
<PAGE>
Baltimore County Savings Bank, F.S.B. Letterhead
________, 1998
Dear Individual Retirement Account Participant:
As you know, Baltimore County Savings Bank, F.S.B. (the "Bank") is in the
process of reorganizing from the mutual form of ownership to the mutual holding
company form of ownership whereby the Bank will become a wholly owned subsidiary
of BCSB Bankcorp, Inc. (the "Company"), which will own all of the stock of the
Bank. Through the Reorganization and Stock Issuance, certain current and former
customers have a priority right to purchase shares of common stock of the
Company in a Subscription Offering. The Company currently is offering up to
2,052,750 shares, subject to adjustment, of the Company at a price of $10.00 per
share.
As the holder of an individual retirement account ("IRA") at the Bank, you
have an opportunity to become a stockholder in the Company using some or all of
the funds being held in your IRA. If you desire to purchase shares of common
stock of the Company through your IRA, the Bank can assist you in self-directing
those funds. This process can be done without an early withdrawal penalty and
generally without a negative tax consequence to your retirement account.
If you are interested in receiving more information on self-directing your
IRA, please contact our Stock Information Center at (410) 256-0460. Because it
may take several days to process the necessary IRA forms, a response is
requested (but not required) by _______, 1998 to accommodate your interest.
Sincerely,
Michael J. Dietz
President and Chief Executive Officer
This letter is neither an offer to sell nor a solicitation of an offer to buy
BCSB Bankcorp, Inc. Common Stock. The offer is made only by the Prospectus,
which was recently mailed to you. The shares of BCSB Bankcorp, Inc. Common
Stock are not deposits and will not be insured by the Federal Deposit Insurance
---
Corporation or any other governmental agency.
<PAGE>
VI. Counter Cards and Lobby Posters
A. Explanation
Counter cards and lobby posters serve two purposes: (1) As a notice to the
Bank's customers and members of the local community that the stock sale is
underway and (2) to remind customers and members of the local community of
the end of the Subscription and Community Offering.
B. Quantity
Approximately 2 - 3 Counter cards may be used in each branch location.
Approximately 1 - 2 Lobby posters may be used at each branch office.
C. Example
<PAGE>
C. POSTER
OR
COUNTER CARD
BCSB Bankcorp, Inc.
Proposed Holding Company for
Baltimore County Savings Bank, F.S.B.
"STOCK OFFERING MATERIALS
AVAILABLE HERE"
Subscription and Community Offering End
_______, 1998
<PAGE>
VII. Invitations
A. Explanation
In order to educate customers and the public about the stock offering, the
Bank may hold several Community Meetings in various locations. In an effort
to target a group of interested investors Trident will request that each
Director and Officer of the Bank submit a list of prospective investors
that he/she would like to invite to a Community Meeting.
Prospectuses are given to each prospect at the Community meeting.
B. Quantity and Method of Distribution
An invitation is mailed to each prospect.
<PAGE>
The Directors, Officers & Employees
of
Baltimore County Savings Bank, F.S.B.
cordially invite you
to attend a brief presentation
regarding the stock offering of
BCSB Bankcorp, Inc.
Please join us at
Place
Address
on
Date
at Time
for hors d'oeuvres
R.S.V.P.
(410) 256-0460
<PAGE>
VIII. Letters
A. Explanation
Once the application for Reorganization and Stock Issuance has received
regulatory approval, the Bank may send out a series of up to three letters
to targeted prospects. These letters are used to help facilitate the
marketing effort to this group. All prospects will receive a Prospectus as
soon as they are available.
B. Method of Distribution
Each prospect is sent a series of up to three letters during the
Subscription and Community Offering.
C. Examples
1. Introductory letter
2. A. Thank you letter
or
B. Sorry you were unable to attend letter
3. Final reminder letter
<PAGE>
Example 1
(Introductory Letter) (non-eligible prospects)
(Baltimore County Savings Bank, F.S.B. Letterhead)
_______, 1998
Name
Address
City, State, Zip
Dear Name:
You have probably read recently in the newspaper that Baltimore County
Savings Bank, F.S.B. (the "Bank") will soon be reorganizing from the mutual form
of organization to the mutual holding company form of organization. This
Reorganization and Stock Issuance is the biggest step in the history of the Bank
in that it allows customers, community members, employees, officers and
directors the opportunity to subscribe for stock in our new holding company -
BCSB Bankcorp, Inc. (the "Company").
I have enclosed a Prospectus and a Stock Order Form that will allow you to
subscribe for shares and possibly become a charter stockholder of the Company
should you so desire. In addition, we will be holding several presentations for
friends of the Bank in order to review the Reorganization and Stock Issuance and
the merits of becoming a charter stockholder of the Company. You will receive
an invitation shortly.
I hope that if you have any questions you will feel free to call me or the
Bank's Stock Information Center at (410) 256-0460. I look forward to seeing you
at our presentation.
Sincerely,
Michael J. Dietz
President
The shares of Common Stock offered in the Reorganization and Stock Issuance are
not deposits and are not insured by the Federal Deposit Insurance Corporation or
any other governmental agency.
This is not an offer to sell or a solicitation of an offer to buy stock. The
offer will be made only by the Prospectus.
<PAGE>
Example 2A
(Thank You Letter)
(Baltimore County Savings Bank, F.S.B. Letterhead)
___________, 1998
Name
Address
City, State, Zip
Dear Name:
On behalf of the Board of Directors and management of Baltimore County
Savings Bank, F.S.B., I would like to thank you for attending our recent
presentation regarding the stock offering by BCSB Bankcorp, Inc. We are
enthusiastic about the stock offering and look forward to completing the
Subscription and Community Offering on or about _______, 1998.
I hope that you will join me in being a charter stockholder, and once again
thank you for your interest.
Sincerely,
Michael J. Dietz
President
The shares of Common Stock offered in the Reorganization and Stock Issuance are
not savings accounts or deposits and are not insured by the Federal Deposit
Insurance Corporation, the Savings Association Insurance Fund or any other
governmental agency.
This is not an offer to sell or a solicitation of an offer to buy stock. The
offer will be made only by the Prospectus.
<PAGE>
Example 2B
(Sorry You Were Unable to Attend)
(Baltimore County Savings Bank, F.S.B. Letterhead)
_______________, 1998
Name
Address
City, State, Zip
Dear Name:
I am sorry you were unable to attend our recent presentation regarding
Baltimore County Savings Bank, F.S.B.'s Reorganization and Stock Issuance. The
Board of Directors and management are committed to building long term
stockholder value, and as a group we are investing over $1.2 million of our own
funds in BCSB Bankcorp, Inc. We are enthusiastic about the stock offering and
look forward to completing the Subscription and Community Offering on or about
_______, 1998.
We have established a Stock Information Center to answer any questions
regarding the stock offering. Should you require any assistance between now and
_______, I encourage you either to stop by any office of Baltimore County
Savings Bank, F.S.B. or to call our Stock Information Center at (410) 256-0460.
I hope you will join me in becoming a charter stockholder of BCSB Bankcorp,
Inc.
Sincerely,
Michael J. Dietz
President
The shares of Common Stock offered in the Reorganization and Stock Issuance are
not savings accounts or deposits and are not insured by the Federal Deposit
Insurance Corporation, the Savings Association Insurance Fund or any other
governmental agency.
This is not an offer to sell or a solicitation of an offer to buy stock. The
offer will be made only by the Prospectus.
<PAGE>
Example 3
(Final Reminder Letter)
(Baltimore County Savings Bank, F.S.B. Letterhead)
___________, 1998
Name
Address
City, State, Zip
Dear Name:
Just a quick note to remind you that the deadline is quickly approaching
for subscribing for stock in BCSB Bankcorp, Inc., the proposed holding company
for Baltimore County Savings Bank, F.S.B.. I hope you will join me in becoming
a charter stockholder in Western North Carolina's newest publicly owned
financial institution holding company.
The deadline for subscribing for shares to become a charter stockholder is
_______, 1998. If you have any questions, I hope you will call our Stock
Information Center at (410) 256-0460.
Once again, I look forward to having you join me as a stockholder of BCSB
Bankcorp, Inc.
Sincerely,
Michael J. Dietz
President
The shares of Common Stock offered in the Reorganization and Stock Issuance are
not savings accounts or deposits and are not insured by the Federal Deposit
Insurance Corporation, the Savings Association Insurance Fund or any other
governmental agency.
This is not an offer to sell or a solicitation of an offer to buy stock. The
offer will be made only by the Prospectus.
<PAGE>
IX. Proxygram
A. Explanation
A proxygram is used when the majority of votes needed to adopt the Plan of
Reorganization and Stock Issuance is still outstanding. The proxygram is
mailed to those "target vote" depositors who have not previously returned
their signed proxy.
Target vote depositors are determined by the Conversion Agent.
B. Example
<PAGE>
B. Example
- --------------------------------------------------------------------------------
P R O X Y G R A M
Baltimore County Savings Bank, F.S.B.
YOUR VOTE ON OUR PLAN OF REORGANIZATION HAS NOT BEEN RECEIVED.
- --------- ---------------------
YOUR VOTE IS VERY IMPORTANT, PARTICULARLY SINCE FAILURE TO VOTE IS EQUIVALENT TO
- ---------------------------
VOTING AGAINST THE PLAN.
VOTING FOR THE REORGANIZATION WILL NOT AFFECT THE INSURANCE OF YOUR ACCOUNT. IT
--
WILL CONTINUE TO BE INSURED UP TO $100,000 BY THE FEDERAL DEPOSIT INSURANCE
- ---------------------------------------------------------------------------
CORPORATION.
- -----------
YOU MAY PURCHASE STOCK IF YOU WISH, BUT VOTING DOES NOT OBLIGATE YOU TO BUY
STOCK.
PLEASE ACT PROMPTLY! SIGN THE ENCLOSED PROXY CARD AND MAIL, OR DELIVER, THE
----------------------------
PROXY CARD TO BALTIMORE COUNTY SAVINGS BANK, F.S.B. TODAY. PLEASE VOTE ALL
---
PROXY CARDS RECEIVED.
WE RECOMMEND THAT YOU VOTE "FOR" THE PLAN OF REORGANIZATION. THANK YOU.
THE BOARD OF DIRECTORS AND MANAGEMENT OF
BALTIMORE COUNTY SAVINGS BANK, F.S.B.
- --------------------------------------------------------------------------------
IF YOU RECENTLY MAILED THE PROXY,
PLEASE ACCEPT OUR THANKS AND DISREGARD THIS REQUEST.
FOR FURTHER INFORMATION CALL (410) 256-4060.
<PAGE>
[Baltimore County Savings Bank, F.S.B. Letterhead]
Dear Member:
The Office of Thrift Supervision has approved the Plan of Reorganization
whereby Baltimore County Savings Bank, F.S.B. (the "Bank") will reorganize from
a federally chartered mutual savings bank to a federally chartered stock savings
bank and concurrently become a wholly owned subsidiary of BCSB Bankcorp, Inc.
(the "Company") (collectively, the "Reorganization"), which in turn will be a
majority-owned subsidiary of a mutual holding company to be known as Baltimore
County Savings Bank, M.H.C. Simultaneously with the Reorganization, the Company
is offering shares of its common stock in Subscription and Community Offerings
(the "Stock Issuance"). In connection with the Reorganization and the Stock
Issuance, the Company intends to establish a charitable foundation dedicated to
charitable and educational purposes within the Baltimore metropolitan area. 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.
Enclosed are a Prospectus and Proxy Statement describing the Reorganization
and Stock Issuance and proxy card(s). As a current member of the Bank, we ask
you to participate in the Reorganization and Stock Issuance by reviewing the
information provided and voting on the Reorganization and Stock Issuance by
completing and mailing the enclosed proxies in the enclosed postage-paid
envelope as soon as possible. The Board of Directors recommends that you vote in
favor of the Plan of Reorganization.
Although we encourage you to vote on the Plan of Reorganization,
unfortunately, the Company is unable to either offer or sell its common stock to
you in the Stock Issuance because the small number of eligible subscribers in
your jurisdiction makes registration or qualification of the Company's common
stock under the securities laws of your jurisdiction impractical for reasons of
cost or otherwise. Accordingly, this letter and the materials enclosed herewith
should not be considered either an offer to sell or a solicitation of an offer
to buy the common stock of the Company.
If you have any questions about your voting rights or the Reorganization
and Stock Issuance in general, please call the Stock Information Center at (410)
256-0460.
Sincerely,
Michael J. Dietz
President
<PAGE>
[Baltimore County Savings Bank, F.S.B. Letterhead]
Dear Member:
A Special Meeting of Members of Baltimore County Savings Bank, F.S.B. ("the
Bank") is scheduled in order to vote on the Reorganization and Stock Issuance,
pursuant to which the Bank will reorganize from a federally chartered mutual
savings bank to a federally chartered stock savings bank and concurrently become
a wholly owned subsidiary of BCSB Bankcorp, Inc. (the "Company"), which in turn
will be a majority-owned subsidiary of a mutual holding company to be known as
Baltimore County Savings Bank, M.H.C. (collectively, the "Reorganization").
Simultaneously with the Reorganization, the Company is offering shares of its
common stock in Subscription and Community Offerings (the "Stock Issuance").
Members also will vote on the proposed establishment of the Baltimore County
Savings Bank Foundation (the "Foundation"), which will be dedicated to
charitable and educational purposes within the Baltimore metropolitan area. The
Special Meeting will be held on _____ __, 1998 at _:00 _.m., Eastern Time, at
the administrative office of the Bank, 4111 E. Joppa Road, Baltimore, Maryland.
The Office of Thrift Supervision has approved the Plan of Reorganization
and the Plan of Stock Issuance subject to, among other things, a favorable vote
of our members. The officers and the entire Board of Directors URGE YOU TO VOTE
IN FAVOR of the Plan of Reorganization and the establishment of the Foundation.
As part of the Reorganization and Stock Issuance, the Company is offering
up to 2,052,750 shares of its common stock (the "Common Stock"), subject to
possible adjustment, at a price of $10.00 per share.
The Board of Directors of the Bank believes that the Reorganization and
Stock Issuance and affiliation with the Company will result in a financial
institution with greater financial resources and flexibility. The net proceeds
from the Stock Reorganization and Stock Issuance and the holding company
structure will permit the Bank to expand the financial services currently
offered. In connection with the Reorganization and Stock Issuance, let us assure
you that:
. THERE WILL BE NO CHANGE IN THE BALANCE, INTEREST RATE, OR MATURITY OF
EXISTING SAVINGS DEPOSITS OR LOANS BECAUSE OF THE REORGANIZATION AND
STOCK ISSUANCE. DEPOSITORS AND BORROWERS WILL ENJOY THE SAME SERVICES
AT THE SAME LOCATION WITH THE SAME STAFF.
. MEMBERS HAVE A RIGHT, BUT NO OBLIGATION, TO BUY STOCK BEFORE STOCK IS
OFFERED TO THE PUBLIC.
. YOUR VOTE FOR APPROVAL IN NO WAY OBLIGATES YOU TO BUY STOCK.
. YOUR SAVINGS DEPOSITS AT THE BANK WILL CONTINUE TO BE INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION.
Enclosed are a Prospectus, Proxy Statement, Stock Order Form, Proxy Card,
and reply envelopes. Members of the Bank (i.e., depositors and certain
borrowers) as of the voting record date,________ __, 1998, may complete the
proxy form and return it to us in the enclosed envelope in order to exercise
their voting rights.
If you wish to purchase Common Stock, we must receive your Stock Order
Form, properly completed, and payment by 12:00 Noon, Eastern Time on________ __,
1998. The purchase of stock is entirely voluntary and no person is obligated to
purchase stock. The Bank will pay interest at the passbook savings rate on all
amounts paid for the Common Stock in cash (if delivered in person) or by check
or money order, from the date payment is received until the date the Stock
Reorganization and Stock Issuance is completed. The subscription funds of a
subscriber will be aggregated with other funds of the subscriber in determining
federal deposit insurance coverage.
Please feel free to call the Stock Information Center at (410) 256-0460
with any questions.
We are extremely pleased to offer you this opportunity to participate in
our future as a stockholder.
Sincerely,
Michael J. Dietz
President
THE COMMON STOCK OFFERED IN THE STOCK REORGANIZATION AND STOCK ISSUANCE IS NOT A
DEPOSIT OR ACCOUNT AND IS NOT FEDERALLY INSURED OR GUARANTEED.
THIS IS NOT AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY COMMON STOCK.
THE OFFER IS MADE ONLY BY THE PROSPECTUS.
<PAGE>
[Baltimore County Savings Bank, F.S.B. Letterhead]
Dear Friend:
The Office of Thrift Supervision has approved the Plan of Reorganization
whereby Baltimore County Savings Bank, F.S.B. (the "Bank") will reorganize from
a federally chartered mutual savings bank to a federally chartered stock savings
bank and concurrently become a wholly owned subsidiary of BCSB Bankcorp, Inc.
(the "Company") (collectively, the "Reorganization"), which in turn will be a
majority-owned subsidiary of a mutual holding company to be known as Baltimore
County Savings Bank, M.H.C. Simultaneously with the Reorganization, the Company
is offering shares of its common stock in Subscription and Community Offerings
(the "Stock Issuance"). In connection with the Reorganization and the Stock
Issuance, the Company intends to establish a charitable foundation dedicated to
charitable and educational purposes within the Baltimore metropolitan area. 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.
As part of the Stock Issuance, the Company is offering up to 2,052,750
shares, subject to possible adjustment, of its common stock (the "Common
Stock"), at a price of $10.00 per share. As a former depositor, subscription
rights to purchase shares of Common Stock are being offered to you as well as to
certain members as of _________ __, 1998, concurrently with the proxy
solicitation of current members of the Bank for their vote on the Plan of
Reorganization and the establishment of the Foundation. Orders submitted by you
and others in the Subscription Offering are contingent upon approval of the Plan
of Reorganization and Stock Issuance at a Special Meeting of Members to be held
on _________ __, 1998.
Enclosed are a Prospectus and Stock Order Form should you decide to
purchase Common Stock. You may, but are not obligated to, purchase stock in the
Company. Please complete the Stock Order Form if you wish to purchase any
shares. Additionally, please designate on the Stock Order Form, in the
appropriate place, the method of payment for the shares. We must receive your
Stock Order Form, properly completed, and payment by 12:00 Noon, Eastern Time on
_______ __, 1998. the Bank will pay interest at its passbook savings rate on all
amounts paid for the Common Stock in cash (which must be delivered in person) or
by check or money order, from the date payment is received until the date the
Stock Reorganization and Stock Issuance is completed.
We are extremely pleased to offer you this opportunity to participate in
our future as a customer of the Bank and as a charter stockholder of the
Company.
If you have any questions, please call the Stock Information Center at
(410)256-0460.
Sincerely,
Michael J. Dietz
President
THE COMMON STOCK OFFERED IN THE STOCK REORGANIZATION AND STOCK ISSUANCE IS
NOT A DEPOSIT OR ACCOUNT AND IS NOT FEDERALLY INSURED OR GUARANTEED.
THIS IS NOT AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY COMMON
STOCK. THE OFFER WILL BE MADE ONLY BY THE PROSPECTUS.
<PAGE>
[TRIDENT SECURITIES LETTERHEAD]
To Members and Friends of Baltimore County Savings Bank, F.S.B.:
Trident Securities, Inc., a member of the National Association of
Securities Dealers ("NASD"), is assisting Baltimore County Savings Bank, F.S.B.
("the Bank") in its Reorganization and Stock Issuance, pursuant to which the
Bank will reorganize from a federally chartered mutual savings bank to a
federally chartered stock savings bank and concurrently become a wholly owned
subsidiary of BCSB Bankcorp, Inc. (the "Company"), which in turn will be a
majority-owned subsidiary of a mutual holding company to be known as Baltimore
County Savings Bank, M.H.C. (collectively, the "Reorganization"). Simultaneously
with the Reorganization, the Company is offering shares of its common stock in
Subscription and Community Offerings (the "Stock Issuance").
At the request of the Company, we are enclosing materials explaining this
Reorganization and Stock Issuance, including an opportunity to invest in shares
of the Company's common stock being offered to customers and the community
until_______ __, 1998 (unless extended). Please read the enclosed offering
materials carefully. The Company has asked us to forward these documents to you
in view of certain requirements of the securities laws in your state.
If you have any questions, feel free to call the Stock Information Center
at (410)256-0460.
Very truly yours,
TRIDENT SECURITIES, INC.
THE COMMON STOCK OFFERED IN THE STOCK REORGANIZATION AND STOCK ISSUANCE IS
NOT A DEPOSIT OR ACCOUNT AND IS NOT FEDERALLY INSURED OR GUARANTEED.
THIS IS NOT AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY COMMON
STOCK. THE OFFER WILL BE MADE ONLY BY THE PROSPECTUS.
<PAGE>
SPECIAL NOTICE
The transfer, purchase, or sale of subscription rights is illegal. Anyone
found to be participating in these actions will lose their subscription rights
and be reported to the appropriate regulatory authorities.
You may be approached by persons who offer to provide you with money to be
used to buy stock or who offer to share in possible profits if you will
exercise your subscription rights with the intent to transfer the stock or
proceeds to those persons. Participation in any such scheme is a violation
of the Bank's Plan of Reorganization and Stock Issuance and will subject
those participating to civil or criminal fines or penalties.
Please report any violations or attempts at these actions to the Stock
Information Center at (410) 256-0460.
<PAGE>
Exhibit 99.3
---------------------------------------
PRO FORMA VALUATION REPORT
MUTUAL HOLDING COMPANY
STOCK OFFERING
BALTIMORE COUNTY SAVINGS BANK,
F.S.B.
Baltimore, Maryland
Dated As Of:
January 2, 1998
---------------------------------------
Prepared By:
RP Financial, LC.
1700 North Moore Street
Suite 2210
Arlington, Virginia 22209
<PAGE>
[LETTERHEAD OF RP FINANCIAL, LC. APPEARS HERE]
January 2, 1998
Board of Directors
Baltimore County Savings Bank, F.S.B.
4111 East Joppa Road
Suite 300
Baltimore, Maryland 21236
Gentlemen:
At your request, we have completed and hereby provide an independent
appraisal ("Appraisal") of the estimated pro forma market value of the Common
Stock which is to be offered in connection with the mutual-to-stock conversion
transaction described below.
This appraisal is furnished pursuant to the requirements of 563b.7 and has
been prepared in accordance with the "Guidelines for Appraisal Reports for the
Valuation of Savings and Loan Associations Converting from Mutual to Stock Form
of Organization" ("Valuation Guidelines") of the Office of Thrift Supervision
("OTS"), including the most recent revisions as of October 21, 1994, and
applicable regulatory interpretations thereof.
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 to the Bank's Eligible Account Holders,
the ESOP, Supplemental Eligible Account Holders, and Other Members, with any
shares not sold in the subscription offering may be offered in the 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 remainder
to be used as general working capital.
<PAGE>
RP Financial, LC.
Board of Trustees
January 2, 1998
Page 2
RP Financial, LC.
- -----------------
RP Financial, LC. ("RP Financial") is a financial consulting firm serving
the financial services industry nationwide that, among other things, specializes
in financial valuations and analyses of business enterprises and securities,
including the pro forma valuation for savings institutions converting from
mutual-to-stock form. The background and experience of RP Financial is detailed
in Exhibit V-1. We believe that, except for the fee we will receive for our
appraisal and assisting the Bank in the preparation of its business plan, we are
independent of the Bank and the other parties engaged by the Bank to assist in
the Stock Issuance process.
Valuation Methodology
- ---------------------
In preparing our appraisal, we have reviewed the Bank's and the Holding
Company's regulatory applications, including the offering circular as filed with
the OTS and the Securities and Exchange Commission ("SEC"). We have conducted a
financial analysis of the Bank that has included a review of its audited
financial information for fiscal years ended September 30, 1993 through 1997 and
various unaudited information and internal financial reports through September
30, 1997 and due diligence related discussions with the Bank's management;
Anderson Associates, LLP, the Bank's independent auditor; Housley Kantarian &
Bronstein, P.C., the Bank's Stock Issuance counsel; and Trident Securities,
Inc., the Bank's financial and marketing advisors in connection with the Holding
Company's stock offering. All conclusions set forth in the Appraisal were
reached independently from such discussions. In addition, where appropriate, we
have considered information based on other available published sources that we
believe are reliable. While we believe the information and data gathered from
all these sources are reliable, we cannot guarantee the accuracy and
completeness of such information.
We have investigated the competitive environment within which the Bank
operates and have assessed the Bank's relative strengths and weaknesses. We have
kept abreast of the changing regulatory and legislative environment for
financial institutions and analyzed the potential impact on the Bank and the
industry as a whole. We have analyzed the potential effects of conversion on the
Bank's operating characteristics and financial performance as they relate to the
pro forma market value. We have reviewed the economy in the Bank's primary
market area and have compared the Bank's financial performance and condition
with publicly-traded thrifts in mutual holding company form, as well as all
publicly-traded thrifts. We have reviewed conditions in the securities markets
in general and in the market for thrift stocks in particular, including the
market for existing thrift issues and the market for initial public offerings by
thrifts. We have considered the market for the stock of all publicly-traded
mutual holding companies. We have also considered the expected market for the
Bank's public shares. We have excluded from such analyses thrifts subject to
announced or rumored acquisition, mutual holding company institutions that have
announced their intent to pursue second step conversions, and/or those
institutions that exhibit other unusual characteristics.
Our Appraisal is based on the Bank's representation that the information
contained in the regulatory applications and additional information furnished to
us by the Bank, its independent auditors, legal counsel and other authorized
agents are truthful, accurate and complete. We did not independently verify the
financial statements and other information provided by the Bank, its independent
auditors, legal counsel and other authorized agents nor did we independently
value the assets or liabilities of the Bank. The valuation considers the Bank
only as a going concern and should not be considered as an indication of the
liquidation value.
Our appraised value is predicated on a continuation of the current
operating environment for the Bank and Holding Company and for all thrifts and
their holding companies. Changes in the local, state and national economy, the
legislative and regulatory environment for financial institutions and mutual
holding companies, the stock market, interest rates, and other external forces
(such as natural disasters or significant world events)
<PAGE>
RP Financial, LC.
Board of Trustees
January 2, 1998
Page 3
may occur from time to time, often with great unpredictability, and may
materially impact the value of thrift stocks as a whole or the Bank's and
Holding Company's values alone. It is our understanding that there are no
current or long-term plans for pursuing a second step conversion or for selling
control of the Holding Company or the Bank following Stock Issuance. To the
extent that such factors can be foreseen, they have been factored into our
analysis.
Pro forma market value is defined as the price at which 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.
Valuation Conclusion
- --------------------
It is our opinion that, as of January 2, 1998, the estimated aggregate pro
forma market value of the shares to be issued immediately following the Stock
Issuance, both shares issued publicly as well as to the MHC, was $43,250,000 at
the midpoint, equal to 4,325,000 shares issued at a per share value of $10.00
for the public shares. Pursuant to conversion guidelines, the 15 percent
offering range indicates a minimum value of $36,762,500 and a maximum value of
$49,737,500. Based on the $10.00 per share offering price determined by the
Board, this valuation range equates to an offering of 3,676,250 shares at the
minimum to 4,973,750 shares at the maximum. The Board of Directors has
established a public offering range such that the public ownership of the
Holding Company will constitute a 42 percent ownership interest prior to the
issuance of shares to the Foundation. Accordingly, the offering range to the
public of the minority stock will be $15,172,500 at the minimum, $17,850,000 at
the midpoint, and $20,527,500 at the maximum. Based on the public offering
range, and inclusive of the shares issued to the Foundation, the public
ownership of the shares will represent 43.3 percent of the shares issued at the
minimum of the valuation range, 43.0 percent of the shares issued at the
midpoint of the valuation range, and 42.8 percent of the shares issued at the
maximum of the valuation range, with the MHC owning the majority of the shares.
Limiting Factors and Considerations
- -----------------------------------
Our valuation is not intended, and must not be construed, as a
recommendation of any kind as to the advisability of purchasing shares of the
Common Stock. Moreover, because such valuation is necessarily based upon
estimates and projections of a number of matters, all of which are subject to
change from time to time, no assurance can be given that persons who purchase
shares of Common Stock in the Stock Issuance will thereafter be able to buy or
sell such shares at prices related to the foregoing valuation of the pro forma
market value thereof.
RP Financial's valuation was determined based on the financial condition
and operations of the Bank as of September 30, 1997, the date of the financial
data included in the regulatory application and prospectus.
RP Financial is not a seller of securities within the meaning of any
federal and state securities laws and any report prepared by RP Financial shall
not be used as an offer or solicitation with respect to the purchase or sale of
any securities. RP Financial maintains a policy which prohibits the company, its
principals or employees from purchasing stock of its client institutions.
The valuation will be updated as provided for in the conversion regulations
and guidelines. These updates will consider, among other things, any
developments or changes in the Bank's financial performance and condition,
management policies, and current conditions in the equity markets for thrift
shares. These updates may also consider changes in other external factors which
impact value including, but not limited to:
<PAGE>
RP Financial, LC.
Board of Trustees
January 2, 1998
Page 4
various changes in the legislative and regulatory environment, the stock market
and the market for thrift stocks, and interest rates. Should any such new
developments or changes be material, in our opinion, to the valuation of the
shares, appropriate adjustments to the estimated pro forma market value will be
made. The reasons for any such adjustments will be explained in the update at
the date of the release of the update.
Respectfully submitted,
RP FINANCIAL, LC.
/s/ Ronald S. Riggins
Ronald S. Riggins
President
/s/ Gregory E. Dunn
Gregory E. Dunn
Senior Vice President
<PAGE>
RP Financial, LC.
TABLE OF CONTENTS
BCSB BANKCORP, INC.
BALTIMORE COUNTY SAVINGS BANK, F.S.B.
Baltimore, Maryland
<TABLE>
<CAPTION>
PAGE
DESCRIPTION NUMBER
----------- ------
<S> <C>
CHAPTER ONE OVERVIEW AND FINANCIAL ANALYSIS
- -----------
Introduction 1.1
Establishment of Charitable Foundation 1.1
Strategic Overview 1.2
Balance Sheet Trends 1.4
Income and Expense Trends 1.8
Interest Rate Risk Management 1.12
Lending Activities and Strategy 1.12
Asset Quality 1.15
Funding Composition and Strategy 1.16
Subsidiary Activities 1.16
Legal Proceedings 1.17
CHAPTER TWO MARKET AREA
- -----------
Introduction 2.1
Market Area Demographics 2.1
National Economic Factors 2.3
Local Economy 2.7
Competition 2.8
CHAPTER THREE PEER GROUP ANALYSIS
- -------------
Peer Group Selection 3.1
Basis of Comparison 3.2
Selection of Peer Group 3.2
Financial Condition 3.5
Income and Expense Components 3.8
Loan Composition 3.11
Interest Rate Risk 3.13
Credit Risk 3.15
Summary 3.15
</TABLE>
<PAGE>
RP Financial, LC.
TABLE OF CONTENTS
BCSB BANKCORP, INC.
BALTIMORE COUNTY SAVINGS BANK, F.S.B.
Baltimore, Maryland
(continued)
<TABLE>
<CAPTION>
PAGE
DESCRIPTION NUMBER
----------- ------
<S> <C>
CHAPTER FOUR VALUATION ANALYSIS
- ------------
Introduction 4.1
Appraisal Guidelines 4.1
RP Financial Approach to the Valuation 4.1
Valuation Analysis 4.2
1. Financial Condition 4.2
2. Profitability, Growth and Viability of Earnings 4.4
3. Asset Growth 4.5
4. Primary Market Area 4.6
5. Dividends 4.6
6. Liquidity of the Shares 4.9
7. Marketing of the Issue 4.9
A. The Public Market 4.9
B. The New Issue Market 4.14
C. The Acquisition Market 4.16
8. Management 4.18
9. Effect of Government Regulation and Regulatory Reform 4.18
Summary of Adjustments 4.19
Basis of Valuation - Fully-Converted Pricing Ratios 4.19
Valuation Approaches 4.20
1. Price-to-Earnings ("P/E") 4.23
2. Price-to-Book ("P/B") 4.24
3. Price-to-Assets ("P/A") 4.26
Valuation Conclusion 4.26
</TABLE>
<PAGE>
RP Financial, LC.
LIST OF TABLES
BCSB BANKCORP, INC.
BALTIMORE COUNTY SAVINGS BANK, F.S.B.
Baltimore, Maryland
<TABLE>
<CAPTION>
TABLE
NUMBER DESCRIPTION PAGE
------ ----------- ----
<S> <C> <C>
1.1 Historical Balance Sheets 1.5
1.2 Historical Income Statements 1.9
2.1 Summary Demographic Data 2.2
2.2 Major Employers in Baltimore County 2.7
2.3 Unemployment Trends 2.8
2.4 Deposit Summary 2.9
3.1 Peer Group of Publicly-Traded Thrifts 3.4
3.2 Balance Sheet Composition and Growth Rates 3.6
3.3 Income as a Percent of Average Assets and Yields, Costs,
Spreads 3.9
3.4 Loan Portfolio Composition and Related Information 3.12
3.5 Interest Rate Risk Measured and Net Interest Income
Volatility 3.14
3.6 Credit Risk Measured and Related Information 3.16
4.1 Peer Group Market Area Comparative Analysis 4.7
4.2 Recent Conversions 4.15
4.3 Market Pricing Comparatives 4.17
4.4 Calculation of Implied Per Share Data -- Incorporating
MHC Second Step Conversion 4.21
4.5 MHC Institutions -- Implied Pricing Ratios, Full
Conversion Basis 4.25
4.6 Pricing Table: MHC Comparables 4.27
</TABLE>
<PAGE>
RP Financial, LC.
Page 1.1
I. OVERVIEW AND FINANCIAL ANALYSIS
Introduction
- ------------
Baltimore County Savings Bank, F.S.B. ("BCSB" or the "Bank"), organized in
1955, is a federally chartered mutual savings bank headquartered in Perry Hall,
Maryland. BCSB serves the Baltimore MSA through six full service branch offices,
five of which are located in Baltimore County. The sixth office is located in
Harford County, which is northeast of Baltimore County. BCSB is a member of the
Federal Home Loan Bank ("FHLB") system and its deposits are insured up to the
maximum allowable amount by the Savings Association Insurance Fund ("SAIF") of
the Federal Deposit Insurance Corporation ("FDIC"). At September 30, 1997, which
is the Bank's fiscal year end, BCSB had $251.7 million in assets, $224.7 million
in deposits and equity of $23.9 million or 9.5 percent of total assets.
On October 22, 1997, the Bank's Board of Directors adopted a Plan of
Reorganization, which was subsequently amended (the "Reorganization"), pursuant
to which the Bank will reorganize into the federal mutual holding company form
of organization. As part of the reorganization, BCSB will become a wholly-owned
subsidiary of BCSB Bankcorp, Inc., a Federal corporation, and BCSB Bankcorp,
Inc. (the "Holding Company") 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. Concurrent with the Reorganization, the MHC will
retain $250,000 for initial capitalization, while the Holding Company will
retain up to 50 percent of the net conversion proceeds. Immediately after
consummation of the Reorganization, it is not anticipated that the MHC or the
Holding Company will engage in any business activity other than ownership of
their respective subsidiaries.
The assets and liabilities of the stock subsidiaries will be substantially
equivalent to those of BCSB prior to the Reorganization. The MHC will own a
controlling interest in the Holding Company of at least 51 percent, and the
Holding Company will be the sole subsidiary of the MHC. The Holding Company will
also own 100 percent of the Bank's outstanding stock.
Establishment of Charitable Foundation
- --------------------------------------
In order to enhance the Bank's existing historically strong service and
reinvestment activities in the local community, the Reorganization provides for
the establishment of Baltimore County Savings Bank Foundation, a private
charitable foundation (the "Foundation") in connection with the stock offering.
The Bank and the Holding Company will create the Foundation and fund it with
authorized but unissued shares of common stock contributed by the Holding
Company in an amount equal to $750,000, which based on an initial
<PAGE>
RP Financial, LC.
Page 1.2
offering price of $10.00 per share will result in the issuance of 75,000 shares
to the Foundation. The Foundation is intended to complement the Bank's existing
community reinvestment activities and will be dedicated to the promotion of
charitable and educational purposes within the Baltimore metropolitan area.
Funding the Foundation with shares of common stock of the Holding Company will
enable the local community served to share in the growth and profitability of
the Holding Company over the long term through dividends and price appreciation.
As such, the Bank believes the Foundation will create a high level of community
goodwill toward the Holding Company and the Bank, increase the Bank's local
visibility and further enhance the Bank's reputation for community service,
thereby strengthening its community banking franchise.
Strategic Overview
- ------------------
BCSB is a community-oriented thrift, with a primary strategic objective of
meeting the borrowing and savings needs of its local customer base. Throughout
its history, BCSB has pursued a traditional thrift operating strategy and, thus,
1-4 family permanent mortgage loans and retail deposits have consistently been
the principal components of the Bank's assets and liabilities, respectively.
Lending diversification by BCSB has emphasized consumer loans and, in
particular, automobile loans. Most of the Bank's automobile loans are originated
indirectly through local new and used car dealerships. BCSB's diversification
into automobile lending has served to enhance the yield and interest rate
sensitivity of the Bank's loan portfolio; however, in 1996 and 1997, as a
measure to limit the credit risk associated with the loan portfolio, BCSB
reduced the percentage of its loan portfolio invested in automobile loans.
Investments serve as a supplement to the Bank's lending activities, with BCSB's
investment portfolio being indicative of a low risk investment philosophy.
Investments securities held by the Bank consist of U.S. Government and agency
securities and mortgage-backed securities which are guaranteed or insured by a
federal agency.
Notwithstanding the Bank's diversification into higher risk types of
lending, BCSB's credit quality measures have generally been maintained at levels
that are indicative of fairly limited credit risk exposure. Comparatively, the
Bank maintains a greater degree of interest rate risk exposure, as BCSB's
emphasis on fixed rate lending funded by short- and intermediate-term deposits
has resulted in a balance sheet that is liability-sensitive.
Retail deposits have consistently served as the primary interest-bearing
funding source for the Bank. Deposit growth has been uneven of the Bank over the
past five fiscal years, due in part to offering a premium CD rate during fiscal
1995 and the closing of a branch facility during fiscal 1997. The closing of
another branch office and the sale of deposits maintained at that branch was
completed in October 1997, which will depress BCSB's deposit growth during
fiscal 1998. The branch, which is located to the south of Baltimore in Anne
<PAGE>
RP Financial, LC.
Page 1.3
Arundel County, was closed due to limited growth prospects and a strategic
decision by the Bank to focus on serving markets that are located to the north
of Baltimore. While CDs account for the largest portion of the Bank's deposit
composition, BCSB has been effective in maintaining a relatively high
concentration of its deposits in lower costing savings and transaction accounts.
As of September 30, 1997, transaction and saving accounts comprised 42.3 percent
of the Bank's total deposits. Borrowings typically have not been utilized by the
Bank and at fiscal year end 1997 the Bank did not maintain any borrowings.
As a traditional thrift, BCSB's earnings base is largely dependent upon net
interest income and operating expense levels. Maintenance of a liability-
sensitive balance sheet reflects the Bank's philosophy that earnings can be more
fully maximized by incurring some interest rate risk, while BCSB's favorable
IEA/IBL ratio will sustain earnings at lower but profitable levels during
periods of rising and higher interest rates. Overall, BCSB's operating strategy
has provided for a relatively strong net interest margin during the past five
fiscal years, although, reflecting the impact of a narrowing interest rate
spread, the net interest margin has declined over the past five years. Operating
expenses have tended to be slightly high for an institution that has been
generally pursuing a traditional thrift operating strategy. Asset shrinkage
served to place further upward pressure on the Bank's operating expense ratio
during fiscal 1997.
Over the past five fiscal years, BCSB's operating strategy has resulted in
positive asset growth, an increasing capital position and healthy core earnings.
Credit risk exposure has been limited by emphasizing the origination of 1-4
family loans and maintaining a notable portion of interest-earning assets in low
risk types of investments. Comparatively, the Bank's interest rate exposure is
more notable, as fixed rate loans and longer term investment have been primarily
funded with short-term deposits. Earnings have been enhanced by a generally
favorable interest rate environment, in which the Bank's maintenance of a
negative short-term gap position has been beneficial to the net interest margin.
The Bank's business plan is to continue to operate as a community-oriented
bank, serving local customer needs with an array of loan and depository
products, and other financial services. The Bank has sought to assemble a well-
qualified management team and staff to facilitate the ability to fully realize
the business plan objectives.
A key component of the Bank's plan is to increase capital through the
minority stock offering. The additional paid-in capital will increase the
operating flexibility and overall financial strength of BCSB. The Bank's
increased capitalization is anticipated to increase earnings through
reinvestment of the net proceeds. The use of proceeds includes the following:
<PAGE>
RP Financial, LC.
Page 1.4
. MHC. The Bank intends to capitalize the MHC with $250,000 of cash. The
---
primary activity of the MHC will be ownership of the majority interest
in the Bank. Such cash is anticipated to be invested in U.S. Treasury
securities and other low risk instruments.
. Holding Company. Approximately 50 percent of the net conversion
---------------
proceeds will be retained by BCSB Bankcorp, Inc. Such funds will
initially be used to provide a loan to the Bank's ESOP trust, and the
balance will be invested into short-term investments. Over time, the
Holding Company funds may be utilized for various corporate purposes,
including payment of dividends and possible repurchase of common stock
consistent with OTS limitations.
. BCSB. Approximately 50 percent of the net proceeds of the conversion
----
will be infused into the Bank in exchange for all of the Bank's newly
issued stock. Proceeds infused into the Bank will initially be
invested into short-term investments. Over time, the proceeds are
expected to be redeployed into the Bank's loan growth and normal
investment activities. 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 the construction
costs, which are currently estimated to be $750,000.
Overall, it is the Bank's objective to pursue growth that will serve to
increase returns, while, at the same time, growth will not be pursued that
compromises the credit quality or increases the overall risk associated with
BCSB's operations. The Bank has acknowledged that it intends to operate with
excess capital in the near term, operating with a below market return on equity,
until such time as the new capital can be leveraged in a safe and sound manner
over an extended period of time.
Balance Sheet Trends
- --------------------
From September 30, 1993 through September 30, 1997, BCSB exhibited annual
asset growth of positive 3.7 percent (see Table 1.1). Asset growth was somewhat
uneven during the period, as the Bank recorded positive asset growth during
fiscal years 1995 and 1996 and asset shrinkage during fiscal years 1994 and
1997. The fluctuating balance of assets was largely attributable to deposit
growth resulting from offering a premium rate on 24-month CDs during fiscal
1995, with the roll-off of those CDs resulting in deposit shrinkage during
fiscal 1997. Deposit shrinkage in fiscal 1997 also reflects the impact of
closing one of the Bank's branches during fiscal 1997. BCSB's composition of
interest-earning assets has remained fairly stable over the past five fiscal
years, with loans receivable being maintained at approximately 60.0 percent of
assets. Asset growth has been funded by deposits and retained earnings, as the
Bank has not utilized borrowings over the past five fiscal years. A summary of
BCSB's key operating ratios for the past five fiscal years are presented in
Exhibit I-3.
BCSB's loan portfolio increased at a 4.0 percent annual rate from fiscal
year end 1993 through fiscal year end 1997, exhibiting positive growth since
declining to a low of $129.2 million at fiscal year end 1994. The
<PAGE>
RP Financial, LC
Page 1.5
Table 1.1
Baltimore County Savings Bank, F.S.B.
Historical Balance Sheets(1)
(Amount and Percent of Assets)
<TABLE>
<CAPTION>
At Fiscal Year End September 30,
-------------------------------------------------------------------------------------------
1993 1994 1995
-------------------------- -------------------------- ------------------------
Amount Pct Amount Pct Amount Pct
------ --- ------ --- ------ ---
($000) (%) ($000) (%) ($000) (%)
<S> <C> <C> <C> <C> <C> <C>
Total Amount of:
Assets $217,666 100.0% $216,786 100.0% $240,683 100.0%
Cash and cash equivalents 32,454 14.9% 23,080 10.6% 24,643 10.2%
Investment securities 8,099 3.7% 16,769 7.7% 27,988 11.6%
Mortgage-backed securities 31,305 14.4% 39,697 18.3% 35,047 14.6%
FHLB stock 1,483 0.7% 1,280 0.6% 1,292 0.5%
Loans receivable, net 135,397 62.2% 129,210 59.6% 145,795 60.6%
Deposits 198,873 91.4% 195,813 90.3% 217,868 90.5%
Borrowings --- 0.0% --- 0.0% --- 0.0%
Total equity 17,074 7.8% 19,082 8.8% 20,697 8.6%
Full service branches(2) 8 8 8
<CAPTION>
At Fiscal Year End September 30, Annual
------------------------------------------------------------- Growth
1996 1997 Rate
--------------------------- ---------------------------- ----
Amount Pct Amount Pct Pct
------ --- ------ --- ---
($000) (%) ($000) (%) (%)
<S> <C> <C> <C> <C> <C>
Total Amount of:
Assets $258,854 100.0% $251,738 100.0% 3.70%
Cash and cash equivalents 20,076 7.8% 19,217 7.6% -12.28%
Investment securities 36,399 14.1% 30,323 12.0% 39.10%
Mortgage-backed securities 39,771 15.4% 37,189 14.8% 4.40%
FHLB stock 1,301 0.5% 1,433 0.6% -0.85%
Loans receivable, net 154,560 59.7% 158,676 63.0% 4.05%
Deposits 233,311 90.1% 224,656 89.2% 3.09%
Borrowings --- 0.0% --- 0.0% N.M.
Total equity 21,913 8.5% 23,858 9.5% 8.72%
Full service branches(2) 8 7
</TABLE>
- ----------------------------
(1) Ratios are as a percent of ending assets.
(2) The Bank currently maintains six full service branch offices, as the
result of deposits at one of the branches being sold subsequent to fiscal
year end 1997.
Sources: BCSB's prospectus, audited financial statements and RP Financial
calculations.
<PAGE>
RP Financial, LC.
Page 1.6
most notable loan growth occurred during fiscal year 1995, which was supported
by growth of the consumer loan portfolio and, in particular, automobile loans.
Fairly strong loan growth was also recorded during fiscal 1996, which was
supported by growth in 1-4 family permanent mortgage loans. Comparatively,
during the past fiscal year, the Bank's loan growth has slowed, with growth in
1-4 family permanent mortgage loans being offset by shrinkage in the balance of
automobile loans outstanding. As of September 30, 1997, the Bank's net loans
receivable balance equaled $158.7 million, or 63.0 percent, of assets, versus
comparative measures of $135.4 million, or 62.2 percent, of assets at fiscal
year end 1993.
Consistent with the Bank's traditional emphasis on originating and
retaining 1-4 family permanent mortgage loans, 1-4 family permanent mortgage
loans represent the primary component of BCSB's loan portfolio composition.
However, the concentration of 1-4 family loans comprising BCSB's loan portfolio
composition declined from 74.4 percent at fiscal year end 1993 to 66.2 percent
at fiscal year end 1997. The decline in the concentration of 1-4 family loans
was mostly due to growth of the consumer loan portfolio, which increased from
10.2 percent of total loans outstanding at fiscal year end 1993 to 22.5 percent
of total loans outstanding at fiscal year end 1997. Most of the growth of the
consumer loan balance was related to an increase in the balance of automobile
loans outstanding, which accounted for 9.5 percent and 19.6 percent of the
Bank's loan portfolio composition at fiscal year ends 1993 and 1997,
respectively. Notwithstanding the overall growth exhibited in automobile loans,
the balance has declined from a peak of $40.8 million at fiscal year end 1995 to
$32.6 million at fiscal year end 1997, reflecting a strategic decision by the
Bank to curtail the size of automobile loan portfolio in light of the higher
degree of credit risk associated with those loans. The balance of the loan
portfolio consists primarily of commercial real estate and construction loans,
which have been maintained at fairly static balances over the past five fiscal
years. Commercial real estate and construction loans equaled 6.1 percent and 5.2
percent of total loans outstanding, respectively, at September 30, 1997. Beyond
consumer loans, BCSB's diversification into non-mortgage lending has consisted
of a nominal amount of commercial business loans which have accounted for less
than 1.0 percent of the loan portfolio throughout the past five years.
Over the past five fiscal years, the Bank's balance of cash, investment
securities and FHLB stock has fluctuated from a low of 18.9 percent of assets at
fiscal year end 1994 to a high of 22.4 percent of assets at fiscal year end
1996. Total cash and investments maintained by the Bank at September 30, 1997
equaled $51.0 million, or 20.2 percent of assets. As of September 30, 1997, the
investment securities portfolio totaled $30.3 million and consisted entirely of
U.S. Government and federal agency securities. The investment securities
portfolio is classified as held to maturity, reflecting the Bank's general
philosophy of not selling securities. Exhibit I-4 provides historical detail of
the Bank's investment portfolio. The investment portfolio consists of securities
with short- and intermediate-term maturities, with the substantial portion of
the portfolio having
<PAGE>
RP Financial, LC.
Page 1.7
scheduled maturities of less than 10 years. In addition to investment
securities, BCSB held funds in cash, interest-bearing deposits in other banks
and federal funds sold which totaled $19.2 million, or 7.6 percent, of assets at
September 30, 1997 and was at the low end of the range of cash and cash
equivalent levels maintained by the Bank in recent years. BCSB's FHLB stock
balance equaled $1.4 million, or 0.6 percent, of assets at September 30, 1997.
Mortgage-backed securities comprise the balance of the Bank's interest-
earning asset composition, serving as an investment alternative to 1-4 family
permanent mortgage loans. Over the past five fiscal years, the Bank's mortgage-
backed securities portfolio has been maintained between 14.4 percent and 18.3
percent of assets and at fiscal year end 1997 equaled $37.2 million, or 14.8
percent, of assets. Mortgage-backed securities held by the Bank consists of
participation certificates, which have been issued by FHLMC, FNMA and GNMA. The
mortgage-backed securities portfolio is classified as held to maturity and
consists primarily of balloon securities.
Over the past five fiscal years, BCSB's funding needs have been
substantially met through retail deposits, internal cash flows and retained
earnings. From fiscal year end 1993 through fiscal year end 1997, the Bank's
deposits increased at an annual rate of 3.1 percent. Deposit growth paralleled
the Bank's asset growth, reflecting positive growth during fiscal years 1995 and
1996 and reflecting declines during fiscal years 1994 and 1997. Fluctuations in
the balance of deposits was largely related to growth and shrinkage in CDs, with
the most notable CD growth occurring during fiscal 1995 as the result of the
premium rate being offered on 24-month CDs. Partially offsetting the CD growth
in fiscal 1995 was deposit run-off in the Bank's transaction and savings
accounts. Accordingly, the concentration of CDs comprising the Bank's deposit
composition increased from 42.1 percent at fiscal year end 1994 to 55.0 percent
at fiscal year end 1995. As of September 30, 1997, CDs comprised 57.4 percent of
the Bank's deposit composition. Regular savings accounts represent the largest
component of the Bank's transaction and savings account balance, totaling $60.6
million, or 27.0 percent of total deposits at fiscal year end 1997, versus
comparative measures of $76.1 million or 38.3 percent, of total deposits at
fiscal year end 1993. Borrowings typically have not been utilized by the Bank
and at fiscal year end 1997 the Bank did not maintain any borrowings. If
borrowings are needed, the Bank has the ability to borrow from the FHLB of
Atlanta.
Positive earnings during the past five fiscal years translated into an
annual capital growth rate of 8.7 percent for the Bank. Capital growth outpaced
the Bank's asset growth rate, as BCSB's equity-to-assets ratio increased from
7.8 percent at fiscal year end 1993 to 9.5 percent at fiscal year end 1997.
Intangibles accounted for 0.2 percent of the Bank's capital at fiscal year end
1997. BCSB maintained healthy capital surpluses relative to all of its
regulatory capital requirements at September 30, 1997. The addition of the
offering proceeds will serve to further strengthen BCSB's capital position and
competitive posture within its primary market, as well
<PAGE>
RP Financial, LC.
Page 1.8
as support expansion into other nearby markets if favorable growth opportunities
are presented. At the same time, as the result of the Bank's higher pro forma
capital position, BCSB's return on equity ("ROE") can be expected to decline
from current levels following the stock offering.
Income and Expense Trends
- -------------------------
The Bank has reported positive earnings over the last five fiscal years
(see Table 1.2), ranging from a low of 0.47 percent of average assets in fiscal
1996 to a high of 1.12 percent of average assets in fiscal 1993. For fiscal
1997, the Bank reported net income of $2.0 million, equal to 0.76 percent of
average assets. Earnings during fiscal 1996 were depressed by the one time
special assessment to recapitalize the SAIF. Notwithstanding the negative
earnings impact of the SAIF assessment, the Bank's return on average assets
ratio has in general declined since fiscal 1993. The decline in the return on
average assets ratio has been primarily attributable to a decreasing net
interest margin, coinciding with the narrowing of the Bank's interest rate
spread. Net interest income and operating expenses represent the major
components of BCSB's core earnings, while non-interest operating income has been
a fairly limited contributor to the Bank's earnings. Income and losses resulting
from real estate operations and provisions or recoveries for loan losses have
been inconsistent factors in the Bank's earnings. Gains and losses resulting
from the sale of investment securities typically have not been a prominent
factor in the Bank's earnings.
BCSB's level of net interest income before provisions for loan losses
peaked at 4.28 percent of average assets during fiscal 1993 and then trended
lower over the next three fiscal years to equal a low of 3.29 percent during
fiscal 1996. During fiscal 1997, the Bank's net interest income to average
assets ratio increased to 3.51 percent. The downward trend reflected in the
Bank's net interest margin from fiscal 1993 through fiscal 1996 was largely
attributable to a decline in the interest income ratio during fiscal year 1994,
and an increase in the interest expense ratio during fiscal years 1995 and 1996.
The decline in the interest income ratio during fiscal year 1994 reflects the
loss of yield income resulting from loans comprising a lower portion of
interest-earning assets, as the Bank experienced a notable decline in 1-4 family
loans during a period of high refinancing activity for 1-4 family loans. The
increase in BCSB's interest expense ratio during fiscal years 1995 and 1996
reflects the shift in the Bank's deposit composition towards a higher
concentration of CDs and a resulting lower concentration of lower costing
transaction and savings accounts. A widening yield-cost spread provided for an
increase in the Bank's net interest margin during fiscal 1997, which was
supported by a decline in BCSB's weighted average cost of funds. The reduction
in the cost of funds was supported by the downward repricing of deposits and, in
particular, the roll-off of the premium rate 24-month CDs.
<PAGE>
RP Financial, LC
Page 1.9
Table 1.2
Baltimore County Savings Bank, F.S.B.
Historical Income Statements(1)
(Amount and Percent of Average Assets)
<TABLE>
<CAPTION>
For the Fiscal Year Ended September 30,
-------------------------------------------------------------------------------------------
1993 1994 1995
-------------------------- -------------------------- --------------------------
Amount Pct Amount Pct Amount Pct
------ --- ------ --- ------ ---
($000) (%) ($000) (%) ($000) (%)
<S> <C> <C> <C> <C> <C> <C>
Interest Income $17,529 7.78% $15,822 7.11% $17,126 7.38%
Interest Expense (7,881) -3.50% (6,968) -3.13% (8,974) -3.87%
------- ------ ------- ------ ------- ------
Net Interest Income $9,648 4.28% $8,854 3.98% $8,152 3.52%
Provision for Loan Losses 465 0.21% 137 0.06% (255) -0.11%
---- ----- ---- ----- ----- ------
Net Interest Income after Provisions $10,113 4.49% $8,991 4.04% $7,897 3.41%
Other Income 549 0.24% 549 0.25% 509 0.22%
Operating Expense (5,147) -2.28% (5,351) -2.40% (5,821) -2.51%
------- ------ ------- ------ ------- ------
Net Operating Income $5,515 2.45% $4,189 1.88% $2,585 1.11%
Non-Operating Income
Gain(loss) on sale of invest. and assets $101 0.04% ($65) -0.03% ($11) 0.00%
Income(loss) on real estate operations (1,609) -0.71% (101) -0.05% 115 0.05%
Other non-operating income(loss) 0 0.00% 0 0.00% 0 0.00%
-- ----- -- ----- -- -----
Net Non-Operating Income (1,508) -0.67% (166) -0.07% 104 0.04%
Net Income Before Tax $4,007 1.78% $4,023 1.81% $2,689 1.16%
Income Taxes (1,483) -0.66% (1,603) -0.72% (1,112) -0.48%
Change in Acctg. Principle -- -- (394) -0.18% -- --
------ ------- ------ ------- ------ -------
Net Income (Loss) $2,524 1.12% $2,026 0.91% $1,577 0.68%
Core Earnings
- -------------
Net Income Before Ext. Items $2,524 1.12% $2,420 1.09% $1,577 0.68%
Addback: Non-Operating Losses 1,609 0.71% 166 0.07% 11 0.00%
Deduct: Non-Operating Gains (101) -0.04% 0 0.00% (115) -0.05%
Tax Effect Non-Op. Items(2) (588) -0.26% (65) -0.03% 41 0.02%
----- ------ ---- ------ --- -----
Core Net Income $3,444 1.53% $2,521 1.13% $1,514 0.65%
<CAPTION>
For the Fiscal Year Ended September 30,
-----------------------------------------------------------
1996 1997
--------------------------- ----------------------------
Amount Pct Amount Pct
------ --- ------ ---
($000) (%) ($000) (%)
<S> <C> <C> <C> <C>
Interest Income $19,064 7.45% $19,458 7.48%
Interest Expense (10,636) -4.16% (10,323) -3.97%
-------- ------ -------- ------
Net Interest Income $8,428 3.29% $9,135 3.51%
Provision for Loan Losses (434) -0.17% (286) -0.11%
----- ------ ----- ------
Net Interest Income after Provisions $7,994 3.12% $8,849 3.40%
Other Income 504 0.20% 601 0.23%
Operating Expense (5,848) -2.28% (6,257) -2.41%
------- ------ ------- ------
Net Operating Income $2,650 1.04% $3,193 1.23%
Non-Operating Income
Gain(loss) on sale of invest. and assets ($194) -0.08% $51 0.02%
Income(loss) on real estate operations 764 0.30% 34 0.01%
Other non-operating income(loss) (1,305) -0.51% 0 0.00%
------- ------ -- -----
Net Non-Operating Income (735) -0.29% 85 0.03%
Net Income Before Tax $1,915 0.75% $3,278 1.26%
Income Taxes (712) -0.28% (1,301) -0.50%
Change in Acctg. Principle ------ ------ ------ ------
-- --- -- ---
Net Income (Loss) $1,203 0.47% $1,977 0.76%
Core Earnings
- -------------
Net Income Before Ext. Items $1,203 0.47% $1,977 0.76%
Addback: Non-Operating Losses 1,499 0.59% 0 0.00%
Deduct: Non-Operating Gains (764) -0.30% (85) -0.03%
Tax Effect Non-Op. Items(2) (282) -0.11% 33 0.01%
----- ------ ------ -----
Core Net Income $1,656 0.65% $1,926 0.74%
</TABLE>
- ----------------------------
(1) Ratios are as a percent of average assets.
(2) Assumes tax rate of 39.0 percent.
Sources: BCSB's prospectus, audited financial statements and RP Financial
calculations.
<PAGE>
RP Financial, LC.
Page 1.10
The impact of interest rates on BCSB's net interest margin is further
revealed through examination of the Bank's historical yields and costs and
resulting interest rate spreads as set forth in Exhibits I-3 and I-5. In
general, trends in the Bank's net interest margin paralleled the widening and
narrowing of its interest rate spread, as the Bank's interest rate spread
narrowed from 4.47 percent during fiscal 1993 to 3.26 percent during fiscal
1996. The reduction in the Bank's interest rate spread was largely attributable
to higher funding costs resulting from a shift in deposit composition towards a
higher concentration of CDs. During fiscal 1997 the Bank's interest rate spread
increased to 3.41 percent, with lower CD costs accounting for most of the
increase in the interest rate spread. BCSB's net interest margin will likely be
enhanced by the stock offering, due to the reinvestment of interest-free capital
into interest-earning assets and the higher IEA/IBL ratio that will result from
the Bank's increased capital position.
Consistent with the Bank's limited diversification, sources of non-interest
operating income have not been a significant contributor to the Bank's earnings.
Throughout the period shown in Table 1.2, sources of non-interest operating
income ranged from 0.20 percent to 0.25 percent of average assets. For the
twelve months ended September 30, 1997, BCSB's non-interest operating income
equaled 0.23 percent of average assets. Sources of non-interest operating income
consist substantially of fees, service charges, and rental income earned on the
Bank's administrative office. At this time, the Bank has no plans to further
diversify into activities that would generate additional non-interest operating
income, and, thus, BCSB's earnings can be expected to remain highly dependent
upon the net interest margin.
Operating expenses represent the other major component of the Bank's
earnings, ranging from a low of 2.28 percent of average assets in fiscal years
1993 and 1996 to a high of 2.51 percent of average assets in fiscal 1995. During
fiscal 1997, the Bank's operating expense to average assets ratio equaled 2.41
percent. The increase in BCSB's operating expense ratio during fiscal 1997 was
attributable to both an increase in operating expenses and asset shrinkage. In
comparison to all publicly-traded SAIF-insured thrifts, the Bank maintained a
relatively high number of employees for its asset size. Assets per full time
equivalent employee equaled $3.3 million for the Bank, versus a comparative
average of $4.3 million for all publicly-traded SAIF-insured thrifts. Upward
pressure will be placed on the Bank's operating expense ratio following the
stock offering, due to expenses associated with operating as a publicly-traded
company, including expenses related to the stock benefit plans. At the same
time, the increase in capital realized from the stock offering will increase the
Bank's capacity to leverage operating expenses through pursuing a more
aggressive growth strategy. The general trends in the Bank's net interest margin
and operating expense ratio since fiscal 1993 indicate that BCSB has been
experiencing earnings compression from the two major components of its core
earnings, as highlighted by the decline exhibited in the Bank's expense coverage
ratio (net interest income divided by operating expenses)
<PAGE>
RP Financial, LC.
Page 1.11
since fiscal 1993. BCSB's expense coverage ratio equaled 1.88 times during
fiscal 1993, versus a comparative ratio of 1.46 times during fiscal 1997.
Loan loss provisions have had a varied impact on the Bank's earnings over
the past five fiscal years, as BCSB posted recoveries during fiscal years 1993
and 1994 and established additional loss provisions during fiscal years 1995
through 1997. Loss provisions established during fiscal 1997 equaled 286,000, or
0.11 percent of average assets, which was lower compared to fiscal 1996 when the
Bank established loss provisions of $434,000, or 0.17 percent of average assets.
The decline in loss provisions established during fiscal 1997 was supported by a
reduction in the Bank's balance of non-performing assets. Exhibit I-6 sets forth
the Bank's loan loss allowance activity during the past five fiscal years.
Earnings related to the Bank's real estate operations have fluctuated
notably over the past five fiscal years, ranging from a low of negative 0.71
percent of average assets in fiscal 1993 to a high of 0.30 percent of average
assets in fiscal 1996. Most of the volatility has stemmed from positive and
negative earnings contributions realized from real estate development
activities, which has been conducted through a wholly-owned subsidiary of the
Bank. The significant loss in fiscal 1993 includes a $1.6 million loss provision
established for the Bank's real estate development and joint venture activities.
Comparatively, during fiscal 1996, the Bank realized a gain of $652,000 from its
real estate development and joint venture activities, which was supplemented
with a gain on the sale of foreclosed real estate amounting to $112,000. In
comparison to the previous four fiscal years, real estate operations had a
modest impact on the Bank's fiscal 1997 earnings with such income amounting to
0.01 percent of average assets. The limited earnings impact of real estate
operations on the Bank's fiscal 1997 earnings reflects the winding down of the
Bank's subsidiary activities involving joint ventures for the development of
real estate. Accordingly, going forward, income and losses from real estate can
expected to remain fairly nominal, consisting largely of gains and losses
resulting from the disposition of real estate owned.
Gains and losses resulting from the sale of investment securities and fixed
assets have generally not been a significant factor in the Bank's earnings. The
loss and gain recorded during fiscal years 1996 and 1997, respectively, both
stemmed from the sale of a bond mutual fund which was sold off completely during
fiscal 1997. In light of the Bank's current philosophy of holding all investment
securities to maturity, gains and losses realized from the sale of investment
securities are not expected to have a material impact on BCSB's earnings going
forward.
Non-recurring items negatively impacted the Bank's earnings during fiscal
years 1994 and 1996, as the result of a change in accounting principle related
to the Bank's adoption of SFAS 109 "Accounting for Income Taxes" booked in
fiscal 1994 and the special SAIF assessment booked in fiscal 1996. The change in
<PAGE>
RP Financial, LC.
Page 1.12
accounting principle was an after-tax adjustment, which reduced the Bank's
fiscal 1994 net income by $394,000, or 0.18 percent average assets. The SAIF
assessment reduced the Bank's fiscal 1996 pre-tax earnings by $1.3 million, or
0.51 percent of average assets.
Interest Rate Risk Management
- -----------------------------
BCSB's balance sheet is liability-sensitive, as the Bank's interest-earning
assets are primarily funded with deposits that mature or are subject to
repricing within one year. Comparatively, a relatively higher concentration of
BCSB's interest-earning assets mature or reprice in more than one year;
particularly, with respect to the Bank's loan portfolio. As of September 30,
1997, of the total loans due after one year from September 30, 1997, fixed rate
loans comprised 91.8 percent of those loans (see Exhibit I-7).
BCSB pursues management of interest rate risk from both the asset and
liability sides of the balance sheet, with the intent of maintaining a certain
degree of interest rate risk that will provide for enhanced profitability during
periods of low and declining interest rates. Strategies implemented by the Bank
to support control of interest rate risk on the asset side include diversifying
into types of lending which consists primarily of short-term and adjustable rate
loans, emphasizing investments with short- and intermediate-terms, and
maintaining a relatively high balance of liquid funds. On the liability side,
management of interest rate risk is largely pursued through offering attractive
rates on certain longer term CDs from time-to-time.
The short-term repricing mismatch between the Bank's interest rate
sensitive assets and liabilities indicates that net interest income will be
somewhat inconsistent in various interest rate environments, with declining and
low interest rate environments being more beneficial to BCSB's net interest
margin. Comparatively, the Bank's net interest margin is adversely impacted by
rising and higher interest rates, as highlighted by the narrowing of BCSB's
yield-cost spread since fiscal 1993. However, given the Bank's current IEA/IBL
ratio of 109.9 percent, which will become stronger following the infusion of
conversion proceeds, BCSB has the capacity to take on a certain degree of
interest rate risk and sustain positive, although lower, core earnings during
periods of moderately rising interest rates. As of September 30, 1997, the Net
Portfolio Value ("NPV") analysis provided by the OTS indicated that a 2.0
percent instantaneous and sustained increase in interest rates would result in a
22 percent decline in the Bank's NPV (see Exhibit I-8).
Lending Activities and Strategy
- -------------------------------
The Bank's lending activities have traditionally emphasized origination of
1-4 family mortgage loans (see Exhibits I-9 and I-10, which reflect loan
composition and lending activity, respectively). As of September
<PAGE>
RP Financial, LC.
Page 1.13
30, 1997, $110.1 million, or 66.2 percent, of BCSB's total loan portfolio was
comprised of loans secured by 1-4 family mortgage loans. Lending diversification
by the Bank has emphasized consumer loans, which amounted to $37.4 million, or
22.5 percent, of total loans outstanding at September 30, 1997. The balance of
the loan portfolio consists primarily of commercial real estate and construction
loans, while commercial business loans constitute a very minor area of lending
diversification for the Bank. Exhibit I-11 provides the contractual maturity of
the Bank's loan portfolio, by loan type, as of September 30, 1997.
BCSB originates both fixed rate and adjustable rate 1-4 family permanent
mortgage loans, retaining all loan originations for portfolio. Standard fixed
rate loans offered by the Bank have terms ranging from 15 to 30 years. BCSB
offers a standard 1-year ARM loan product, as well as one-year ARM loans which
have an initial fixed rate of interest for 3 years. ARM loans are currently
indexed to the one-year U.S. Treasury securities rate, with the initial rate of
interest being dependent upon the length of the repricing term (i.e., a higher
rate is charged for loans with a initial 3-year repricing term). Initial rates
on ARM loans are typically discounted from the fully-indexed rate, although the
borrower is qualified at the fully-indexed rate. ARM loans are subject to a
maximum repricing adjustment of 2.0 percent per adjustment period with a maximum
aggregate adjustment of 6.0 percent over the life of the loan. In the current
interest rate environment, most of the Bank's 1-4 family lending volume has
consisted of fixed rate loans. BCSB will originate 1-4 family loans up to a
loan-to-value ("LTV) ratio of 95.0 percent, although private mortgage insurance
("PMI") is typically required for loans with LTV ratios above 80.0 percent.
Included in the 1-4 family loan balance are fixed rate home equity loans, which
are amortized for terms of up to 15 years and a maximum LTV ratio of 80.0
percent of the combined balance of the home improvement loan and the first lien.
Construction loans originated by the Bank consist substantially of loans to
finance the construction of 1-4 family residences. As of the September 30, 1997,
the Bank's construction loan portfolio totaled $8.6 million, or 5.2 percent, of
total loans outstanding. Most of the Bank's construction lending activities are
for the construction of pre-sold homes, which convert to permanent loans upon
completion of the construction. To a lesser extent, BCSB originates speculative
construction loans. To control the risk associated with speculative construction
lending, the Bank typically limits the builder to one spec loan at a time and
generally confines originations to builders who have maintained a favorable
credit quality history with BCSB. Construction loans require payment of interest
only during the construction period, which is typically 12 months. For
construction loans, the Bank will lend up to a maximum LTV ratio of 80.0
percent.
The balance of the mortgage loan portfolio consists of commercial real
estate loans, which are collateralized by properties in the Bank's normal
lending territory. As of September 30, 1997, the Bank's commercial real loan
portfolio totaled $10.2 million, or 6.1 percent, of total loans outstanding.
Such loans are typically extended up to a LTV ratio of 75.0 percent, with loan
terms typically providing for up to 20-year
<PAGE>
RP Financial, LC.
Page 1.14
amortizations. In light of the higher credit risk associated with commercial
real estate loans, loan rates offered on those loans are at a premium to the
Bank's 1-4 family loan rates. Properties securing the commercial real estate
loan portfolio consist primarily of small office buildings, churches, medical
condominiums, small shopping centers, and small commercial and industrial
buildings. Included in the commercial real estate loan balance are land loans,
which serve as a complement to the Bank's 1-4 family lending activities. Land
loans held by the Bank are generally secured by single-family lot loans or land
that will be used for residential development. At September 30, 1997, the Bank
had two such loans outstanding totaling $2.1 million. Terms of land loans
offered by the Bank generally require a LTV ratio of 75.0 percent or less and
are floating rate loans tied to the Prime rate. Most land loans are extended as
3-year balloon loans.
Automobile loans comprise the major portion of the consumer loan portfolio,
amounting to $32.6 million, or 19.6 percent, of total loans outstanding at
September 30, 1997. Indirect automobile loans comprise the majority of the
Bank's automobile loan portfolio, as the Bank maintains indirect lending
relationships with a number of local dealerships for both new and used cars.
Approximately two-thirds of the Bank's indirect lending activities are for used
cars. Automobile loans are offered for terms of up to 60 months, with higher
rates and shorter terms being required for used cars. The dealer will mark-up
the Bank's rate by varying amounts, with an average mark-up on the Bank's rate
approximating 2.0 percent. The indirect loans are underwritten to meet the
Bank's underwriting criteria and the Bank has final approval on all indirect
loans originated. The balance of the consumer loan portfolio consists of loans
secured by deposits and home equity lines of credit, with respective balances of
$825,000, or 0.5 percent, and $4.0 million, or 2.4 percent, of total loans
outstanding at September 30, 1997. Home equity lines of credit offered by BCSB
are floating rate loans tied to the Prime rate and are subject to the same
underwriting criteria as the Bank's fixed rate home improvement loans. Going
forward, the Bank's consumer lending activities are expected to continue to
emphasize indirect automobile loans.
BCSB holds a nominal balance of commercial business loans, with such loans
generally being extended to long term customers of the Bank. The commercial
business loans held by the Bank are secured loans. Commercial business lending
is not viewed as an active lending area for the Bank and, thus, it is expected
that commercial loans will remain a nominal component of the Bank's loan
portfolio composition going forward.
Exhibit I-10, which shows the Bank's lending activities over the past three
fiscal years, highlights BCSB's lending emphasis on originating 1-4 family and
consumer loans. Consumer loans represented the Bank's most active lending area
over the past three fiscal years accounting for 56.2 percent of total
originations, which was followed by 1-4 family loans accounting for 38.2 percent
of total originations during the past three fiscal years. Lending
diversification beyond consumer and 1-4 family permanent mortgage loans
consisted primarily of construction loans. No loans were purchased during the
past three fiscal years, which is consistent
<PAGE>
RP Financial, LC.
Page 1.15
with the Bank's general philosophy of generating loan growth solely through
originations. Likewise, reflecting the Bank's generally philosophy of retaining
all loan originations for its own portfolio, no whole loans were sold by BCSB
during the past three fiscal years. Typically, selling participating interests
in loans has not been an active area for the Bank as well, although in fiscal
1996 the Bank sold participating interests in two loans which totaled $4.9
million. During the past three fiscal years, the Bank's lending volume was
highest in fiscal 1996 with total originations amounting to $61.4 million. An
increase in 1-4 family loan originations accounted for the Bank's higher lending
volume during fiscal 1996. Comparatively, loan originations dropped to $51.8
million during fiscal 1997, which was mostly attributable to declines in 1-4
family and consumer loan originations. Going forward, the Bank's lending
strategy is expected to be consistent with recent historical trends, with 1-4
family and consumer loans accounting for the major portion of BCSB's lending
activities.
Asset Quality
- -------------
The Bank's historical 1-4 family lending emphasis has generally supported
favorable credit quality measures, although during fiscal years 1993 through
1995 BCSB's credit quality was somewhat impaired by holding relatively high
balances of real estate. Such real estate consisted of both foreclosed real
estate, as well as real estate developed and held for sale. The Bank's balance
of non-performing real estate and repossessed cars peaked at $2.0 million at
fiscal year end 1994 and has declined steadily to a balance of $61,000 at fiscal
year end 1997. Comparatively, the Bank's non-performing loan balance has
fluctuated somewhat over the past five fiscal years, declining from $2.7 million
at fiscal year end 1993 to $905,000 at fiscal year end 1995 and then exhibiting
a sharp increase to $2.3 million during fiscal 1996. Most of the increase in the
Bank's fiscal 1996 non-performing loan balance was attributable to an increase
in non-performing 1-4 family permanent mortgage loans. At fiscal year end 1997,
the Bank's non-performing loan balance declined to $1.8 million. Overall, the
Bank's balance of non-performing assets ranged from a high of $4.6 million, or
2.10 percent, of assets at fiscal year end 1993 to a low of $1.9 million, or
0.76 percent, of assets at fiscal year end 1997. As shown in Exhibit I-12, non-
performing assets held by the Bank at September 30, 1997 consisted of $1.8
million of non-accruing loans and $61,000 of foreclosed real estate and
repossessed cars. Non-accruing loans held by the Bank at September 30, 1997
consisted substantially of 1-4 family permanent mortgage loans ($1.757 million),
with the balance consisting of commercial real estate loans ($86,000).
The Bank reviews and classifies assets on a regular basis and establishes
loan loss provisions based on the overall quality, size and composition of the
loan portfolio, as well other factors such as historical loss experience,
industry trends and local real estate market and economic conditions. At
September 30, 1997, the Bank had $1.8 million of assets classified as
Substandard, $1.8 million of assets classified as Special Mention,
<PAGE>
RP Financial, LC.
Page 1.16
and $56,000 of assets classified as Loss. The Bank maintained valuation
allowances of $978,000 at September 30, 1997, equal to 0.62 percent of net loans
receivable and 51.4 percent of non-performing assets.
Funding Composition and Strategy
- --------------------------------
Deposits have consistently been the Bank's primary source of funds, and at
September 30, 1997 deposits constituted 100 percent of BCSB's interest-bearing
liabilities. Exhibit I-13 sets forth the Bank's historical deposit composition
and Exhibit I-14 reflects the interest rate and maturity composition of the CD
portfolio at September 30, 1997. CDs represent the largest component of the
Bank's deposit composition, with BCSB's current CD composition reflecting a
relatively high concentration of short-term CDs (maturities of one year or
less). As of September 30, 1997, the CD portfolio totaled $129.0 million, or
57.4 percent, of total deposits, with 72.0 percent of those CDs having
maturities of one year or less. As of September 30, 1997, jumbo CDs (CD accounts
with balances of $100,000 or more) amounted to $10.5 million, or 8.1 percent, of
total CDs. Deposit rates offered by the Bank are generally in the middle-to-
upper end of the range of rates offered by local competitors.
Lower costing savings and transaction accounts have typically comprised a
fairly notable portion of the Bank's deposit composition, with such deposits
amounting to $94.9 million, or 42.2 percent, of total deposits at September 30,
1997. Over the past three fiscal years, the Bank's concentration of transaction
and savings accounts comprising total deposits declined from 44.8 percent at
fiscal year end 1995 to 42.2 percent at fiscal year end 1997, while a more
notable decline was experienced between fiscal years 1993 and 1995. At fiscal
year end September 30, 1993, transaction and savings accounts comprised 56.1
percent of the Bank's deposits. Growth in CDs and a decline in savings accounts
have accounted for most of the decline in the level of transaction and savings
accounts comprising the Bank's deposit composition.
BCSB generally has not utilized borrowings as a funding source and at
fiscal year end 1997 did not maintain any borrowings. BCSB's deposit growth,
internal funding and stock proceeds are expected to be adequate enough to fund
the substantial portion of the Bank's lending and investment activities for the
intermediate-term. To the extent borrowings are utilized by the Bank, such
borrowings are expected to consist primarily of FHLB advances.
Subsidiary Activities
- ---------------------
BCSB maintains two wholly-owned subsidiaries, Baltimore County Service
Corp. ("BCSC") and Ebeneezer Road, Inc. ("Ebeneezer Road"). BCSC was formed in
the mid-1970s for the purpose of
<PAGE>
RP Financial, LC.
Page 1.17
participating in joint ventures for the development of real estate. The last
development project was completed during the fiscal year ended September 30,
1996, and at September 30, 1997, BCSC conducted no activities. Ebeneezer Road is
an insurance agency that sells primarily mortgage life insurance and annuity
products. During the fiscal years 1997 and 1996, Ebeneezer Road had revenues of
$7,000 and $10,000, respectively, and net income of $3,000 and $6,000,
respectively. At this time no other subsidiary activities are being planned by
the Bank.
Legal Proceedings
- -----------------
BCSB is involved in routine legal proceedings occurring in the ordinary
course of business which, in the aggregate, are believed by management to be
immaterial to the financial condition and results of operations of BCSB.
<PAGE>
RP Financial, LC.
Page 2.1
II. MARKET AREA
Introduction
- ------------
Headquartered in Perry Hall, Baltimore County, Maryland, BCSB serves the
Baltimore MSA through six full service branches. Five of the Bank's branches are
located in Baltimore County, with the remaining branch being located in Harford
County. Harford County is to the northeast of Baltimore County. The Bank's
market area can be characterized as being primarily urban or suburban in nature.
Exhibit II-1 provides information on the Bank's office facilities.
Consistent with large metropolitan areas in general, the economy in the
Bank's market area is based on a mixture of service, manufacturing,
wholesale/retail trade, and state and local government. The market area economy
suffered a downturn in terms of economic activity and real estate value in the
early 1990s -- in lockstep with the national recession. However, more recently,
the Baltimore economy has rebounded from the downturn, which can be attributed
to an improved national economy and economic diversification within the
Baltimore MSA. Maintaining operations in a large metropolitan area serves as a
benefit to the Bank in periods of economic growth, while at the same time
fosters significant competition for the financial services provided by BCSB. The
Bank's competitive environment includes a large number of thrifts, commercial
banks, and other financial services companies, some of which have a regional or
national presence.
Future growth opportunities for BCSB depend in part on national economic
factors, the future growth in the Bank's market area, which has been measured by
indicators such as demographic growth trends, the health and stability of the
regional and local economy, and the nature and intensity of the competitive
environment for financial institutions. These factors have been briefly examined
to help determine the growth potential that exists for the Bank, which has an
impact on the business strategies discussed herein.
Market Area Demographics
- ------------------------
Demographic and economic growth trends, measured by changes in population,
number of households, age distribution and median household income, provide key
insight into the health of the Bank's market area (see Table 2.1). In the 1990s,
the Bank's market area has exhibited mix demographic growth trends. Baltimore
City experienced a decline in population from 1990 to 1997, versus comparative
increases recorded by the counties of Baltimore and Harford. Harford County's
annual population growth rate of 2.3 percent exceeded Baltimore County's
comparative growth rate of 0.6 percent, although Baltimore County's population
base was more than 3 times larger than Harford County's. The decline in
Baltimore City's population reflects a general trend of urban flight to suburban
markets where most of the job growth and
<PAGE>
RP Financial, LC.
Page 2.2
Table 2.1
Baltimore County Savings Bank, FSB
Summary Demographic Data
<TABLE>
<CAPTION>
Year
------------------------------------ Growth Rate Growth Rate
Population (000) 1990 1997 2002 1990-97 1997-2002
- ---------------- ---- ---- ---- ------- ---------
<S> <C> <C> <C> <C> <C>
United States 248,710 267,805 281,209 1.1% 1.0%
Maryland 4,781 5,111 5,368 1.0% 1.0%
Baltimore County 692 721 741 0.6% 0.6%
Baltimore City 736 663 642 -1.5% -0.6%
Harford County 182 213 235 2.3% 2.0%
Households (000)
- ----------------
United States 91,947 99,020 104,001 1.1% 1.0%
Maryland 1,749 1,884 1,990 1.1% 1.1%
Baltimore County 268 283 293 0.8% 0.7%
Baltimore City 276 251 244 -1.4% -0.5%
Harford County 63 75 84 2.6% 2.1%
Median Household Income ($)
- ---------------------------
United States $29,199 $36,961 $42,042 3.4% 2.6%
Maryland 36,248 45,907 50,902 3.4% 2.1%
Baltimore County 35,943 43,571 46,461 2.8% 1.3%
Baltimore City 21,382 28,893 31,284 4.4% 1.6%
Harford County 38,975 47,655 54,544 2.9% 2.7%
Per Capita Income - ($)
- ----------------------
United States $13,179 $18,100 ---- 4.6% N/A
Maryland 15,578 21,234 ---- 4.5% N/A
Baltimore County 15,938 21,680 ---- 4.5% N/A
Baltimore City 10,161 14,868 ---- 5.6% N/A
Harford County 14,863 19,811 ---- 4.2% N/A
1997 Age Distribution(%) 0-14 Years 15-24 Years 25-44 Years 45-64 Years 65+ Years Median Age Check (not printed)
- ------------------------ ---------- ----------- ----------- ----------- --------- ---------- -------------------
<S> <C> <C> <C> <C> <C> <C> <C>
United States 21.7 13.6 31.4 20.5 12.7 34.8 99.9
Maryland 21.8 11.8 34.0 21.0 11.3 35.0 99.9
Baltimore County 19.8 11.0 32.6 21.4 15.1 37.0 99.9
Baltimore City 22.2 13.1 32.4 18.7 13.6 34.5 100.0
Harford County 23.6 11.6 34.3 21.3 9.3 34.0 100.1
<CAPTION>
Less Than $15,000 to $25,000 to $50,000 to $100,000 to
1997 HH Income Dist.(%) $15,000 25,000 $50,000 $100,000 $150,000 $150,000+
- ----------------------- ------- ------ ------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
United States 17.7 14.4 33.5 26.5 5.4 2.6 100.1
Maryland 11.5 10.8 32.2 34.7 7.7 3.2 100.1
Baltimore County 10.4 11.8 35.8 32.7 6.4 3.0 100.1
Baltimore City 26.1 16.6 33.0 20.1 3.0 1.3 100.1
Harford County 8.7 9.8 34.3 38.5 6.7 2.1 100.1
</TABLE>
Source: CACI.
<PAGE>
RP Financial, LC.
Page 2.3
residential development has been occurring. Growth in households mirrored the
population growth trends, with the strongest household growth being recorded by
Harford County, while the number of households in Baltimore City declined. Over
the next five years, population and household growth trends are projected to
remain essentially the same for BCSB's primary market area, indicating growth
opportunities for the Bank are likely to be more favorable in the outlying
suburban markets.
Median household and per capita income measures for the City of Baltimore
were well below the comparative measures for the primary market area counties.
The low income levels for the City of Baltimore reflect a labor force that is
composed of a high concentration of blue collar workers, both skilled and
unskilled, as well as some concentrations of poverty in certain areas of the
City. Comparatively, the relative affluence of the more suburban markets is
indicated by the household and per capita income measures for Baltimore and
Harford Counties, which were comparable to or exceeded the comparative measures
for Maryland and the U.S. The greater wealth of the suburban markets is
consistent with national trends, in which the white collar professionals who
work in the City generally reside in the surrounding suburbs. Additionally, much
of the growth in white collar jobs has been occurring in suburban markets that
surround the City. Population growth has served to spur economic growth in the
suburban markets as well. Consistent with projected household income for the
U.S. and Maryland, household income growth throughout the Bank's primary market
area is projected to slow over the next five years. The general slow down in
household income growth reflects that most of the job growth is being realized
in service related jobs, which tend to be relatively low paying jobs. Based on
these demographic trends, suburban markets outside of the City of Baltimore
offer the most favorable growth opportunities for the Bank.
National Economic Factors
- -------------------------
Over the past year, national economic growth has been mixed. GDP growth for
the fourth quarter of 1996 came in at a stronger than expected 4.7 percent
annual growth rate (subsequently revised to 3.9 percent), although most of the
economic data released during the beginning of the first quarter of 1997
indicated a continuation of moderate economic growth. Such measures as a 1.9
percent decline in December 1996 durable goods orders and a modest uptick in the
January 1997 unemployment rate to 5.4 percent, versus 5.3 percent in December
1996, eased concerns that the economy was overheating. However, the increase in
the unemployment rate was attributable to more people entering the job force,
and some markets began to experience labor shortages. In congressional testimony
at the end of February 1997, the Federal Reserve Chairman indicated that he
anticipated recent signs of lower job insecurity among workers would lead to
upward pressure in wages, which could possibly trigger the Federal Reserve to
boost interest rates. Signs of inflation became more notable during March and
April, as many of the first quarter economic indicators
<PAGE>
RP Financial, LC.
Page 2.4
showed signs of a strengthening economy. Most notably, during February,
industrial production increased 0.5 percent, housing starts rose 12.2 percent
and the sale of existing homes jumped 9.0 percent. Accelerating economic growth
was further indicated by a decline in the March unemployment rate to 5.2
percent, versus 5.3 percent for February, and a higher than expected rise in the
March "core" producer price index, which posted its largest increase in 18
months. However, inflation measures showed that the "Goldilocks Economy"
remained in effect, based on lower producer prices and a lower than expected
increase in the employment cost index. Some of the reasons cited for the low
inflation were a larger labor force, a measurable increase in productivity, and
an increasingly global economy. First quarter 1997 GDP growth was measured at
5.9 percent, far exceeding analysts' projections.
Second quarter economic data generally reflected a less robust pace of
growth than maintained during the first quarter. Most notably, a lower than
anticipated National Association of Purchasing Managers index in April 1997
indicated a slowdown of expansion in the manufacturing sector. New home sales
also dropped by 7.7 percent in April 1997, the sharpest decline in six months.
Automobile sales for April and May declined from year earlier levels, and
discounting became more common by automakers. A rise in the June unemployment
rate and GDP growth slowing to an annual rate of 2.2 percent in the second
quarter, which was well below the revised 4.9 percent rate recorded in the first
quarter, further signaled that the economy was slowing to a more sustainable
pace.
Economic data released in August 1997 provided mixed signals of economic
growth, as a decline in the July unemployment rate and an unexpectedly sharp
decline in the U.S. trade deficit provided indications of a strengthening
economy. At the same time, a modest increase in the July consumer price index
and a decline in July wholesale prices suggested that inflation remained non-
threatening. At the end of August, the second quarter GDP was revised upward to
a 3.6 percent annual growth rate compared to a 2.2 percent original estimate. In
early-September, a slight increase in the August unemployment rate did little to
alleviate inflation concerns, as the employment data indicated that the job
market remained tight and wages continued to rise. Comparatively, only a slight
increase in the August consumer price index provided evidence that inflation
remained tame at the end of the third quarter. September unemployment data
served to further calm inflation fears in early-October, as the unemployment
rate was unchanged at 4.9 percent and fewer jobs than expected were added to the
economy.
At the beginning of the fourth quarter of 1997, inflation concerns became
more notable following congressional testimony by the Federal Reserve Chairman,
as he indicated that it would be difficult for the U.S. economy to maintain the
current balance between tight labor markets and low inflation. However, economic
data released in October and November provided mixed signals on the strength of
the economy. For example, a decline in the October unemployment rate to a 24-
year low of 4.7 percent indicated a rapidly expanding
<PAGE>
RP Financial, LC.
Page 2.5
economy, while, comparatively, a decline in October retail sales suggested that
the economy may be slowing. Economic growth was also viewed as being contained
by the upheaval in Asian markets, based on expectations that international
turmoil would result in a drop in demand for U.S. exports. Fears of a revival in
inflation were further limited by tumbling oil prices. However, the threat of
inflation was rekindled in early-December on news of the November unemployment
rate dropping to a 24-year low of 4.6 percent, as the tight labor market pushed
hourly wages higher. Economic data released in mid-December provided for a more
favorable inflation outlook, as the increase in November retail sales was well
below economists expectations and producer prices declined in November.
Inflation concerns were further eased in early-January 1998 on news that U.S.
manufacturing growth slowed in December and predictions by economists of slower
growth for the U.S. economy in 1998.
Consistent with the mixed economic activity, interest rate trends have been
varied as well over the past year. Interest rates edged lower in November 1996,
as the October economic data suggested that inflationary pressures were non-
threatening. Bond prices declined slightly in early-December, as investors
focused on weakness in the dollar and rising oil prices. Concern over Japanese
investors slowing their buying of U.S. Treasury notes caused bond prices to
slide in mid-December, despite economic data which continued to indicate mild
inflation. Interest rates were somewhat trendless at the close of 1996, as the
Federal Reserve elected not to change interest rates at its December meeting.
With few inflationary signs, interest rates held steady at the beginning of
1997, which was followed by a mild easing in interest rates during the first
half of February. Indications of slowing economic growth and the Federal
Reserve's decision to leave rates unchanged at its early-February meeting
spurred the downward trend in interest rates. However, interest rates edged
higher in late-February, following renewed concerns by the Federal Reserve
Chairman over the sharp rise in the stock market during the past two years.
After stabilizing briefly, the strengthening economy and growing expectations of
a rate increase by the Federal Reserve propelled interest rates higher in late-
March. The Federal Reserve increased short-term interest rates by 0.25 percent
in late-March, which was followed by a sharp sell-off in the bond market. For
the first time in six months, the rate on the 30-year benchmark bond moved above
7.0 percent in late-March.
Inflation concerns pushed interest rates higher during the first half of
April 1997, which was followed by a slight decline in interest rates on rumors
of a national budget accord. News of the budget agreement and favorable
inflation data sustained the rally in bond prices through early-May. Interest
rates stabilized in mid-May, as the Federal Reserve opted not to raise interest
rates at its May meeting. The high level of consumer confidence indicated by the
May reading caused the 30-year bond yield to edge above 7.0 percent in late-May.
However, the increase was short-lived, as signs of slowing economic growth
provided for a lower interest rate environment during June.
<PAGE>
RP Financial, LC.
Page 2.6
The downward trend in interest rates became more pronounced during July
1997, following the Federal Reserve's decision to leave rates unchanged at its
early-July meeting and the release of new economic data that indicated inflation
was under control. Slower economic growth indicated by a second quarter GDP
growth rate of 2.2 percent sustained the rally in bond prices at the end of
July. However, in early-August, the stronger than expected job growth reflected
in the July employment data and a falling U.S. dollar against the yen and mark
caused bond prices to tumble. After recovering briefly on the favorable
inflation readings reflected in the July wholesale and retail prices, bond
prices declined in late-August on news of the narrower than expected June trade
deficit. Bond prices rallied briefly at the end August and in early-September,
due to technical pressures and economic data that showed manufacturing growth
cooled in August. Interest rates increased slightly in mid-September, reflecting
investor fears that the August economic data would show a strengthening economy
and higher prices. However, the low inflation reading indicated by the August
consumer price report ignited a bond market rally, with the yield on the 30-year
bond posting its second largest decline in the 1990s on September 16, 1997. Bond
prices approached their highest level in two years in early-October, reflecting
the stable inflation environment as confirmed by the September unemployment
data.
In mid-October 1997, renewed inflation fears raised by the tight labor
markets and growing expectations of a rate hike by the Federal Reserve provided
for an easing in bond prices. The sell-off in the global markets at the end of
October served to abbreviate the decline in bond prices, as skittish investors
dumped stocks in favor of bonds. The Federal Reserve's decision to leave
interest rates unchanged at its mid-November meeting, along with signs of
slowing economic growth indicated by a decline in October retail sales, served
to strengthen the advance in bond prices in mid-November as the yield on the
bellwether 30-year U.S. Treasury bond approached 6.0 percent. Renewed interest
in U.S. Treasury bonds by Japanese investors and fading concerns of inflation
provided for a stable bond market in late-November. The rally in bond prices was
not sustained in early-December, as bond prices declined on news of the
surprisingly strong jobs report for November. However, positive inflation news
indicated by the lower than expected increase in November retail sales and the
decline in November producer prices, as well as world market turmoil, served to
push the yield on the 30-year U.S. Treasury bond below 6.0 percent in mid-
December. Bond prices were further boosted in mid-December by the Federal
Reserve's decision to leave interest rates unchanged at its mid-December
meeting, while a flight to quality caused by lingering concerns over the long-
term stability of Asian financial markets sustained the advance in the bond
market in late-December and early-January 1998. As of January 2, 1998, one- and
thirty-year U.S. Government bonds were yielding 5.42 percent and 5.84 percent,
respectively, versus comparative year ago rates of 5.55 percent and 6.74
percent, respectively. Exhibit II-2 provides historical interest rate trends
from 1991 through January 2, 1998.
<PAGE>
RP Financial, LC.
Page 2.7
Local Economy
- -------------
The Baltimore MSA has a fairly diversified local economy, which is
supported by employment in the services, manufacturing, wholesale/retail trade
and 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 today is dominated by high technology,
particularly within the defense industry. Traditional defense contractors have
been seeking to diversify into commercial markets, as companies such as Lockheed
Martin Corp. and AAI Corporation are placing an increasing emphasis on product
commercialization and dual use technology applications.
Similar to national trends, most of the job growth being realized in the
Baltimore MSA has been realized in service related industries and service jobs
now account for the largest portion of the work force. Based on the most recent
data available, service jobs accounted for 32.8 percent of Baltimore County's
employment in 1995 as compared to 30.5 percent in 1991. Comparatively, from 1991
to 1995, manufacturing jobs declined from 11.3 percent to 9.7 percent of
Baltimore County's labor force. Table 2.2 provides information on the major
employers in Baltimore County.
Table 2.2
Major Employers in Baltimore County
<TABLE>
<CAPTION>
Employer Product Employees
-------- ------- ---------
<S> <C> <C>
Bethlehem Steel Corporation Steel mill and shipyard 6,180
Franklin Square Hospital Hospital 2,658
Greater Baltimore Medical Center Hospital 2,237
Baltimore Gas and Electric Gas and electricity 2,014
Sweetheart Cup Company Paper and plastic cups 2,000
McCormick and Company, Incorporated Food products 1,941
Blue Cross and Blue Shield Health care services 1,801
Becton Dickinson and Company Microbiology systems 1,753
Bell Atlantic Telecommunications 1,688
AT&T Communications service 1,500
</TABLE>
Source: Baltimore County Department of Economic Development
Comparative unemployment rates for the primary market area, as well as for
the U.S. and Maryland, are shown in Table 2.3. The unemployment data for the
market area further implies that the more favorable growth opportunities exist
outside of the City of Baltimore, with both Baltimore and Harford Counties
recording significantly lower unemployment rates compared to the City.
Unemployment rates for Baltimore
<PAGE>
RP Financial, LC.
Page 2.8
and Harford Counties were indicative of healthy and expanding economies, with
both rates being comparable to the Maryland and U.S. measures. Comparatively,
the September 1997 unemployment rate for the City of Baltimore was more than
twice as high compared to the primary market area counties, as well as compared
to the unemployment rates for Maryland and the U.S. Similar to the U.S. and
Maryland, unemployment rates declined in Baltimore and Harford Counties from a
year ago. In contrast, unemployment in Baltimore City was higher than a year
ago, further indicating the economic prospects for that market are less
favorable.
Table 2.3
Unemployment Trends(1)
<TABLE>
<CAPTION>
Sept. 1996 Sept. 1997
Region Unemployment Unemployment
------ ------------ ------------
<S> <C> <C>
United States 5.0% 4.7%
Maryland 4.8 4.7
Baltimore County 5.4 4.8
Baltimore City 8.2 10.6
Harford County 4.7 4.5
</TABLE>
(1) Unemployment rates have not been seasonally adjusted.
Source: U.S. Bureau of Labor Statistics.
Competition
- -----------
Competition among financial institutions in the Bank's market area is
significant, and, as larger institutions compete for market share to achieve
economies of scale, the market environment for the Bank's products and services
is expected to become increasingly competitive in the future. Smaller
institutions such as BCSB will be forced to either compete with larger
institutions on pricing, or to identify and operate in a "niche" that will allow
for operating margins to be maintained at profitable levels.
The Bank's retail deposit base is closely tied to the economic fortunes of
the Baltimore MSA and, in particular, in areas that are nearby to one of BCSB's
six branches. Table 2.4 displays deposit market trends from June 30, 1994
through June 30, 1996 for jurisdictions within the Baltimore MSA that were
served by the Bank's branches during that period. Additional data is also
presented for the State of Maryland. The data indicates that deposit growth in
the Bank's primary market area was mixed, as indicated by the positive deposit
growth recorded in Harford and Anne Arundel Counties and the negative deposit
growth recorded in Baltimore County and Baltimore City. Commercial banks
maintained the bulk of deposits in each of the four
<PAGE>
RP Financial, LC.
Page 2.9
Table 2.4
Baltimore County Savings Bank, FSB
Deposit Summary
<TABLE>
<CAPTION>
As of June 30,
-------------------------------------------------------------------------------------
1994 1996
---------------------------------------- ----------------------------------------- Deposit
Market Number of Market No. of Growth Rate
Deposits Share Branches Deposits Share Branches 1994-1996
-------- ----- -------- -------- ----- -------- ---------
(Dollars In Thousands) (%)
<S> <C> <C> <C> <C> <C> <C> <C>
State of Maryland $54,758,831 100.0% 1,782 $54,090,955 100.0% 1,701 -0.6%
- -----------------
Commercial Banks 39,857,706 72.8% 1,359 40,574,252 75.0% 1,331 0.9%
Savings Institutions 14,901,125 27.2% 423 13,516,703 25.0% 370 -4.8%
Anne Arundel County(1) $3,793,056 100.0% 160 $3,908,941 100.0% 154 1.5%
- ----------------------
Commercial Banks 2,908,011 76.7% 123 3,116,876 79.7% 122 3.5%
Savings Institutions 885,045 23.3% 37 792,065 20.3% 32 -5.4%
Baltimore County SB (2) 9,763 1.1% 1 12,232 1.5% 1 11.9%
Baltimore County SB (3) 0.3% 0.3%
Baltimore County $10,109,498 100.0% 300 $9,623,257 100.0% 280 -2.4%
- ----------------
Commercial Banks 6,045,765 59.8% 190 6,438,007 66.9% 192 3.2%
Savings Institutions 4,063,733 40.2% 110 3,185,250 33.1% 88 -11.5%
Baltimore County SB (2) 167,820 4.1% 6 194,086 6.1% 6 7.5%
Baltimore County SB (3) 1.7% 2.0%
Baltimore City $8,869,937 100.0% 170 $7,929,135 100.0% 165 -5.5%
- --------------
Commercial Banks 7,499,473 84.5% 131 6,522,146 82.3% 128 -6.7%
Savings Institutions 1,370,464 15.5% 39 1,406,989 17.7% 37 1.3%
Baltimore County SB (2) 0 0.0% 0 0 0.0% 0
Baltimore County SB (3) 0.0% 0.0%
Harford County $1,400,038 100.0% 69 $1,507,736 100.0% 68 3.8%
- --------------
Commercial Banks 1,046,947 74.8% 53 1,129,044 74.9% 54 3.8%
Savings Institutions 353,091 25.2% 16 378,692 25.1% 14 3.6%
Baltimore County SB (2) 22,477 6.4% 1 28,072 7.4% 1 11.8%
Baltimore County SB (3) 1.6% 1.9%
</TABLE>
(1) Anne Arundel County branch was sold in October 1997.
(2) Percent of thrift deposits.
(3) Percent of total deposits.
Source: FDIC; OTS.
<PAGE>
RP Financial, LC.
Page 2.10
jurisdictions and recorded positive deposit growth except in Baltimore City.
Comparatively, thrift deposits declined in each of the jurisdictions, except for
Harford County. The drop in thrift deposits was attributable to a number of
factors, including disintermediation caused by the low interest rate environment
and market share expansion by commercial banks through acquisition, as
highlighted by the decline in the number of thrift branches maintained in each
of the four jurisdictions during the two year period covered in Table 2.4.
Consolidation among savings institutions was most evident in Baltimore County,
with the number of thrift branches declining from 110 in 1994 to 88 in 1996.
BCSB recorded positive deposit growth in all three counties where branches
were maintained during the period covered in Table 2.4, which served to increase
its market share of total bank and thrift deposits in each of those counties.
Baltimore County accounts for the major portion of BCSB's deposit base, where
the Bank's market share of deposits increased from 1.7 percent in 1994 to 2.0
percent in 1996. As highlighted by the relatively low market share of deposits
maintained by the Bank, competition for deposits in the primary market served by
BCSB is significant and includes a number of financial institutions with greater
resources than maintained by the Bank. Subsequent to the period shown in Table
2.4, the Anne Arundel County branch and one branch in Baltimore County were
closed. Deposits at the Anne Arundel County branch were sold to a regional
financial institution, while the deposits at the Baltimore County branch were
consolidated into one of the Bank's other branches.
Future deposit growth may be enhanced by the infusion of the stock
proceeds, as the additional capital will improve BCSB's competitive position and
leverage capacity. The Bank should also continue to benefit from its favorable
image as a locally-owned and community-oriented institution, as the trend of
consolidation among financial institutions is expected to provide BCSB with
additional opportunities to acquire customers, facilities and key personnel that
become available as the result of community banks being acquired. However, given
the competition faced by BCSB, it will be difficult for the Bank to realize
notable gains in deposit market share without paying above market rates for
deposits or further expanding BCSB's branch network. At this time, the Bank is
negotiating to lease land in Harford County on which it will build a new branch
in the City of Abingdon. Beyond the contemplated new branch in Harford County,
the Bank currently has no other definitive plans to expand its branch network.
<PAGE>
RP Financial, LC.
Page 3.1
III. PEER GROUP ANALYSIS
This chapter presents an analysis of BCSB's operations versus a group of
comparable companies (the "Peer Group") selected from the universe of all
publicly-traded savings institutions. The primary basis of the pro forma market
valuation of BCSB is provided by these public companies. Factors affecting the
Bank's pro forma market value such as financial condition, credit risk, interest
rate risk, and recent operating results can be readily assessed in relation to
the Peer Group. Current market pricing of the Peer Group, subject to appropriate
adjustments to account for differences between BCSB and the Peer Group, will
then be used as a basis for the valuation of BCSB's to-be-issued common stock.
Peer Group Selection
- --------------------
The mutual holding company form of ownership has been in existence in its
present form since 1991. As of the date of this appraisal, there were
approximately 22 publicly-traded institutions operating as subsidiaries of MHCs.
We believe there are a number of characteristics of MHC shares that make them
different from the shares of fully-converted companies. These factors include:
(1) lower aftermarket liquidity in the MHC shares since less than 50 percent of
the shares are available for trading; (2) guaranteed minority ownership
interest, with no opportunity of exercising voting control of the institution in
the MHC form of organization, thus limiting acquisition speculation in the stock
price; (3) the potential impact of "second step" conversions on the pricing of
public MHC institutions; (4) the policy adopted by the OTS regarding the
dividend waiver by MHC institutions; and (5) certain MHCs have formed or are
forming middle-tier holding companies, facilitating the ability for stock
repurchases, thus improving the liquidity of the stock on an interim basis. We
believe that each of these factors has an impact on the pricing of the shares of
MHC institutions, and that such factors are not reflected in the pricing of
fully-converted public companies.
Given the unique characteristic of the MHC form of ownership, RP Financial
concluded that the appropriate Peer Group for BCSB's valuation should be
comprised of the subsidiary institutions of mutual holding companies. The Peer
Group is consistent with the regulatory guidelines, and other recently completed
MHC transactions. Further, the Peer Group should be comprised of only those MHC
institutions whose common stock is either listed on a national exchange or is
NASDAQ listed, since the market for companies trading in this fashion is regular
and reported. We believe non-listed MHC institutions are inappropriate for the
Peer Group, since the trading activity for thinly-traded stocks is typically
highly irregular in terms of frequency and price and may not be a reliable
indicator of market value. We have excluded from the Peer Group those public MHC
institutions that are currently pursuing a "second step" conversion and/or
companies whose market prices appear to be distorted by speculative factors or
unusual operating conditions. The
<PAGE>
RP Financial, LC.
Page 3.2
universe of all publicly-traded MHC institutions is included as Exhibit III-2.
Institutions excluded from the calculation of averages are denoted with a
footnote (7).
Basis of Comparison
- -------------------
This appraisal includes two sets of financial data and ratios for each
public MHC institution. The first set of financial data reflects the actual book
value, earnings, assets and operating results reported by the public MHC
institution in its public filings inclusive of the minority ownership interest
outstanding to the public. The second set of financial data, discussed at length
in the following chapter, places all of the public MHC institutions on equal
footing by restating their financial data and pricing ratios on a "fully-
converted" basis assuming the sale of the majority shares held by the MHCs in
public offerings based on their respective current prices and standard
assumptions. Throughout the appraisal, the adjusted figures will be specifically
identified as being on a fully-converted basis. Unless so noted, the figures
referred to in the appraisal will be actual financial data reported by the
public MHC institutions.
Both sets of financial data have their specific use and applicability to
the appraisal. The actual financial data, as reported by the public MHC
institutions and reflective of the minority interest outstanding, will be used
primarily in this Chapter III to make financial comparisons between the Peer
Group and BCSB. The differences between the Peer Group's reported financial data
and the financial data of BCSB as a mutual institution are not significant
enough to distort the conclusions of the comparison (in fact, such differences
are greater in a standard conversion appraisal). The adjusted financial data
(fully-converted basis) will be more fully described and quantified in the
pricing analysis discussed in Chapter IV of the appraisal. The fully-converted
pricing ratios are considered critical to the valuation analysis in Chapter IV,
because they place each public MHC institution on a fully-converted basis
(making their pricing ratios comparable to the pro forma valuation conclusion
reached herein), eliminate distortion in pricing ratios between public MHC
institutions that have sold different percentage ownership interests to the
public, and reflect the actual pricing ratios (fully-converted basis) being
placed on public MHC institutions in the market today to reflect the unique
trading characteristics of public MHC institutions.
Selection of Peer Group
- -----------------------
Under ideal circumstances, the Peer Group would be comprised of ten
publicly-traded Maryland-based MHC institutions with capital, earnings, credit
quality and interest rate risk comparable to BCSB. However, the universe of 22
public MHC institutions only includes one institution headquartered in Maryland
(Leeds FSB). Excluded from the group of 22 public MHCs are five companies who
have announced or are in
<PAGE>
RP Financial, LC.
Page 3.3
the process of completing second-step conversions (FSLA - First SB SLA of NJ,
HARB - Harbor FSB of FL, TSBS - Peoples Bancorp of NJ, PERT -Perpetual of SC,
and PFSL - Pocahontas Federal of AR), since their pricing ratios have become
distorted in anticipation of the second-step appraisal.
Unlike the universe of public companies, which includes approximately 360
public companies, the universe of public MHC institutions is small, thereby
limiting the prospects of a relatively comparable Peer Group. Nonetheless,
because the trading characteristics of public MHC institution shares are
significantly different from those of fully-converted companies, the universe of
17 public MHC institutions was the most appropriate group for this valuation.
Relying solely on full stock public companies for the Peer Group would not
capture the difference in current market pricing for public MHC institutions and
thus could lead to distorted valuation conclusions. The federal regulatory
agencies have previously concurred with this selection procedure of the Peer
Group for MHC valuations.
Potential shortcomings to using all 17 publicly-traded MHCs include the
variations in asset sizes, operating strategies, market areas (both regional and
local), and financial measures among the 17 public MHC institutions. Although we
considered these potential shortcomings in our analysis, RP Financial's ultimate
conclusion was that the size of the Peer Group was statistically meaningful
(i.e., there were enough institutions included to support meaningful
conclusions), the differences in financial and other characteristics among the
Peer Group members would, on average, be offsetting (i.e., the pricing reflected
in the exceptionally strong market in Florida state would be offset by the
weaker market pricing of an institution operating in Iowa), and importantly the
pricing characteristics were more relevant than fully-converted institutions. To
account for differences between BCSB and the MHC Peer Group in reaching a
valuation conclusion, it will be necessary to make certain valuation
adjustments. The following discussion addresses financial similarities and
differences.
Table 3.1 on the following page lists key general characteristics of the
Peer Group companies. Although there are differences among several of the Peer
Group members, by and large they are well-capitalized and profitable
institutions and their decision to reorganize in MHC form itself suggests a
commonality of operating philosophy. Importantly, the trading prices of the Peer
Group companies reflect the unique operating and other characteristics of public
MHC institutions. While the Peer Group is not exactly comparable to BCSB, we
believe such companies form a good basis for the valuation of BCSB, subject to
certain valuation adjustments.
In aggregate, the Peer Group companies maintain a slightly lower level of
capitalization relative to the universe of all public thrifts (11.97 percent of
assets versus 13.33 percent for the all SAIF average), generate slightly lower
core earnings (0.81 percent ROA versus 0.87 percent average for the all SAIF
average), and generate a slightly lower core ROE (7.33 percent core ROE versus
7.62 percent for the all SAIF average).
<PAGE>
RP FINANCIAL, LC.
- -------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 3.1
Peer Group of Publicly-Traded Thrifts
January 7, 1998(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
- ------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ------ -------
($) ($Mil)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PBCT Peoples Bank, MHC of CT (40.1) (3) OTC Southwestern CT Div. 7,731 97 12-31 07/88 37.50 2,292
HARS Harris SB, MHC of PA (24.3) OTC Harrisburg PA M.B. 2,110 31 12-31 01/94 19.87 671
NWSB Northwest SB, MHC of PA (30.7) OTC Pennsylvania Thrift 2,101 53 06-30 11/94 14.62 684
FFFL Fidelity FSB, MHC of FL (47.7) OTC Southeast FL Thrift 1,046 20 12-31 01/94 31.50 214
CMSV Commty. Svgs, MHC of FL (48.5) OTC Southeast FL Thrift 709 20 12-31 10/94 35.25 180
FFSX First FS&LA. MHC of IA (46.1) OTC Western IA Thrift 457 13 06-30 07/92 30.50 86
LFED Leeds FSB, MHC of MD (36.3) OTC Baltimore MD Thrift 285 1 06-30 05/94 21.88 113
WAYN Wayne S&L Co. MHC of OH (47.8) OTC Central OH Thrift 250 6 03-31 06/93 29.00 65
GDVS Greater DV SB,MHC of PA (19.9) (3) OTC Southeast PA Thrift 249 7 12-31 03/95 30.75 101
SBFL SB Fngr Lakes MHC of NY (33.1) OTC Western NY Thrift 228 4 04-30 11/94 32.00 57
PHSB Ppls Home SB, MHC of PA (45.0) OTC Western PA Thrift 206 9 12-31 07/97 18.87 52
PBHC OswegoCity SB MHC of NY (46.1) (3) OTC Upstate NY Thrift 193 5 12-31 11/95 29.00 56
PULB Pulaski SB, MHC of MO (29.8) OTC St. Louis MO Thrift 179 5 09-30 05/94 31.37 66
PLSK Pulaski SB, MHC of NJ (46.0) OTC New Jersey Thrift 179 6 12-31 04/97 18.25 38
JXSB Jcksnville SB,MHC of IL (45.6) OTC Central IL Thrift 164 4 12-31 04/95 28.50 36
SKBO First Carnegie,MHC of PA(45.0) OTC Western PA Thrift 147 J 3 03-31 04/97 18.75 43
WCFB Wbstr Cty FSB MHC of IA (45.2) OTC Central IA Thrift 94 1 12-31 08/94 20.00 42
</TABLE>
NOTES: (1) Or most recent date available (M=March, S=September, D=December,
J=June, E=Estimated, and P=Pro Forma)
(2) Operating strategies are: Thrift=Traditional Thrift,
M.B.=Mortgage Banker, R.E.=Real Estate Developer,
Div.=Diversified, and Ret.=Retail Banking.
(3) FDIC savings bank institution.
Source: Corporate offering circulars, data derived from information
published in SNL Securities Quarterly Thrift Report, and financial
reports of publicly-traded thrifts.
Date of Last Update: 01/07/98
<PAGE>
RP Financial, LC.
Page 3.5
Please note that RP Financial has used core earnings in this discussion to
eliminate the effects of non-operating items.
The summary table below underscores the key differences, particularly in
the average pricing ratios between full stock and MHC institutions (both as
reported and on a fully-converted basis).
<TABLE>
<CAPTION>
Publicly-Traded MHCs
(Excluding Announced
Second Steps)
------------
Fully
All MHC Converted
Publicly-Traded Reported Basis
(Excluding MHCs) Basis (Pro Forma)
<S> <C> <C> <C>
Financial Characteristics (Averages)
-----------------------------------
Assets ($Mil) 1,165 961 1,114
Equity/Assets (%) 13.33% 11.97% 23.54%
Core Return on Assets (%) 0.87 0.81 1.11
Core Return on Equity (%) 7.62 7.33 4.80
Pricing Ratios (Averages)(1)
------------------------
Core Price/Earnings (x)(2) 20.97x N.M. 23.24x
Price/Book (%) 165.51% 246.27 107.71%
Price/Assets (%) 20.36 29.27 25.14
</TABLE>
(1) Based on market prices as of January 2, 1998.
(2) Core P/E multiple is not meaningful for publicly-traded MHCs on a
reported basis, as only one of the companies maintains a core P/E
multiple of less than 30 times.
The following sections present a comparison of BCSB's financial condition,
income and expense trends, loan composition, interest rate risk and credit risk
versus the figures reported by the Peer Group. The conclusions drawn from the
comparative analysis are then factored into the valuation analysis discussed in
the final chapter.
Financial Condition
- -------------------
Table 3.2 shows comparative balance sheet measures for BCSB and the Peer
Group. BCSB's and the Peer Group's ratios reflect balances as of September 30,
1997. BCSB's net worth base of 9.5 percent was below the Peer Group's average
net worth ratio of 12.0 percent; however, with the addition of stock proceeds,
the Bank's pro forma capital position (consolidated with the holding company)
will likely be slightly higher than the Peer Group's ratio. BCSB's capital
included a nominal balance of intangibles (less than 0.1 percent of assets),
while the Peer Group's capital included intangibles amounting to 0.2 percent of
assets. BCSB's higher pro forma capital position will be favorable from a risk
perspective and in terms of future earnings potential that
<PAGE>
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 3.2
Balance Sheet Composition and Growth Rates
Comparable Institution Analysis
As of September 30, 1997
<TABLE>
<CAPTION>
Balance Sheet as a Percent of Assets
----------------------------------------------------------------------------------------
Cash and Borrowed Subd. Net Goodwill Tng Net MEMO:
Investments Loans MBS Deposits Funds Debt Worth & Intang Worth Pref.Stock
----------- ------ ------ -------- -------- ------- -------- -------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Baltimore County Savings Bank
- -----------------------------
September 30, 1997 20.2 63.0 14.8 89.2 0.0 0.0 9.5 0.0 9.5 0.0
SAIF-Insured Thrifts 17.5 67.9 11.4 70.1 15.2 0.2 13.0 0.2 12.8 0.0
State of MD 14.8 68.8 13.6 78.4 8.6 0.0 11.9 0.0 11.9 0.0
Comparable Group Average 22.0 62.7 11.7 76.6 10.0 0.1 12.0 0.2 11.8 0.0
Florida Companies 20.4 66.3 9.6 76.2 11.6 0.0 9.8 0.0 9.7 0.0
Mid-Atlantic Companies 25.9 54.7 15.9 75.1 11.7 0.0 12.2 0.4 11.8 0.0
Mid-West Companies 14.4 75.1 7.5 80.1 5.2 0.0 13.1 0.0 13.1 0.0
Other Comparative Companies 27.7 65.5 0.0 72.6 14.6 1.9 9.0 0.0 9.0 0.0
Comparable Group
- ----------------
Florida Companies
- -----------------
CMSV Commty. Svgs, MHC of FL (48.5) 35.1 59.0 1.9 76.7 9.5 0.0 11.3 0.0 11.3 0.0
FFFL Fidelity FSB, MHC of FL (47.7) 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)(1)(3)
15.3 42.1 39.6 53.0 28.8 0.0 16.4 0.0 16.4 0.0
GDVS Greater DV SB,MHC of PA (19.9) 34.7 60.3 1.5 77.5 10.5 0.0 11.6 0.0 11.6 0.0
HARS Harris SB, MHC of PA (24.3) 53.7 42.3 0.4 53.5 37.3 0.0 8.2 0.9 7.3 0.0
LFED Leeds FSB, MHC of MD (36.3) 29.1 62.6 6.7 81.9 0.2 0.0 16.6 0.0 16.6 0.0
NWSB Northwest SB, MHC of PA (30.7) 19.2 75.2 2.9 80.4 8.8 0.0 9.6 0.5 9.1 0.0
PBHC OswegoCity SB MHC of NY (46.1) 21.4 59.3 12.4 80.9 6.4 0.0 11.9 1.9 10.0 0.0
PHSB Ppls Home SB, MHC of PA (45.0)(3) 19.8 48.4 28.6 84.2 1.5 0.0 13.7 0.0 13.7 0.0
PLSK Pulaski SB, MHC of NJ (46.0) 14.7 56.1 26.3 84.2 3.2 0.0 12.0 0.0 12.0 0.0
SBFL SB Fngr Lakes MHC of NY (33.1) 25.6 46.1 24.6 80.6 9.1 0.0 9.3 0.0 9.3 0.0
Mid-West Companies
- ------------------
FFSX First FS&LA. MHC of IA (46.1) 11.8 75.6 9.2 71.0 18.9 0.0 8.7 0.1 8.7 0.0
JXSB Jcksnville SB,MHC of IL (45.6) 8.7 79.0 8.1 87.5 0.2 0.0 10.6 0.0 10.6 0.0
PULB Pulaski SB, MHC of MO (29.8) 13.9 80.7 3.0 82.9 1.2 0.0 13.3 0.0 13.3 0.0
WAYN Wayne S&L Co. MHC of OH (47.8) 13.5 83.0 0.1 84.2 5.6 0.0 9.5 0.0 9.5 0.0
WCFB Wbstr Cty FSB MHC of IA (45.2) 24.1 57.3 17.1 75.1 0.3 0.0 23.4 0.0 23.4 0.0
New England Companies
- ---------------------
PBCT Peoples Bank, MHC of CT (40.1) 27.7 65.5 0.0 72.6 14.6 1.9 9.0 0.0 9.0 0.0
<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
- -----------------------------
September 30, 1997 -2.76 -11.62 0.79 -3.71 0.00 8.88 9.03 9.10 9.10 17.43
SAIF-Insured Thrifts 11.88 4.83 13.24 7.74 14.51 3.23 2.55 11.19 11.22 23.13
State of MD 5.29 -0.15 5.57 5.32 -4.76 3.22 3.28 10.51 10.51 23.09
Comparable Group Average 8.23 6.08 7.26 5.00 4.21 8.14 7.30 11.79 11.62 25.64
Florida Companies 15.51 12.86 16.44 14.21 45.17 6.99 7.21 9.65 9.65 19.45
Mid-Atlantic Companies 9.77 10.09 7.44 3.47 14.79 9.24 7.11 12.01 11.64 27.89
Mid-West Companies 2.82 -4.77 3.28 2.93 -19.46 5.60 5.69 13.02 13.02 26.42
Other Comparative Companies 6.83 3.90 7.09 10.67 -12.22 16.62 16.64 8.40 8.40 13.90
Comparible Group
- ----------------
Florida Companies
- -----------------
CMSV Commty. Svgs, MHC of FL (48.5) 9.06 5.98 10.10 9.09 20.12 7.18 7.18 11.40 11.40 23.10
FFFL Fidelity FSB, MHC of FL (47.7) 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)(1)(3)
10.74 12.77 12.88 -3.78 12.06 NM NM 16.60 16.60 58.20
GDVS Greater DV SB,MHC of PA (19.9) 7.12 5.25 8.90 2.77 68.30 6.65 6.65 NM 11.73 27.04
HARS Harris SB, MHC of PA (24.3) 22.43 NM -19.53 -4.12 NM 17.32 23.01 6.95 6.95 14.34
LFED Leeds FSB, MHC of MD (36.3) 3.91 -4.08 7.17 3.60 -13.33 7.34 7.34 16.27 16.27 35.34
NWSB Northwest SB, MHC of PA (30.7) 10.48 8.18 11.45 10.18 23.77 8.16 7.35 NM 8.97 18.32
PBHC OswegoCity SB MHC of NY (46.1) 4.10 -9.24 10.02 -2.34 NM 9.63 -8.00 9.84 9.84 16.90
PHSB Ppls Home SB, MHC of PA (45.0)(3) 1.01 -6.95 5.70 -4.02 NM NM NM 13.20 13.20 28.00
PLSK Pulaski SB, MHC of NJ (46.0) 12.69 78.08 6.16 6.34 NM NM NM 11.98 11.98 29.17
SBFL SB Fngr Lakes MHC of NY (33.1) 15.46 -3.32 24.25 22.65 -16.84 6.31 6.31 9.22 9.22 23.73
Mid-West Companies
- ------------------
FFSX First FS&LA. MHC of IA (46.1) -0.28 -25.28 4.84 -2.08 6.13 9.22 9.39 8.62 8.62 17.10
JXSB Jcksnville SB,MHC of IL (45.6) 14.28 NM 8.97 15.69 -42.42 4.69 4.96 10.30 10.30 15.10
PULB Pulaski SB, MHC of MO (29.8) 0.34 -7.95 7.20 0.57 -26.67 6.02 6.02 13.29 13.29 28.74
WAYN Wayne S&L Co. MHC of OH (47.8) -0.25 -1.55 -0.67 0.51 -12.95 5.96 5.96 9.53 9.53 17.69
WCFB Wbstr Cty FSB MHC of IA (45.2) -0.01 15.72 -3.94 -0.06 -21.41 2.12 2.12 23.38 23.38 53.48
New England Companies
- ---------------------
PBCT Peoples Bank, MHC of CT (40.1) 6.83 3.90 7.09 10.67 -12.22 16.62 16.64 8.40 8.40 13.90
</TABLE>
(1) Financial information is for the quarter ending June 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.
Page 3.7
could be realized through leverage and lower funding costs. However, at the same
time, the Bank's higher pro forma capital position will likely result in a
decline in return on equity. Both the Bank's and the Peer Group's capital ratios
reflected healthy capital surpluses over the regulatory capital requirements,
with the Peer Group's ratios currently indicating slightly greater capital
surpluses.
The interest-earning asset compositions for the Bank and the Peer Group
were somewhat similar, with loans constituting the bulk of interest-earning
assets for both BCSB and the Peer Group. BCSB and the Peer Group exhibited
comparable loans-to-assets ratios of 63.0 percent and 62.7 percent,
respectively. Comparatively, the Bank's interest-earning asset composition
reflected a higher concentration of mortgage-backed securities (14.8 percent of
assets versus 11.7 percent for the Peer Group), which was largely offset by the
Peer Group's higher ratio of cash and investments (22.0 percent of assets versus
20.2 percent for the Bank). Overall, BCSB's interest-earning assets amounted to
98.0 percent of assets, which was higher than the comparative Peer Group ratio
of 96.4 percent. As the result of planned capital expenditures by the Bank
(currently estimated at $1.25 million), it is anticipated that BCSB's
concentration of interest-earning assets comprising total assets will decline to
a level that is more comparable to the Peer Group's ratio following the stock
offering.
BCSB's funding liabilities reflected a funding strategy that was somewhat
similar to that of the Peer Group's funding composition. The Bank's deposits
equaled 89.2 percent of assets, which was above the Peer Group average of 76.6
percent. Deposits accounted for all of BCSB's interest-bearing liabilities,
while the Peer Group posted a borrowings-to-assets ratios of 10.0 percent.
Accordingly, the Bank was considered to have slightly greater borrowing capacity
than the Peer Group, although both BCSB and the Peer Group were considered to
have ample borrowing capacities. Subordinated debt represented a nominal balance
on the Peer Group's balance sheet, as the result of one Peer Group company
holding subordinated debt equal to 1.9 percent of assets. Total interest-bearing
liabilities maintained by the Bank and the Peer Group, as a percent of assets,
equaled 89.2 and 86.7 percent, respectively, with the Peer Group's lower ratio
being supported by maintenance of a higher capital position.
A key measure of balance sheet strength for a thrift institution is its
IEA/IBL ratio. Presently, the Peer Group's IEA/IBL ratio is slightly higher than
the Bank's ratio, based on respective ratios of 111.3 percent and 109.9 percent.
The additional capital realized from stock proceeds 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 will be deployed into
interest-earning assets.
The growth rate section of Table 3.2 shows annual growth rates for key
balance sheet items. BCSB's and the Peer Group's growth rates are based on
annual growth for the 12 months ended September 30, 1997.
<PAGE>
RP Financial, LC.
Page 3.8
Asset growth rates of negative 2.8 percent and positive 8.2 percent were posted
by the Bank and the Peer Group, respectively. BCSB's negative asset growth
resulted from declines in cash and investments and mortgage-backed securities,
which was partially negated by positive growth in loans. Growth in loans and
mortgage-backed securities accounted for most of the Peer Group's asset growth,
while a lower positive growth rate was recorded in the Peer Group's balance of
cash and investments. Overall, the Peer Group's asset growth measures would tend
to support greater earnings growth relative to the Bank's measures.
BCSB's deposits declined by 3.7 percent during the period covered in Table
3.2, with the decline in deposits being funded by asset shrinkage and retained
earnings. The Peer Group's asset growth was funded by primarily by deposits and,
to a lesser degree, borrowings and capital. The Peer Group's growth rate for
borrowings was somewhat understated, as the "NM" borrowings growth rates shown
for four of the Peer Group companies included companies with borrowings growth
rates in excess of 100 percent. For the period shown in Table 3.2, Peer Group
companies with borrowing growth rates in excess of 100 percent accounted for
three out of the four "NM" borrowing growth rates shown in Table 3.2.
Capital growth rates posted by the Bank and the Peer Group equaled positive
8.9 percent and positive 8.1 percent, respectively, with the Peer Group's higher
return on average assets ratio being more than offset by maintenance of a higher
level of capital, dividend payments, stock repurchases and possible negative
SFAS 115 adjustments. Following the increase in capital realized from stock
offering proceeds, the Bank's capital growth rate will be depressed by its
higher pro forma capital position, as well as by possible dividend payments and
stock repurchases.
Income and Expense Components
- -----------------------------
BCSB and the Peer Group reported net income to average assets ratios of
0.76 percent and 0.88 percent, respectively (see Table 3.3), based on earnings
for the twelve months ended September 30, 1997. The Peer Group's higher
profitability was supported by maintenance of a lower level of operating
expenses and a higher level of non-interest operating income, which was
partially offset by the Bank's higher net interest margin. Loan loss provisions
had a comparable impact on the Bank's and the Peer Group's earnings, while gains
were a slightly larger factor in the Peer Group's earnings. In general, the
Bank's and the Peer Group's reported earnings were viewed as being fairly
representative of their core earnings.
The Bank's stronger net interest margin resulted from both a higher
interest income ratio and a lower interest expense ratio. BCSB's higher interest
income ratio was supported by maintaining a higher level of interest-earning
assets as a percent of total assets (98.0 percent versus 96.4 percent for the
Peer Group), as well as a higher yield earned on interest-earning assets (7.81
percent versus 7.51 percent for the Peer Group). The
<PAGE>
RP FINANCIAL, LC.
-----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Table 3.3
Income as a Percent of Average Assets and Yields, Costs, Spreads
Comparable Institution Analysis
For the Twelve Months Ended September 30, 1997
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
------ ------ ------- ------ ------- ------- ---- ----- ------ ------
Baltimore County Savings Bank
-----------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
September 30, 1997 0.76 7.48 3.97 3.51 0.11 3.40 0.14 0.01 0.09 0.24
SAIF-Insured Thrifts 0.90 7.39 4.11 3.28 0.13 3.15 0.11 0.01 0.29 0.42
State of MD 0.74 7.38 4.52 2.86 0.04 2.82 0.06 0.05 0.15 0.25
Comparable Group Average 0.88 7.26 4.02 3.25 0.12 3.13 0.13 0.00 0.31 0.43
Florida Companies 0.74 7.26 4.01 3.25 0.04 3.21 0.04 0.01 0.45 0.50
Mid-Atlantic Companies 0.84 7.19 4.02 3.17 0.10 3.07 0.03 0.00 0.23 0.25
Mid-West Companies 0.95 7.47 4.11 3.36 0.08 3.28 0.05 0.00 0.30 0.35
Other Comparable Companies 1.15 6.87 3.51 3.35 0.59 2.77 1.59 -0.06 0.76 0.00
Comparable Group
----------------
Florida Companies
-----------------
CMSV Commty. Svgs, MHC of FL (48.5) 0.80 7.27 3.93 3.34 0.07 3.27 0.03 0.01 0.53 0.58
FFFL Fidelity FSB, MHC of FL (47.7) 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)(1)(3) 0.65 7.07 4.23 2.84 0.04 2.80 0.00 0.00 0.06 0.06
GDVS Greater DV SB, MHC of PA (19.9) 0.92 7.04 3.69 3.35 0.04 3.31 0.00 0.04 0.25 0.29
HARS Harris SB, MHC of PA (24.3) 0.92 7.03 4.53 2.50 0.05 2.44 0.10 0.03 0.15 0.28
LFED Leeds FSB, MHC of MD (36.3) 1.19 7.05 4.16 2.89 0.05 2.85 0.00 0.00 0.10 0.10
NWSB Northwest SB, MHC of PA (30.7) 0.97 7.87 4.20 3.67 0.15 3.53 0.09 0.00 0.21 0.31
PBHC OswegoCity SB MHC of NY (46.1) 1.06 7.32 3.57 3.75 0.15 3.60 0.02 -0.03 0.53 0.53
PHSB Ppls Home SB, MHC of PA (45.0)(3) 0.89 7.17 3.65 3.51 0.27 3.25 0.00 0.00 0.45 0.45
PLSK Pulaski SB, MHC of NJ (46.0) 0.64 7.06 4.10 2.96 0.09 2.88 0.04 -0.01 0.05 0.09
SBFL SB Fngr Lakes MHC of NY (33.1) 0.37 7.14 4.09 3.05 0.09 2.96 0.02 -0.06 0.23 0.18
Mid-West Companies
------------------
FFSX First FS&LA. MHC of IA (46.1) 0.73 7.38 4.46 2.92 0.06 2.86 0.05 0.00 0.48 0.53
JXSB Jcksnville SB, MHC of IL (45.6) 0.66 7.81 4.33 3.47 0.17 3.30 0.20 0.00 0.33 0.53
PULB Pulaski SB, MHC of MO (29.8) 1.21 7.56 3.91 3.65 0.09 3.55 0.00 0.00 0.27 0.27
WAYN Wayne S&L Co. MHC of OH (47.8) 0.73 7.53 4.31 3.21 0.02 3.20 0.00 0.00 0.22 0.22
WCFB Wbstr Cty FSB MHC of IA (45.2) 1.42 7.09 3.55 3.54 0.05 3.48 0.00 0.00 0.20 0.21
New England Companies
---------------------
PBCT Peoples Bank, MHC of CT (40.1) 1.15 6.87 3.51 3.35 0.59 2.77 1.59 -0.06 0.76 2.28
</TABLE>
<TABLE>
<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
------- ------- ------- ------- --------- -------- ------ ---------- --------
Baltimore County Savings Bank
-----------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
September 30, 1997 2.40 0.01 0.02 0.00 7.81 4.40 3.41 3,312 39.69
SAIF-Insured Thrifts 2.20 0.02 0.04 0.00 7.63 4.81 2.82 4,282 37.22
State of MD 1.78 0.00 -0.11 0.00 7.61 5.20 2.41 5,190 35.55
Comparable Group Average 2.32 0.02 0.09 0.00 7.51 4.62 2.89 3,514 38.78
Florida Companies 2.62 0.02 0.13 0.00 7.53 4.57 2.96 3,127 38.77
Mid-Atlantic Companies 2.11 0.02 0.03 0.00 7.41 4.62 2.80 4,083 40.48
Mid-West Companies 2.26 0.00 0.07 0.00 7.72 4.80 2.92 2,849 37.09
Other Comparable Companies 3.86 0.02 0.62 0.00 7.32 3.91 3.41 2,492 35.39
Comparable Group
----------------
Florida Companies
-----------------
CMSV Commty. Svgs, MHC of FL (48.5) 2.71 0.00 0.10 0.00 7.54 4.55 2.99 2,598 35.32
FFFL Fidelity FSB, MHC of FL (47.7) 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)(3) 1.62 0.00 -0.01 0.00 6.90 4.92 1.98 3,002 NM
GDVS Greater DV SB, MHC of PA (19.9) 2.21 0.00 0.00 0.00 7.31 4.20 3.11 3,606 33.18
HARS Harris SB, MHC of PA (24.3) 1.62 0.12 0.16 0.00 7.33 5.00 2.33 4,263 34.19
LFED Leeds FSB, MHC of MD (36.3) 1.03 0.00 0.00 0.00 7.16 5.07 2.09 10,571 37.90
NWSB Northwest SB, MHC of PA (30.7) 2.21 0.05 0.02 0.00 8.09 4.72 3.37 2,639 38.87
PBHC OswegoCity SB MHC of NY (46.1) 2.72 0.04 0.17 0.00 7.82 4.04 3.78 2,573 28.90
PHSB Ppls Home SB, MHC of PA (45.0)(3) 2.85 0.00 0.01 0.00 7.39 4.28 3.11 2,752 NM
PLSK Pulaski SB, MHC of NJ (46.0) 1.95 0.00 0.00 0.00 7.34 4.74 2.60 4,262 36.86
SBFL SB Fngr Lakes MHC of NY (33.1) 2.73 0.00 -0.09 0.00 7.40 4.59 2.81 3,081 73.49
Mid-West Companies
------------------
FFSX First FS&LA. MHC of IA (46.1) 2.28 0.01 0.03 0.00 7.63 4.93 2.70 2,855 35.74
JXSB Jcksnville SB, MHC of IL (45.6) 2.84 0.00 0.01 0.00 8.18 4.96 3.22 2,028 43.63
PULB Pulaski SB, MHC of MO (29.8) 2.40 0.00 0.23 0.00 7.82 4.61 3.21 2,111 34.75
WAYN Wayne S&L Co. MHC of OH (47.8) 2.38 0.00 0.06 0.00 7.76 4.79 2.97 2,750 34.02
WCFB Wbstr Cty FSB MHC of IA (45.2) 1.43 0.00 0.00 0.00 7.19 4.71 2.49 4,499 37.31
New England Companies
---------------------
PBCT Peoples Bank, MHC of CT (40.1) 3.86 0.02 0.62 0.00 7.32 3.91 3.41 2,492 35.39
</TABLE>
(1) Financial information is for the quarter ending June 30, 1997.
(3) Income and expense information has 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.
Page 3.10
slightly lower interest expense ratio maintained by the Bank was supported by
its lower cost of funds (4.40 percent versus 4.62 percent for the Peer Group),
which was partially offset by the Peer Group's lower level of interest-bearing
liabilities (86.7 percent versus 89.2 percent for the Bank). Following the
infusion of stock proceeds, the Bank's comparative advantage with respect to
maintaining a lower interest expense ratio should increase due to the decline in
the level of interest-bearing liabilities being utilized to fund assets.
Overall, BCSB and the Peer Group reported net interest income to average assets
ratios of 3.51 percent and 3.25 percent, respectively.
In another key area of core earnings strength, the Bank maintained a higher
level of operating expenses than the Peer Group. For the period covered in Table
3.3, the Bank and the Peer Group recorded operating expense to average assets
ratios of 2.41 percent and 2.34 percent, respectively. BCSB's higher operating
expense ratio can in part be explained by its maintenance of a higher number of
employees for its asset size, as compared to the Peer Group companies on
average. Assets per full time equivalent employee equaled $3.3 million for the
Bank, versus a comparative measure of $3.5 million for the Peer Group. On a
post-offering basis, the Bank's operating expenses can be expected to increase
with the addition of public company reporting expenses and stock benefit plans,
with such expenses already impacting the Peer Group's operating expenses.
When viewed together, net interest income and operating expenses provide
considerable insight into a thrift's earnings strength, since those sources of
income and expenses are typically the most prominent components of earnings and
are generally more predictable than losses and gains realized from the sale of
assets or other non-recurring activities. In this regard, as measured by their
expense coverage ratios (net interest income divided by operating expenses), the
Bank's earnings strength was slightly more favorable than the Peer Group's.
Expense coverage ratios posted by BCSB and the Peer Group equaled 1.46x and
1.39x, respectively. An expense coverage ratio of greater than 1.0x indicates
that an institution is able to sustain pre-tax profitability without having to
rely on non-interest sources of income.
Sources of non-interest operating income were a slightly larger contributor
to the Peer Group's earnings, with such income amounting to 0.24 percent and
0.43 percent of BCSB's and the Peer Group's average assets, respectively. The
Bank's lower level of non-interest operating income is reflective of a
traditional thrift operating strategy, which provides for 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 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 64.0 percent was slightly less favorable than
the Peer Group's efficiency ratio of 63.0 percent.
<PAGE>
RP Financial, LC.
Page 3.11
Loss provisions had a comparable impact on the Bank's and the Peer Group's
earnings, amounting to 0.11 percent and 0.12 percent of average assets for BCSB
and the Peer Group, respectively. Overall, the level of loan loss provisions
established by the Bank and the Peer Group were indicative of low credit risk
operating strategies, which, in turn, have provided generally favorable credit
quality measures for the Bank and the Peer Group. However, notwithstanding the
comparable level of loss provisions established by the Bank and the Peer Group,
the credit quality measures for the Peer Group compared favorably to the Bank's
measures (see Table 3.6). Net gains realized from the sale of investments and
loans were slightly positive for both the Bank and the Peer Group, with such
gains amounting to 0.02 percent and 0.09 percent of average assets for BCSB and
the Peer Group, respectively. Given the generally non-recurring nature of gains
and losses resulting from the sale of loans and investments, the net gains
reflected in Bank's and the Peer Group's earnings will be discounted in
evaluating the relative strengths and weaknesses of their respective earnings.
Extraordinary items were not a factor in either the Bank's or the Peer Group's
earnings. The Bank's and the Peer Group's pre-tax earnings were similarly
impacted by taxes, with BCSB and the Peer Group posting effective tax rates of
39.7 percent and 38.5 percent, respectively.
Loan Composition
- ----------------
Table 3.4 presents data related to the loan composition of BCSB and the
Peer Group. In comparison to the Bank, the Peer Group's loan portfolio
composition reflected a higher concentration of 1-4 family permanent mortgage
loans and mortgage-backed securities (80.2 percent versus 72.3 percent for the
Bank). The Peer Group's higher ratio was the result of maintaining a higher
concentration of 1-4 family permanent mortgage loans, which was partially offset
by BCSB's higher concentration of mortgage-backed securities. Given the Bank's
general philosophy of retaining most loan originations for portfolio, loans
serviced for others represented a more significant off-balance sheet item for
the Peer Group. While the Peer Group companies were viewed as being primarily
portfolio lenders, a couple of the Peer Group companies maintained significant
balances of loans serviced for others (Peoples Bank of CT and Harris SB of PA).
The Peer Group's average balance of loans serviced for others equaled $214.8
million, or 22.4 percent of average assets, which represents a recurring source
of non-interest operating income that is not a significant part of the Bank's
current earnings stream. BCSB's loans serviced for others totaled $8.2 million,
or 3.2 percent of total assets. With the exception of Peoples Bank and Harris
SB, loan servicing intangibles were not a significant balance sheet item for the
Peer Group companies.
As indicated by the higher percentage of 1-4 family loans maintained by the
Peer Group, BCSB exhibited a greater degree of lending diversification into
higher risk types of loans. Consumer loans accounted for the substantial portion
of the Bank's lending diversification, with such loans consisting primarily of
<PAGE>
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 3.4
Loan Portfolio Composition and Related Information
Comparable Institution Analysis
As of September 30, 1997
<TABLE>
<CAPTION>
Portfolio Composition as a Percent of MBS and Loans
---------------------------------------------------------
1-4 Constr. 5+Unit Commerc. RWA/ Serviced
Institution MBS Family & Land Comm RE Business Consumer Assets For Others
----------- ------ ------ ------ ------- -------- -------- ------ ----------
(%) (%) (%) (%) (%) (%) (%) ($000)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Baltimore County Savings Bank 18.27 54.07 5.28 3.96 0.03 18.39 54.42 8,156
SAIF-Insured Thrifts 15.28 62.21 5.32 11.46 6.29 1.62 52.88 396,792
State of MD 16.99 72.97 7.44 3.70 1.81 0.40 46.22 24,362
Comparable Group Average 11.49 68.71 3.07 7.51 7.75 2.52 51.25 214,788
<CAPTION>
Comparable Group
----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CMSV Commty. Svgs, MHC of FL (48.5) 4.23 74.30 13.30 10.73 1.66 1.53 49.73 19,614
FFFL Fidelity FSB, MHC of FL (47.7) 17.25 66.22 8.91 5.23 4.66 2.20 51.13 43,474
SKBO First Carnegie,MHC of PA(45.0)(1) NA NA NA NA NA NA 29.11 0
FFSX First FS&LA. MHC of IA (46.1) 12.75 70.45 1.76 5.13 9.74 0.79 52.74 27,413
GDVS Greater DV SB,MHC of PA (19.9) 3.71 78.68 1.70 11.00 3.69 0.00 45.18 880
HARS Harris SB, MHC of PA (24.3) 14.86 68.71 2.01 5.73 8.53 0.04 50.70 1,054,960
JXSB Jcksnville SB,MHC of IL (45.6) 10.91 57.54 0.98 9.10 16.55 4.96 71.23 81,067
LFED Leeds FSB, MHC of MD (36.3) 13.79 83.08 1.20 0.88 2.09 0.00 46.19 0
NWSB Northwest SB, MHC of PA (30.7) 4.40 73.72 3.56 2.88 12.06 4.62 52.82 99,736
PBHC OswegoCity SB MHC of NY (46.1) 15.44 63.13 1.51 11.73 2.76 5.74 59.57 0
PBCT Peoples Bank, MHC of CT (40.1) 0.01 46.87 4.02 13.79 22.51 12.16 83.74 2,249,421
PHSB Ppls Home SB, MHC of PA (45.0) NA NA NA NA NA NA 49.70 0
PULB Pulaski SB, MHC of MO (29.8) 4.04 91.96 0.00 3.29 1.09 0.01 47.41 28,972
PLSK Pulaski SB, MHC of NJ (46.0) NA NA NA NA NA NA 42.69 0
SBFL SB Fngr Lakes MHC of NY (33.1) 32.74 43.28 0.89 8.61 12.10 2.70 40.96 6,825
WAYN Wayne S&L Co. MHC of OH (47.8) 0.19 86.35 3.11 6.60 5.46 0.59 53.93 39,033
WCFB Wbstr Cty FSB MHC of IA (45.2) 26.50 57.70 0.07 10.43 5.61 0.00 44.44 0
<CAPTION>
Servicing
Assets
------
($000)
<S> <C>
Baltimore County Savings Bank 0
SAIF-Insured Thrifts 3,346
State of MD 22
Comparable Group Average 1,280
<CAPTION>
Comparable Group
----------------
<S> <C>
CMSV Commty. Svgs, MHC of FL (48.5) 0
FFFL Fidelity FSB, MHC of FL (47.7) 186
SKBO First Carnegie,MHC of PA (45.0)(1) 0
FFSX First FS&LA. MHC of IA (46.1) 0
GDVS Greater DV SB,MHC of PA (19.9) 0
HARS Harris SB, MHC of PA (24.3) 12,014
JXSB Jcksnville SB,MHC of IL (45.6) 261
LFED Leeds FSB, MHC of MD (36.3) 0
NWSB Northwest SB, MHC of PA (30.7) 0
PBHC OswegoCity SB MHC of NY (46.1) 0
PBCT Peoples Bank, MHC of CT (40.1) 9,300
PHSB Ppls Home SB, MHC of PA (45.0) 0
PULB Pulaski SB, MHC of MO (29.8) 0
PLSK Pulaski SB, MHC of NJ (46.0) 0
SBFL SB Fngr Lakes MHC of NY (33.1) 0
WAYN Wayne S&L Co. MHC of OH (47.8) 0
WCFB Wbstr Cty FSB MHC of IA (45.2) 0
</TABLE>
(1) Financial information is for the quarter ending June 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.
Page 3.13
automobile loans. Consumer loans accounted for 18.4 percent and 2.5 percent of
BCSB's and the Peer Group's loan and MBS portfolios, respectively. Commercial
business loans represented the most notable area of lending diversification for
the Peer Group (7.8 percent of loans and MBS), while commercial business lending
is not an active lending area for the Bank. Other areas of lending
diversification for the Bank and the Peer Group consisted of multi-
family/commercial real estate and construction/land loans, with the Peer Group
maintaining a higher concentration of multi-family/commercial real estate loans
(7.5 percent of loans and MBS versus 4.0 percent for the Bank) and a lower
concentration of construction/land loans (3.1 percent of loans and MBS versus
5.3 percent for the Bank). BCSB's greater diversification into higher risk types
of lending translated into a higher risk weighted assets-to-assets ratio than
maintained by the Peer Group companies on average, based on comparative ratios
of 54.4 percent and 51.3 percent, respectively. Overall, the Bank's and the Peer
Group's risk weighted assets-to-assets ratios were slightly above and below the
comparative ratio of 52.9 percent for all publicly-traded SAIF-insured thrifts,
indicating a potentially higher degree of credit risk exposure associated with
BCSB's asset composition.
Interest Rate Risk
- ------------------
Table 3.5 reflects various key ratios highlighting the relative interest
rate risk exposure of the Bank versus the Peer Group companies. In terms of
balance sheet composition, BCSB's interest rate risk characteristics were
considered to be slightly less favorable than the Peer Group's. In particular,
BCSB's lower capital position and lower IEA/IBL ratio indicate a greater
dependence on the yield-cost spread to sustain the net interest margin. However,
BCSB's lower level of non-interest earning assets was a positive consideration
in terms of capacity to generate interest income. On a pro forma basis, the
infusion of stock proceeds should serve to increase the Bank's equity-to-assets
ratio and IEA/IBL ratio to levels that are comparable to or slightly more
favorable than the comparative Peer Group ratios. At the same time, the planned
capital expenditures will place upward pressure on the Bank's level of non-
interest earning assets, although BCSB's non-interest earnings assets-to-assets
ratio should remain slightly below the Peer Group's ratio.
To analyze interest rate risk associated with the net interest margin, we
reviewed quarterly changes in net interest income as a percent of average assets
for BCSB and the Peer Group. In general, the relative fluctuations in both the
Bank's and the Peer Group's net interest income to average assets ratios were
considered to be fairly limited and, thus, based on the interest rate
environment that prevailed during the period covered in Table 3.5, neither BCSB
or the Peer Group were viewed as having significant interest rate risk exposure
in their respective net interest margins. The stability of the Bank's net
interest margin should be enhanced by the infusion of stock proceeds, as
interest rate sensitive liabilities will be funding a lower portion of BCSB's
assets.
<PAGE>
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 3.5
Interest Rate Risk Measures and Net Interest Income Volatility
Comparable Institution Analysis
As of September 30, 1997 or Most Recent Date Available
<TABLE>
<CAPTION>
Balance Sheet Measures
--------------------------
Non-Earn.
Equity/ IEA/ Assets/
Institution Assets IBL Assets
- ----------- ------ ------ ------
(%) (%) (%)
<S> <C> <C> <C>
Baltimore County Savings Bank 9.5 109.9 2.0
SAIF-Insured Thrifts 12.8 114.0 3.2
State of MD 11.9 112.0 2.9
Comparable Group Average 11.8 111.6 3.5
Comparable Group
- ----------------
CMSV Commty. Svgs, MHC of FL (48.5) 11.3 111.5 3.9
FFFL Fidelity FSB, MHC of FL (47.7) 8.2 108.0 3.5
SKBO First Carnegie,MHC of PA(45.0)(1) 16.4 118.6 3.0
FFSX First FS&LA. MHC of IA (46.1) 8.7 107.5 3.3
GDVS Greater DV SB,MHC of PA (19.9) 11.6 109.6 3.5
HARS Harris SB, MHC of PA (24.3) 7.3 106.3 3.6
JXSB Jcksnville SB,MHC of IL (45.6) 10.6 109.3 4.2
LFED Leeds FSB, MHC of MD (36.3) 16.6 119.9 1.6
NWSB Northwest SB, MHC of PA (30.7) 9.1 109.2 2.7
PBHC OswegoCity SB MHC of NY (46.1) 10.0 106.6 7.0
PBCT Peoples Bank, MHC of CT (40.1) 9.0 104.6 6.8
PHSB Ppls Home SB, MHC of PA (45.0) 13.7 113.0 3.2
PULB Pulaski SB, MHC of MO (29.8) 13.3 116.0 2.4
PLSK Pulaski SB, MHC of NJ (46.0) 12.0 111.1 3.0
SBFL SB Fngr Lakes MHC of NY (33.1) 9.3 107.4 3.7
WAYN Wayne S&L Co. MHC of OH (47.8) 9.5 107.6 3.4
WCFB Wbstr Cty FSB MHC of IA (45.2) 23.4 130.6 1.5
<CAPTION>
Quarterly Change in Net Interest Income
----------------------------------------------------------
09/30/97 06/30/97 03/31/97 12/31/96 09/30/96 06/30/96
-------- -------- -------- -------- -------- --------
(change in net interest income is annualized in basis points)
<S> <C> <C> <C> <C> <C> <C>
Baltimore County Savings Bank 22 -4 -7 6 -2 NA
SAIF-Insured Thrifts -3 1 0 0 -1 12
State of MD -4 -5 11 -4 1 4
Comparable Group Average 1 -0 6 -1 -6 13
Comparable Group
- ----------------
CMSV Commty. Svgs, MHC of FL (48.5) 0 -1 -5 -31 28 30
FFFL Fidelity FSB, MHC of FL (47.7) -6 -13 -3 -13 -13 13
SKBO First Carnegie,MHC of PA(45.0)(1) NA 14 30 NA NA NA
FFSX First FS&LA. MHC of IA (46.1) -9 1 12 -5 1 11
GDVS Greater DV SB,MHC of PA (19.9) -2 11 11 4 32 4
HARS Harris SB, MHC of PA (24.3) -8 1 -12 15 -65 41
JXSB Jcksnville SB,MHC of IL (45.6) 11 -30 7 3 11 14
LFED Leeds FSB, MHC of MD (36.3) -11 4 11 5 -5 -8
NWSB Northwest SB, MHC of PA (30.7) -19 7 7 -5 -23 19
PBHC OswegoCity SB MHC of NY (46.1) 5 4 20 NA NA NA
PBCT Peoples Bank, MHC of CT (40.1) 23 -30 11 35 -29 -6
PHSB Ppls Home SB, MHC of PA (45.0) 28 0 NA NA NA NA
PULB Pulaski SB, MHC of MO (29.8) 12 12 0 -5 13 4
PLSK Pulaski SB, MHC of NJ (46.0) 9 19 -12 -6 NA NA
SBFL SB Fngr Lakes MHC of NY (33.1) -5 -3 -13 5 -29 16
WAYN Wayne S&L Co. MHC of OH (47.8) 4 6 -5 -4 -9 17
WCFB Wbstr Cty FSB MHC of IA (45.2) -9 -9 31 -9 7 12
</TABLE>
(1) Financial information is for the quarter ending June 30, 1997.
NA=Change is greater than 100 basis points during the quarter.
Source: Audited and unaudited financial statements, corporate reports and
offering circulars, and RP Financial, LC. calculations. The information
provided in this table has been obtained from sources we believe are
reliable, but we cannot guarantee the accuracy or completeness of such
information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP Financial, LC.
Page 3.15
Credit Risk
- -----------
Overall, the Peer Group's credit risk exposure appeared to be slightly less
than the Bank's, with both the Bank's and the Peer Group's credit quality
measures being representative of fairly limited credit risk exposure. As shown
in Table 3.6, the Peer Group's ratio of non-performing assets- (REO, non-
accruing loans and accruing loans more than 90 days past due) to-assets was
lower than the Bank's ratio (0.60 percent versus 0.76 percent for the Bank).
Similarly, the Peer Group's non-performing loans-to-loans ratio was lower than
the Bank's ratio (0.61 percent versus 1.16 percent for the Bank). Loss reserve
ratios were also stronger for the Peer Group, as the Peer Group maintained a
higher level of loss reserves as a percent of non-performing assets (135.5
percent versus 51.4 percent for the Bank) and as percent of loans (0.78 percent
versus 0.62 percent for the Bank). Net loan charge-offs were a slightly larger
factor in the Peer Group's earnings, equaling 0.35 percent and 0.15 percent of
loans receivable for the Peer Group and the Bank, respectively.
Summary
- -------
Based on the above analysis, RP Financial concluded that the Peer Group
forms a reasonable basis for determining the pro forma market value of BCSB. Due
to the limited number of publicly-traded MHCs in today's market, there are some
significant differences between the Bank and certain Peer Group members. Those
areas where substantial differences exist, such as disparate asset sizes,
different market areas, market capitalization and other variations will be
addressed in the form of valuation adjustments to the extent necessary. For
these reasons, and because the Peer Group members all share the unique
characteristics of mutual holding company ownership, RP Financial concluded that
the Peer Group pricing (full conversion basis) will serve as a sound basis in
deriving a pro forma market value for BCSB.
<PAGE>
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Table 3.6
Credit Risk Measures and Related Information
Comparable Institution Analysis
As of September 30, 1997 or Most Recent Date Available
NPAs & Rsrves/
REO/ 90+Del/ NPLs/ Rsrves/ Rsrves/ NPAs & Net Loan NLCs/
Institution Assets Assets Loans Loans NPLs 90+Del Chargoffs Loans
- ----------- ------ ------ ------ ------ ------ -------- --------- ----------
(%) (%) (%) (%) (%) (%) ($000) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Baltimore County Savings Bank 0.02 0.76 1.16 0.62 53.07 51.37 234 0.15
SAIF-Insured Thrifts 0.25 0.76 0.85 0.77 163.23 124.35 283 0.08
State of MD 0.20 0.59 0.74 0.44 137.48 114.15 19 0.01
Comparable Group Average 0.18 0.60 0.61 0.78 157.08 135.50 167 0.35
Comparable Group
- ----------------
CMSV Commty. Svgs, MHC of FL (48.5) 0.08 0.41 0.55 0.62 113.79 90.57 108 0.10
FFFL Fidelity FSB, MHC of FL (47.7) 0.05 0.40 0.47 0.28 58.82 51.95 19 0.01
SKBO First Carnegie,MHC of PA(45.0)(1) 0.01 NA NA 0.83 NA NA 1 -0.51
FFSX First FS&LA. MHC of IA (46.1) 0.00 0.22 0.20 0.53 260.79 185.09 17 0.02
GDVS Greater DV SB,MHC of PA (19.9) 1.37 1.82 0.29 1.00 351.50 33.64 1,444 3.82
HARS Harris SB, MHC of PA (24.3) 0.36 0.65 0.66 0.96 145.38 63.38 41 0.02
JXSB Jcksnville SB,MHC of IL (45.6) 0.07 0.79 0.91 0.56 61.70 56.34 100 0.31
LFED Leeds FSB, MHC of MD (36.3) 0.00 0.06 0.09 0.30 315.29 315.29 0 0.00
NWSB Northwest SB, MHC of PA (30.7) 0.22 0.77 0.72 0.87 120.38 85.90 443 0.11
PBHC OswegoCity SB MHC of NY (46.1) 0.29 0.91 1.03 0.67 64.65 43.96 317 1.11
PBCT Peoples Bank, MHC of CT (40.1) 0.12 0.76 1.07 1.66 154.97 146.25 NM NM
PHSB Ppls Home SB, MHC of PA (45.0) 0.01 0.45 0.80 1.37 172.12 148.08 156 0.62
PULB Pulaski SB, MHC of MO (29.8) 0.00 NA NA 0.42 NA NA 0 -0.01
PLSK Pulaski SB, MHC of NJ (46.0) 0.00 0.65 1.14 0.95 83.38 83.38 0 -0.07
SBFL SB Fngr Lakes MHC of NY (33.1) 0.08 0.50 0.90 1.10 121.93 103.35 15 0.06
WAYN Wayne S&L Co. MHC of OH (47.8) 0.36 0.58 0.26 0.46 174.36 65.29 7 0.01
WCFB Wbstr Cty FSB MHC of IA (45.2) 0.06 0.07 0.02 0.72 NA 560.00 1 -0.01
</TABLE>
(1) Financial information is for the quarter ending June 30, 1997.
Source: Audited and unaudited financial statements, corporate reports and
offering circulars, and RP Financial, LC. calculations. The
information provided in this table has been obtained from sources
we believe are reliable, but we cannot guarantee the accuracy or
completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP Financial, LC.
Page 4.1
IV. VALUATION ANALYSIS
Introduction
- ------------
This chapter presents the valuation analysis and methodology used to
determine BCSB's estimated pro forma market value for purposes of pricing the
minority stock. The valuation incorporates the appraisal methodology promulgated
by the OTS and adopted in practice by the FDIC for standard conversions and
mutual holding company offerings, particularly regarding selection of the Peer
Group, fundamental analysis on both the Bank and the Peer Group, and
determination of the Bank's pro forma market value utilizing the market value
approach.
Appraisal Guidelines
- --------------------
The OTS written appraisal guidelines, originally released in October 1983
and updated in late-1994, specify the market value methodology for estimating
the pro forma market value of an institution. The FDIC, state banking agencies
and other Federal agencies have endorsed the OTS appraisal guidelines as the
appropriate guidelines involving mutual-to-stock conversions. As previously
noted, the appraisal guidelines for MHC offerings is somewhat different,
particularly in the Peer Group selection process. Specifically, the regulatory
agencies have indicated that the Peer Group should be based on the pro forma
fully-converted pricing characteristics of publicly-traded MHCs, rather than on
already fully-converted publicly-traded stock thrifts, given the unique
differences in stock pricing of MHCs and fully-converted stock thrifts. Pursuant
to this methodology: (1) a peer group of comparable publicly-traded institutions
is selected; (2) a financial and operational comparison of the subject company
to the peer group is conducted to discern key differences; and (3) the pro forma
market value of the subject company is determined based on the market pricing of
the peer group, subject to certain valuation adjustments based on key
differences.
RP Financial Approach to the Valuation
- --------------------------------------
The valuation analysis herein complies with such regulatory approval
guidelines. Accordingly, the valuation incorporates a detailed analysis based on
the Peer Group, discussed in Chapter III, which constitutes "fundamental
analysis" techniques. The valuation incorporates a "technical analysis" of
recently completed stock offerings of comparable MHCs, including the aftermarket
trading of such offerings. In this regard, there has been limited new MHC
activity, so this analysis is rather limited. It should be noted that these
valuation analyses, based on either the Peer Group or the recent MHC
transactions, cannot possibly fully account for all the market forces which
impact trading activity and pricing characteristics of a stock on a given day.
<PAGE>
RP Financial, LC.
Page 4.2
The pro forma market value determined herein is a preliminary value for the
Bank's to-be-issued stock. Throughout the MHC process, RP Financial will: (1)
review changes in the Bank's operations and financial condition; (2) monitor the
Bank's operations and financial condition relative to the Peer Group to identify
any fundamental changes; (3) monitor the external factors affecting value
including, but not limited to, local and national economic conditions, interest
rates, and the stock market environment, including the market for thrift stocks;
and (4) monitor pending MHC offerings, and to a lesser extent, conversion
offerings, both regionally and nationally. If material changes should occur
prior to closing the offering, RP Financial will evaluate, in conjunction with
the Bank, if updated valuation reports should be prepared reflecting such
changes and their related impact on value, if any. RP Financial will also
prepare a final valuation update at the closing of the offering to determine if
the prepared valuation analysis and resulting range of value continues to be
appropriate.
The appraised value determined herein is based on the current market and
operating environment for the Bank and for all thrifts. Subsequent changes in
the local and national economy, the legislative and regulatory environment, the
stock market, interest rates, and other external forces (such as natural
disasters or major world events), which may occur from time to time (often with
great unpredictability) may materially impact the market value of all thrift
stocks, including BCSB, the market value of the stocks of public MHC
institutions, or BCSB's value alone. To the extent a change in factors impacting
the Bank's value can be reasonably anticipated and/or quantified, RP Financial
has incorporated the estimated impact into its analysis.
Valuation Analysis
- ------------------
A fundamental analysis discussing similarities and differences relative to
the Peer Group was presented in Chapter III. The following sections summarize
the key differences between the Bank and the Peer Group and how those
differences affect the pro forma valuation. Emphasis is placed on the specific
strengths and weaknesses of the Bank relative to the Peer Group in such key
areas as financial condition, profitability, growth and viability of earnings,
asset growth, primary market area, dividends, liquidity of the shares, marketing
of the issue, management, and the effect of government regulations and/or
regulatory reform. We have also considered the market for thrift stocks, in
particular new issues, to assess the impact on value of BCSB coming to market at
this time.
1. Financial Condition
-------------------
The financial condition of an institution is an important determinant in
pro forma market value, because investors typically look to such factors as
liquidity, capital, asset composition and quality, and funding
<PAGE>
RP Financial, LC.
Page 4.3
sources in assessing investment attractiveness. The similarities and differences
in the Bank's and the Peer Group's financial strength are noted as follows:
o Overall A/L Composition. Loans funded by retail deposits were the
-----------------------
primary components of both BCSB's and the Peer Group's balance sheets.
BCSB's and the Peer Group's interest-earning asset compositions
exhibited a similar concentration of loans, with the Bank's loan
portfolio composition reflecting a greater degree of diversification
into higher risk and higher yielding types of loans. BCSB's greater
degree of lending diversification also translated into a higher risk
weighted assets-to-asset ratio than maintained by the Peer Group.
BCSB's funding composition reflected a higher concentration of
deposits and a lower concentration of borrowings than the comparative
Peer Group ratios, indicating greater future borrowing capacity for
the Bank. Overall, as a percent of assets, the Bank maintained a
higher level of interest-earning assets and a higher level of
interest-bearing liabilities, which resulted in a slightly more
favorable IEA/IBL ratio for the Peer Group. However the infusion of
stock proceeds will serve to address the Bank's lower IEA/IBL ratio.
Credit quality measures indicated a slightly greater degree of credit
risk exposure for the Bank, while BCSB and the Peer Group exhibited
fairly comparable interest rate risk exposure measures. For valuation
purposes, RP Financial concluded no adjustment was warranted for the
Bank's overall asset/liability composition.
o Credit Quality. Both the Bank's and the Peer Group's credit quality
--------------
measures were indicative of fairly limited credit risk exposure. The
Peer Group maintained a lower non-performing assets-to-assets ratio
than the Bank and higher loss reserves as a percent of non-performing
assets, non-performing loans and total loans than the comparative
ratios for BCSB. The Bank's greater diversification into higher risk
types of lending translated into a higher risk weighted assets-to-
assets ratio than maintained by the Peer Group. Overall, the Peer
Group's measures tended to reflect more limited credit exposure than
maintained by the Bank. Therefore, RP Financial concluded that a
slight downward adjustment was warranted for the Bank's credit
quality.
o Balance Sheet Liquidity. The Bank operated with a comparable balance
-----------------------
of cash and investment securities relative to the Peer Group (20.2
percent of assets versus 22.0 percent for the Peer Group). BCSB's
future borrowing capacity was considered to be slightly greater than
the Peer Group's, in light of the higher level of borrowings
maintained by the Peer Group; however, both the Bank and the Peer
Group were considered to have ample borrowing capacities. Overall,
balance sheet liquidity for the Bank and the Peer Group were not
viewed as being materially different and, thus, RP Financial concluded
that no adjustment was warranted for the Bank's balance sheet
liquidity.
o Funding Liabilities. Retail deposits served as the primary interest-
-------------------
bearing source of funds for the Bank and the Peer Group, with
borrowings being utilized to a greater degree by the Peer Group. The
Peer Group's greater utilization of borrowings was reflected in its
cost of funds, which exceeded the Bank's cost of funds. Overall, the
Bank currently maintains a higher level of interest-bearing
liabilities than the Peer Group (89.2 percent of assets versus 86.7
percent for the Peer Group), which was attributable to BCSB's lower
capital position. Following the stock offering, the increase in BCSB's
capital position will address the higher level of interest-bearing
liabilities currently maintained by the Bank. Accordingly, primarily
as the result of the Peer Group's greater utilization of borrowings,
which tend to be a higher costing source of funds than retail
deposits, RP Financial concluded that a slight upward adjustment was
warranted for the Bank's funding composition.
<PAGE>
RP Financial, LC.
Page 4.4
o Capital. The Bank operates with a lower pre-conversion capital ratio
-------
than the Peer Group, 9.5 percent and 12.0 percent of assets,
respectively. This disadvantage will be addressed by the stock
offering, which will provide BCSB with a pro forma capital position
that can be expected to be comparable to or higher than the Peer
Group's equity-to-assets ratio. Accordingly, RP Financial concluded
that no adjustment was warranted for the Bank's capital position.
On balance, the characteristics of the Bank's and the Peer Group's
financial conditions were not materially different in most respects for
valuation purposes. Accordingly, we concluded that no valuation adjustment was
warranted for the Bank's financial strength.
2. Profitability, Growth and Viability of Earnings
-----------------------------------------------
Earnings are a key factor in determining pro forma market value, as the
level and risk characteristics of an institution's earnings stream and the
prospects and ability to generate future earnings heavily influence the multiple
the investment community will pay for earnings. The major factors considered in
the valuation are described below.
o Reported Earnings. The Bank recorded lower earnings on a ROAA basis
-----------------
(0.76 percent of average assets versus 0.88 percent for the Peer
Group). The Peer Group's more favorable reported earnings resulted
from maintenance of a lower level of operating expenses and larger
earnings contributions realized from non-interest operating income and
net gains realized on the sale of loans and investments. A higher net
interest margin represented an earnings advantage for the Bank.
Reinvestment of stock proceeds into interest-earning assets will serve
to increase the Bank's earnings, with the benefit of reinvesting
proceeds expected to be somewhat offset by higher operating expenses
associated with operating as a stock institution and the
implementation of the stock benefit plans. Overall, no adjustment to
the Bank's valuation was warranted for this factor.
o Core Earnings. Both the Bank's and the Peer Group's earnings were
-------------
derived largely from recurring sources, including net interest income,
operating expenses, and non-interest operating income. In these
measures, the Bank operated with a higher net interest margin, a
higher operating expense ratio and a lower level of non-interest
operating income. The Bank's higher net interest margin and higher
level of operating expenses translated into a slightly higher expense
coverage ratio (1.46x versus 1.39x for the Peer Group). Comparatively,
the Peer Group's higher level of non-interest operating income
provided the Peer Group with a slightly more favorable efficiency
ratio (63.0 percent versus 64.0 percent for the Bank). Loss provisions
had a comparable impact on the Bank's and the Peer Group's earnings,
even though the Peer Group exhibited comparatively higher reserve
coverage ratios and a lower risk weighted assets ratio relative to the
Bank's measures. Overall, these measures, as well as the expected
earnings benefits the Bank should realized from the redeployment of
stock proceeds into interest-earning assets, which will somewhat be
negated by expenses associated with stock benefit plans and operating
as a stock institution, indicate that BCSB's core earnings were
comparable to the Peer Group's and no adjustment was warranted for the
Bank's core earnings.
o Interest Rate Risk. Quarterly changes in the Bank's and the Peer
------------------
Group's net interest income to average assets ratios indicated a
similar degree of interest rate risk exposure in their
<PAGE>
RP Financial, LC.
Page 4.5
respective net interest margins, with both the Bank's and the Peer
Group's net interest margins exhibiting fairly limited quarterly
fluctuations during the twelve month period ending September 30, 1997.
Other measures of interest rate risk, such as capital ratios, IEA/IBL
ratios, and the level of non-interest earning assets-to-total assets
were generally more favorable for the Peer Group, although the Bank
maintained a lower level of non-interest earning assets as compared to
the Peer Group's ratio. On a pro forma basis, the infusion of stock
proceeds can be expected to address the Bank's lower capital position
and lower IEA/IBL ratio, as well as enhance the stability of the
Bank's net interest margin through the reinvestment of stock proceeds
into interest-earning assets. Accordingly, RP Financial concluded that
the interest rate risk associated with the Bank's earnings was
comparable to the Peer Group's, and no adjustment was warranted for
valuation purposes.
o Credit Risk. Loan loss provisions were a similar factor in BCSB's and
-----------
the Peer Group's earnings. In terms of future exposure to credit
quality related losses, both the Bank's and the Peer Group's operating
strategies and credit quality measures indicated relatively limited
credit risk exposure. Lending diversification into higher risk types
of loans was more notable for the Bank, which translated into a higher
risk weighted assets-to-assets ratio for BCSB. The Peer Group's credit
quality measures tended to be more favorable than BCSB's, based on the
Peer Group's lower non-performing assets/assets ratio and higher
reserve coverage ratios with respect to loans and non-performing
assets. Overall, RP Financial concluded that the credit risk exposure
associated with the Peer Group's earnings was less than BCSB's and a
slight downward adjustment was warranted for valuation purposes.
o Earnings Growth Potential. Several factors were considered in
-------------------------
assessing earnings growth potential. First, the Bank's recent
historical growth has been less than the Peer Group's, as BCSB
recorded asset shrinkage during the most recent twelve month period.
Second, the infusion of stock proceeds will increase the Bank's
earnings growth potential with respect to leverage capacity and
providing the Bank with additional liquidity for purposes of funding
loan growth. Finally, the Peer Group companies on average are larger
than the Bank, which provides more flexibility in diversifying
operations. Overall, the Bank's earnings growth potential appears to
be less favorable than that of the Peer Group's, and, thus, we
concluded that a slight downward adjustment is warranted for this
factor.
o Return on Equity. Following the infusion of stock proceeds, the Bank's
----------------
pro forma capital position will be comparable to or higher than the
Peer Group's equity-to-assets ratio. Likewise, as the result of the
increase in the Bank's capital position, BCSB's pro forma ROE is
expected to be comparable to the Peer Group's ROE. Therefore, RP
Financial concluded that no adjustment was warranted for the Bank's
ROE.
Overall, credit risk exposure and earnings growth potential were the most
noteworthy differences between the Bank's and the Peer Group's earnings, with
both factors representing negative valuation considerations for the Bank.
Accordingly, RP Financial concluded that a slight downward valuation adjustment
was warranted for profitability, growth and viability of the Bank's earnings.
3. Asset Growth
------------
BCSB exhibited a significantly lower asset growth rate than the Peer Group,
during the period covered in our comparative analysis (negative 2.8 percent
versus positive 8.2 percent for the Peer Group). While the
<PAGE>
RP Financial, LC.
Page 4.6
Bank's pro forma capital position will provide for comparable or greater
capacity to leverage relative to the Peer Group's equity-to-assets ratio, it is
not viewed as a material advantage for the Bank. The Bank's greater leverage
capacity is viewed to be negated by the more limited growth recorded by BCSB
historically, despite maintaining more than adequate capital for leveraging
purposes. Relative to the Peer Group, the Bank's asset growth potential is also
viewed as being constrained by its smaller asset size and more limited
resources. On balance, we believe a slight downward adjustment is warranted for
this factor.
4. Primary Market Area
-------------------
The general condition of a financial institution's market area has an
impact on value, as future success is in part dependent upon opportunities for
profitable activities in the local market area. Operating in the Baltimore
metropolitan area, the Bank faces significant competition for loans and deposits
from larger financial institutions, who provide a broader array of services and
have significantly larger branch networks than maintained by the Bank. Like many
large metropolitan areas, the Baltimore metropolitan area is characterized by
mixed demographic trends. Baltimore and Harford Counties, the two jurisdictions
where the Bank's branches are maintained, have exhibited positive demographic
growth trends during the 1990s, versus declines in population and households
recorded by Baltimore City. Overall, the growth potential associated with the
Bank's market area is viewed as being relatively favorable, with BCSB's
relatively small size being viewed as somewhat of a disadvantage in terms of
competing for market share.
In general, the Peer Group companies operate in less populous markets than
served by the Bank. Population growth rates in the markets served by the Peer
Group companies were on average slightly less favorable than the primary market
area served by the Bank. On average, the Peer Group companies maintained a
larger deposit market share than the Bank, indicating a competitive advantage
for the Peer Group companies in terms of the degree of competition faced for
deposits. Summary demographic and deposit market share data for the Bank and the
Peer Group companies is provided in Table 4.1. Overall, the faster growing
market served by BCSB is somewhat offset by the competitive advantage maintained
by the Peer Group companies in terms of deposit market share. Therefore, we
concluded that no adjustment is warranted for the Bank's primary market area.
5. Dividends
---------
The Holding Company had indicated its intentions to pay an annual cash
dividend of $0.50 per share, which would provide for a yield of 5.0 percent
based on the initial offering price of $10.00 per share, and a pro forma payout
ratio of approximately 41 percent. However, future declarations of dividends by
the Board of Directors will depend upon a number of factors, including
investment opportunities, growth objectives,
<PAGE>
Table 4.1
Peer Group Market Area Comparative Analysis
<TABLE>
<CAPTION>
Population Proj.
-------------------- Pop. 1990-97 1997-2002
Institution County 1990 1997 2002 % Change % Change Median Age
- ----------- ------ ---- ---- ---- -------- -------- ----------
(000) (000)
<S> <C> <C> <C> <C> <C> <C> <C>
Community Savings, NHC of FL Palm Beach 864 1,012 1,115 17.2% 10.1% 40.9
Fidelity FSB, MHC of FL Palm Beach 864 1,012 1,115 17.2% 10.1% 40.9
First Carnegie, MHC of PA Allegheny 1,336 1,286 1,252 -3.8% -2.6% 38.8
First FS&LA, MHC of IA Woodbury 99 103 106 4.4% 3.2% 34.3
Greater Del. Valley, MHC of PA Delaware 548 547 547 -0.1% -0.1% 36.6
Harris SB, MHC of PA Dauphin 238 248 255 4.2% 2.8% 37.4
Jacksonville SB, MHC of IL Morgan 36 36 36 -0.4% -0.3% 36.1
Leeds FSB, MHC of MD Baltimore 692 721 741 4.2% 2.8% 37.0
Northwest SB, MHC of PA Warren 45 44 44 -1.2% -0.9% 38.3
Oswego City SB, MHC of NY Oswego 122 126 128 3.1% 2.1% 32.1
Peoples Bank, MHC of CT Fairfield 828 836 842 1.1% 0.7% 37.4
Peoples Home SB, MHC of PA Beaver 186 187 187 0.3% 0.2% 39.2
Pulaski SB, MHC of MO St Louis 994 1,004 1,012 1.1% 0.8% 36.7
Pulaski SB, MHC of NJ Union 494 498 501 0.9% 0.6% 37.2
SB of Finger Lakes, MHC of NY Ontario 95 100 104 5.3% 3.5% 35.7
Wayne S&L Co, MHC of OH Wayne 101 110 115 8.2% 5.2% 34.1
Webster City FSB, MHC of IA Hamilton 16 16 16 0.0% 0.0% 39.1
--- --- --- ---- ---- -----
Averages: 445 464 477 3.6% 2.2% 37.2
Medians: 238 248 255 1.1% 0.8% 37.2
Baltimore County SB of MD Baltimore 692 721 741 4.2% 2.8% 37.0
<CAPTION>
Per Capita Income
----------------------------- Deposit
% State Market
Institution County Amount Average Share(1)
- ----------- ------ ------ ------- --------
<S> <C> <C> <C> <C>
Community Savings, NHC of FL Palm Beach 21,754 126.2% 1.9%
Fidelity FSB, MHC of FL Palm Beach 21,754 126.2% 3.2%
First Carnegie, MHC of PA Allegheny 18,708 103.9% 0.2%
First FS&LA, MHC of IA Woodbury 16,764 102.1% 15.3%
Greater Del. Valley, MHC of PA Delaware 22,326 123.9% 2.7%
Harris SB, MHC of PA Dauphin 18,993 105.4% 7.2%
Jacksonville SB, MHC of IL Morgan 16,672 84.5% 19.2%
Leeds FSB, MHC of MD Baltimore 21,680 102.1% 1.5%
Northwest SB, MHC of PA Warren 15,543 86.3% 28.5%
Oswego City SB, MHC of NY Oswego 12,294 66.4% 19.3%
Peoples Bank, MHC of CT Fairfield 27,087 129.1% 23.3%
Peoples Home SB, MHC of PA Beaver 13,741 76.3% 7.8%
Pulaski SB, MHC of MO St Louis 24,656 139.6% 0.6%
Pulaski SB, MHC of NJ Union 24,441 101.0% 0.4%
SB of Finger Lakes, MHC of NY Ontario 15,101 81.6% 13.9%
Wayne S&L Co, MHC of OH Wayne 16,017 92.9% 10.9%
Webster City FSB, MHC of IA Hamilton 16,204 98.7% 25.7%
------ ----- -----
Averages: 19,043 102.7% 10.7%
Medians: 18,708 102.1% 7.8%
Baltimore County SB of MD Baltimore 21,680 102.1% 2.0%
</TABLE>
(1) Total institution deposits in headquarters county as percent of total county
deposits.
Sources: CACI, Inc, SNL Securities
<PAGE>
RP Financial, LC.
Page 4.8
financial condition, profitability, tax considerations, minimum capital
requirements, regulatory limitations, stock market characteristics and general
economic conditions. As publicly-traded thrifts' capital levels and
profitability have improved and as weak institutions have been resolved, the
proportion of institutions with cash dividend policies has increased. Sixteen of
the 17 of the institutions in the Peer Group pay regular cash dividends, with
implied dividend yields ranging from 0.97 percent to 4.00 percent. Peoples Home
SB of PA is the one Peer Group company which currently does not reflect payment
of a cash dividend, which may be due in part to the recency of its stock
offering. The average dividend yield on the stocks of the Peer Group
institutions was 1.86 percent as of January 2, 1998, representing an average
earnings payout ratio of 14.77 percent (see Table 4.6). As of January 2, 1998,
approximately 85 percent of all publicly-traded SAIF-insured thrifts (non-MHC
institutions) have adopted cash dividend policies (see Exhibit IV-1) exhibiting
an average yield of 1.76 percent and an average payout ratio of 35.58 percent.
The dividend paying thrifts generally maintain higher than average profitability
ratios, facilitating their ability to pay cash dividends, which supports a
market pricing premium on average relative to non-dividend paying thrifts.
Our valuation adjustment for dividends for BCSB as an MHC also considered
the OTS policy with regard to waiver of dividends by the MHC. Under current OTS
policy, any waiver of dividends by the MHC may require the minority
stockholders' ownership interest to be reduced in a "second step" conversion to
reflect the cumulative waived dividend account. Currently, those institutions in
the Peer Group who are subject to OTS oversight and formed their MHCs prior to
the current dividend waiver policy that became effective February 1, 1995 are
not subject to the dividend waiver issue in a second step conversion (i.e. they
are "grandfathered"), except in the case of special dividends or regular
dividends that are deemed "excessive" and were waived by the MHC. Seven of the
Peer Group companies are thus immune to the dividend waiver issue. The practice
of the majority of public MHC institutions in the Peer Group has been for the
MHC to waive its right to the dividend. BCSB has indicated that, in the case of
Baltimore County Savings Bank, M.H.C., the MHC also intends to waive its right
to the dividend. BCSB will be subject to the current OTS policy with regard to
dividend waivers, while slightly less than half of the Peer Group members are
not currently subject to such a policy (due to "grandfathering").
The Holding Company's indicated dividend yield is higher than the Peer
Group's average dividend yield; however, based on the Peer Group's earnings and
capital position, the Peer Group has the capacity to pay dividends that is
comparable to the Bank's dividend yield. In particular, the Bank's payout ratio
of 41.30 percent was well above the Peer Group's payout ratio of 14.77 percent.
Accordingly, we concluded that a slight downward adjustment was warranted for
purposes of dividends relative to the Peer Group because of the dividend waiver
issue.
<PAGE>
RP Financial, LC.
Page 4.9
6. Liquidity of the Shares
-----------------------
The Peer Group is by definition composed of companies that are traded in
the public markets, and all of the Peer Group members trade on the NASDAQ
system. Typically, the number of shares outstanding and market capitalization
provides an indication of how much liquidity there will be in a particular
stock. The market capitalization of the Peer Group companies, based on the
shares issued and outstanding to public shareholders (i.e., excluding the
majority ownership interest owned by the respective MHCs) ranged from $16.5
million to $917.0 million as of January 2, 1998, with average and median market
values of $104.1 million and $25.6 million, respectively. The public shares
issued and outstanding to the public shareholders of the Peer Group members
ranged from approximately 580,000 to 24.5 million, with average and median
shares outstanding of approximately 3.8 million and 1.0 million, respectively.
The Bank's minority stock offering will result in shares outstanding and a
market capitalization that are above and below the comparative Peer Group
medians. Like the stocks of the Per Group companies, it is anticipated that the
Holding Company's stock will be listed on NASDAQ. Accordingly, in comparison to
the Peer Group companies, we do not anticipate that the liquidity
characteristics of the Holding Company's stock to be materially different and,
thus, no adjustment was required for this factor.
7. Marketing of the Issue
----------------------
Three separate markets exist for thrift stocks: (1) the after-market for
public companies, both fully-converted stock companies and MHCs, in which
trading activity is regular and investment decisions are made based upon
financial condition, earnings, capital, ROE, dividends and future prospects; (2)
the new issue market in which converting thrifts are evaluated on the basis of
the same factors but on a pro forma basis without the benefit of prior
operations as a publicly-held company and stock trading history; and (3) the
thrift acquisition market. All three of these markets were considered in the
valuation of the Bank's to-be-issued stock.
A. The Public Market
-----------------
The value of publicly-traded thrift stocks is easily measurable, and
is tracked by most investment houses and related organizations. Exhibit IV-1
provides pricing and financial data on all publicly-traded thrifts. In general,
thrift stock values react to market stimuli such as interest rates, inflation,
perceived industry health, projected rates of economic growth, regulatory issues
and stock market conditions in general. Exhibit IV-2 displays historical stock
market trends for various indices and includes historical stock price index
values for thrifts and commercial banks. Exhibit IV-3 displays historical stock
price indices for thrifts only.
<PAGE>
RP Financial, LC.
Page 4.10
In terms of assessing general stock market conditions, the stock
market has generally trended higher over the past year. The stock market moved
higher during the end of 1996 and the first three weeks of 1997, with the Dow
Jones Industrial Average ("DJIA") establishing several new highs in the process.
Factors contributing to the rally in the stock market included the Federal
Reserve's decision to leave rates unchanged at its December meeting, economic
data which reflected moderate growth and low inflation, and favorable fourth
quarter earnings particularly in the technology sector. However, a disappointing
fourth quarter earnings report by IBM ignited a sell-off in the stock market in
late-January. Higher interest rates extended the downturn, as the 30-year bond
approached 7.0 percent at the end of January. A high degree of market volatility
was evident throughout most of February 1997, reflecting concern over
speculative excesses in the stock market; particularly, as the DJIA closed above
the 7000 mark in mid-February. Profit taking, growing expectations of a
correction and comments by the Federal Reserve Chairman pulled the market lower
in late-February.
Following a downturn in late-February 1997, the market recovered in
early-March. Despite increasing expectations of an interest rate hike by the
Federal Reserve, the DJIA closed to a new record high of 7085.16 on March 11,
1997. However, an upward revision to the January retail sales figure triggered a
one day sell-off in stocks and bonds on March 13, 1997, as the stronger than
expected growth heightened expectations of an interest rate increase by the
Federal Reserve. Unease over higher interest rates, profitability concerns in
the technology sector and litigation concerns for tobacco stocks pulled the
stock market lower in mid-March. As expected, the Federal Reserve increased the
rate on short-term funds by 0.25 percent at its late-March meeting. Following
the rate increase, the sell-off in the stock market became more severe amid
further signs of an accelerating economy. Stocks bottomed-out on news of a
stronger than expected rise in core producer prices for March, with the DJIA
closing at 6391.69 on April 11, 1997, or 9.8 percent below the all-time high
recorded a month ago.
Some favorable first quarter earnings reports and news of a possible
settlement by tobacco companies to resolve the threat of liability lawsuits
provided for a modest recovery in the stock market in mid-April 1997. In late-
April, the release of economic data which indicated mild inflationary pressures
furthered the rally in bond and stock prices. News of a budget agreement and a
favorable ruling for tobacco companies sent the stock market soaring to record
highs in early-May. Mixed economic data and the Federal Reserve's decision to
leave its target for the federal funds rate unchanged at its May meeting
sustained a positive trend in the stock market through the end of May. Profit
worries caused a sell-off in technology stocks in early-June, while declining
interest rates served to stabilize the broader market. Technology stocks rallied
the stock market to new highs in mid-July, as a number of technology companies
posted favorable second quarter earnings. Favorable inflation data, including
second quarter GDP growth slowing to an annual rate of 2.2
<PAGE>
RP Financial, LC.
Page 4.11
percent, versus 4.9 percent in the first quarter, and comments by the Federal
Reserve Chairman which indicated that an increase in interest rates was not
imminent, spurred bond and stock prices strongly higher during the second half
of July.
A decline in the July 1997 unemployment rate reversed the positive
bond and stock market trends in early-August, as inflation concerns became more
prominent. A declining dollar against the yen and mark sharpened the decline in
bond prices, with the 30-year U.S. Treasury bond yield increasing from 6.32
percent at the end of July to 6.66 percent as of August 8, 1997. The sell-off in
bonds pulled stock prices lower as well. While bond prices firmed in mid-August,
notable volatility was evident in the stock market. The DJIA moved at least 100
points for five consecutive days from August 18, 1997 through August 21, 1997,
which set a record for volatility. Profit worries among some of the large blue
chip companies and mixed inflation readings were factors contributing to the
roller-coaster performance of the stock market. Despite strengthening bond
prices, stocks traded lower through the end of August. Bond prices moved higher
on inflation data which showed that prices stayed low during the second quarter,
even though second quarter GDP growth was revised upward to an annual rate of
3.6 percent compared to an original estimate of 2.2 percent.
Volatility returned to the stock market in early-September, with the
DJIA posting a record breaking point increase of 257.36 on September 2, 1997.
The rally was sparked by economic data that indicated manufacturing growth
slowed in August, thereby easing investors' inflation worries. However, the
rally was not sustained, as the DJIA pulled back following the one day rally.
The pull back was largely attributed to profit worries, which more than offset
favorable inflation news indicated by a slight increase in the national
unemployment rate for August (4.9 percent in August versus 4.8 percent in July).
Stocks fluctuated in a narrow trading range in mid-September, in anticipation of
third quarter earnings and August economic data. The low inflation reading
indicated by the August consumer price index sent stock and bond prices sharply
higher on September 16, 1997, with the DJIA posting a 175 point increase and the
yield on the 30-year U.S. Treasury bond posting its second largest decline in
the 1990s. Uncertainty over third quarter earnings provided for a mixed stock
market performance towards the end of September, while generally favorable
inflation readings pushed interest rates to their lowest level in two years. The
release of September employment data on October 3, 1997 caused bond and stock
prices to soar in early trading activity, as the September unemployment rate was
unchanged at 4.9 percent and fewer jobs than expected were added to the economy
during September. However, most of the initial gains were erased by news of
rising tensions between Iraq and Iran.
Congressional testimony by the Federal Reserve Chairman, in which he
indicated that it would be difficult to maintain the current balance between
tight labor markets and low inflation, caused stock and bond prices to skid in
mid-October 1997. Disappointing third quarter earnings in the technology sector
<PAGE>
RP Financial, LC.
Page 4.12
sharpened the sell-off in the stock market, with the Dow Jones Industrial
Average ("DJIA") posting consecutive losses of more than 1.0 percent on October
16 and 17.
Stocks bounced back in early-week trading the following week,
reflecting positive third quarter earnings surprises posted by some of the blue
chip stocks. However, the recovery was abbreviated by global selling pressure,
which was led by the decline in the Hong Kong stock market, as the DJIA posted a
two-day loss approximating 320 points on October 23 and 24, 1997. The sell-off
in the world financial markets turned into a rout on the following Monday, with
a 5.8 percent decline in the Hong Kong stock market fueling the largest ever
point decline in the DJIA. On October 24, the DJIA declined 554 points or 7.2
percent. While the selling was broad based, technology stocks sensitive to Asian
demand experienced some of the sharpest declines. The turmoil in the stock
market provided for a sharp rally in U.S. Treasury bonds, reflecting a flight to
quality by skittish investors. The stock market recovered strongly the day after
the record breaking point decline, as the DJIA surged a record breaking 337
points on October 28. Comparatively, bond prices declined sharply on October 28,
as investors pulled out of the Treasury market to reinvest into the stock
market.
Market conditions remained uneven through the week ended October 31,
1997, which was followed by a soaring stock market on November 3, 1997. The DJIA
posted a 232 point increase on November 3, which was supported by a resurgence
in the Hong Kong market. Following the one day rally, volatility returned to the
stock market through mid-November. The market's uneven performance was largely
attributable to the ongoing influence of the international markets, particularly
the Asian and Latin American markets. In mid-November, the yield on the 30-year
bellwether Treasury issue approached 6.0 percent, its lowest level since
February 1996. Advances in the bond market provided for a generally positive
stock market environment in the second half of November, with bank and
technology issues being among the strongest performers. Renewed confidence that
the Asian governments would control the region's financial problems furthered
the stock market rally in early-December. Despite a sell-off in the bond market
caused by the November unemployment rate dropping to its lowest level since
October 1973, the DJIA showed surprising strength and closed almost 99 points
higher on December 5, 1997. Stocks declined the following week, as earnings
concerns, particularly in the technology sector, overshadowed a rally in the
bond market. Positive inflation news and world market turmoil caused investors
to dump stocks in favor of bonds, which served to push the yield on the
bellwether 30-year Treasury bond below 6.0 percent in mid-December. Bond prices
were also boosted by the Federal Reserve's decision to leave interest rates
unchanged at its mid-December meeting, which also provided for a modest recovery
in the stock market. In late-December, investors dumped stocks on earnings
concerns, while a flight to quality pushed bond prices higher. The stock market
surged higher at year end, as worries about South Korea's financial crisis
eased. On January 2, 1998, the DJIA closed at 7965.04, an increase of 21.7
percent from year a year ago.
<PAGE>
RP Financial, LC.
Page 4.13
Similar to the overall stock market, the market for thrift stocks has
generally been favorable during the past twelve months. Bullish sentiment for
thrift stocks heightened at the beginning of 1997, as investors reacted
positively to favorable inflation data and generally strong fourth quarter
earnings. The rally in thrift issues was driven by the large California
institutions, reflecting expectations that there would be further consolidation
among the large California thrifts. The acquisition speculation for the large
California thrifts became a reality in mid-February, as H.F. Ahmanson's
unsolicited offer to acquire Great Western Financial sent the SNL Index soaring
in mid-February.
Stable interest rates and acquisition activity supported higher thrift
prices in early-March 1997; however, like the stock market in general, the peak
in thrift prices was followed by a sharp sell-off in mid-March. In fact,
interest rate sensitive issues were among the sectors hardest hit by the revised
January retail sales report, as the 30-year bond approached 7.0 percent.
Interest rate sensitive issues continued to experience selling pressure in late-
March and early-April, as signs of a strengthening economy pushed interest rates
higher. The sell-off in thrift stocks culminated on April 11, 1997, as interest
rates increased sharply on news of the higher than expected rise in core
producer prices for March. Thrift prices edged modestly higher in mid-April,
reflecting generally favorable first quarter earnings and a slight decline in
interest rates following the release of economic data which showed that
inflation was low. Favorable inflation data and the budget agreement provided
for a more substantial rally in thrift stocks in late-April and early-May, as
interest rate sensitive issues were bolstered by declining interest rates.
Thrift stocks continued to trend higher through June and early-July
1997, based on the improved interest rate outlook and an overall positive
outlook for the economy. Generally favorable second quarter earnings and the 30-
year U.S. Treasury bond yield declining below 6.50 percent served to further
boost thrift prices in mid-July, with the declining interest rate environment
serving to sustain the rally in thrift prices through the end of July. Thrift
prices generally declined during the first half of August, due to higher
interest rates and profit taking. From July 31, 1997 to August 15, 1997, the SNL
Index declined by 3.7 percent. Thrift prices recovered modestly during the
second half of August, as the Federal Reserve left short-term interest rates
unchanged at its August meeting. Thrift stocks participated in the one day stock
market rally on September 2, 1997, as evidenced by a 1.95 percent increase in
the SNL Index. News of NationsBank's proposed acquisition of Barnett Banks for
more than four times its book value appears to have further contributed to the
one day run-up in thrift prices. In contrast to the overall stock market, thrift
prices continued to move higher following the one day rally in the DJIA. Stable
interest rates and acquisition news sustained the positive market for thrift
issues. The decline in interest rates following the release of the August
consumer price index in mid-September served to further the rally in thrift
prices. During late-September and early-October, interest rate
<PAGE>
RP Financial, LC.
Page 4.14
sensitive issues in general benefited from the declining interest rate
environment and expectations of strong third quarter earnings.
The upward trend in thrift prices stalled in mid-October 1997, as
interest rates moved higher following warnings by the Federal Reserve Chairman
of inflation creeping back into the economy due to the tight labor markets.
Thrift stocks gyrated in conjunction with the overall market in late-October,
with the SNL index declining by 5.2 percent on October 27 and increasing by 2.4
percent on October 28. Thrift prices further recovered on October 29, which was
supported by a rally in the bond market. Aided by the favorable interest rate
climate, thrift stocks posted further gains in early-November and then retreated
modestly in mid-November. Thrift and bank issues declined on concerns that a
slowing U.S. economy could lead to weaker loan demand and higher delinquency
rates. However, led by the strengthening bond market, thrift and bank issues
moved higher during late-November and early-December. Acquisition news also
contributed to the upturn in bank and thrift prices, as two major bank
acquisitions were announced for relatively high price-to-book multiples. First
Union Corp.'s proposed acquisition of CoreStates Financial ($47 billion in
assets) was for 539 percent of book value, while First American Corporation's
proposed acquisition for Deposit Guaranty Corporation ($6.8 billion in assets)
was for 419 percent of book value. Those deals, along with speculation of
possible other major thrift and bank acquisitions, filtered into the prices of
bank and thrift issues in general. Concern of relatively high valuations
somewhat offset the declining interest rate environment, as thrift issues traded
in a narrow range in mid-December. Thrift prices moved higher at the close of
1997, as interest rates continued to decline. The SNL Index for all publicly-
traded thrifts closed at 810.5 on January 2, 1998, an increase of 68.2 percent
from one year ago.
B. The New Issue Market
--------------------
In addition to thrift stock market conditions in general, the new
issue market for converting thrifts is also an important consideration in
determining the Bank's pro forma market value. Over the past year, the market
for converting thrift issues has generally been favorable. Fewer offerings, more
attractive pricing, lower interest rates, and the general positive trend in
thrift prices facilitated a healthy market for converting thrift issues during
the fourth quarter of 1996. In general, the market environment for converting
thrift issues has been highly receptive throughout 1997, with the most recently
completed conversions experiencing very strong market interest. Since late-
October 1997, standard conversion offerings completed and began trading have
exhibited an average price increase of 46.2 percent on the first day of trading.
As shown in Table 4.2, the average one week change in price for standard
conversion offerings completed during the latest three month period ending
January 2, 1998 equaled positive 46.3 percent. The average pro forma
price/tangible book and core price/earnings ratios of the recent conversions,
excluding second step conversions, was 76.9 percent and 20.4 times, generally
reflecting closings at the top of the super range.
<PAGE>
RP Financial, LC.
Table 4.2
Recent Conversions (Last Three Months)
Conversion Pricing Characteristics: Sorted Chronologically
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Institutional Information Pre-Conversion Data Offering 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>
Guaranty Fed. Bancshares(8) MO* 12/31/97 GFED $ 212 13.82% 0.64% 244% $ 43.4 132% 2.1% 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.
Warwick Community Bncrp AR 12/23/97 WSBI 291 10.04% 0.56% 93% 64.1 132% 3.4% Stock 3.00%
Staten Island Bancorp, Inc. NY* 12/22/97 SIB 2,145 9.11% 1.15% 58% 515.8 132% 1.7% Stock 5.00%
North Arkansas Bancshares AR 12/19/97 P. Sheet 34 6.77% 0.21% 203% 3.7 132% 10.8% N.A. N.A.
Community Natl. Corp.(8,9) TN 12/12/97 CNLK 27 14.83% 0.69% 103% 4.5 132% 7.2% N.A. N.A.
High Country Bancorp CO 12/10/97 HCBC 76 7.81% 0.23% 286% 12.6 132% 4.4% N.A. N.A.
Equality Bancorp, Inc.(8) MO* 12/02/97 EBI 239 5.82% 0.29% 41% 13.2 115% 3.9% N.A. N.A.
Landmark Financial Corp. NY 12/01/97 P. Sheet 14 6.66% 1.38% 55% 1.5 132% 9.9% N.A. N.A.
First Security Fed.Fin.,Inc IL 10/31/97 FSFF 260 11.52% 0.87% 74% 64.1 132% 1.7% Stock 3.90%
Averages: $ 297 11.28% 0.60% 141% $ 67.4 131% 4.5% N.A. 3.20%
Averages, Excluding 2nd Steps: $ 342 11.20% 0.62% 145% $ 83.1 132% 4.6% N.A. 3.20%
Medians: $ 100 10.78% 0.60% 98% $ 26.1 132% 3.5% N.A. 3.45%
Medians, Excluding 2nd Steps: $ 86 10.04% 0.56% 93% $ 30.4 132% 3.4% N.A. 3.45%
- --------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Insider Purchases Pro Forma Data
------------------------------------------
Pricing Ratios(4) Financial Charac.
---------------------------------------------------------------------
Benefit Plans
-------------
Conversion Recog. Mgmt.& Core IPO
Institution State Date Ticker ESOP Plans Dirs. P/TB P/E(5) P/A ROA TE/A ROE Price
- ----------- ----- ---- ------ ---- ----- ------- ---- ------ --- --- ---- --- -----
(%) (%) (%)(3) (%) (x) (%) (%) (%) (%) ($)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Guaranty Fed. Bancshares(8) MO* 12/31/97 GFED 8.0% 4.0% 5.1% 93.5% 20.2x 25.0% 1.2% 26.7% 4.6% $ 10.00
Great Pee Dee Bancorp SC 12/31/97 PEDE 8.0% 4.0% 8.5% 74.0% 18.0 28.0% 1.6% 37.8% 4.1% 10.00
Coddle Creek Financial NC 12/31/97 P. Sheet 8.0% 4.0% 8.9% 77.8% 28.2 23.6% 0.8% 30.3% 2.8% 50.00
Union Community Bancorp IN* 12/29/97 UCBC 8.0% 4.0% 5.8% 74.6% 17.2 27.2% 1.6% 36.5% 4.3% 10.00
Warwick Community Bncrp AR 12/23/97 WSBI 8.0% 4.0% 18.6% 79.4% 18.1 18.9% 1.0% 23.8% 4.4% 10.00
Staten Island Bancorp, Inc. NY* 12/22/97 SIB 8.0% 4.0% 1.5% 87.2% 18.4 20.9% 1.1% 24.0% 4.7% 12.00
North Arkansas Bancshares AR 12/19/97 P. Sheet 8.0% 4.0% 18.6% 72.0% N.M. 10.1% -0.2% 14.1% -1.2% 10.00
Community Natl. Corp.(8,9) TN 12/12/97 CNLK 0.0% 4.0% 17.6% 85.9% 17.1 22.9% 1.3% 26.7% 5.0% 10.00
High Country Bancorp CO 12/10/97 HCBC 8.0% 4.0% 11.0% 77.8% 26.1 15.1% 0.6% 19.5% 3.0% 10.00
Equality Bancorp, Inc.(8) MO* 12/02/97 EBI 9.1% 5.0% 10.6% 100.5% 18.8 10.0% 0.5% 9.9% 5.4% 10.00
Landmark Financial Corp. NY 12/01/97 P. Sheet 8.0% 4.0% 8.2% 70.9% N.M. 9.8% -0.3% 13.8% -1.3% 10.00
First Security Fed.Fin.,Inc. IL 10/31/97 FSFF 8.0% 4.0% 4.4% 78.1% 16.5 21.1% 1.3% 27.0% 4.7% 10.00
Averages: 7.4% 4.1% 9.9% 81.0% 19.9x 19.4% 0.9% 24.2% 3.4% $ 13.50
Averages, Excluding 2nd Steps: 8.0% 4.0% 9.5% 76.9% 20.4x 19.4% 0.8% 25.2% 2.8% $ 14.67
Medians: 8.0% 4.0% 8.7% 78.0% 18.3x 21.0% 1.1% 25.4% 4.4% $ 10.00
Medians, Excluding 2nd Steps: 8.0% 4.0% 8.5% 77.8% 18.1x 20.9% 1.0% 24.0% 4.1% $ 10.00
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Post-IPO Pricing Trends
----------------------------------------------
Closing Price:
----------------------------------------------
First After After
Conversion Trading % First % First %
Institution State Date Ticker Day Change Week(6)Change Month(7)Change
- ----------- ----- ---- ------ ------- ------ ------ ------ ------- ------
($) (%) ($) (%) ($) (%)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Guaranty Fed. Bancshares(8) MO* 12/31/97 GFED $12.88 28.8% N.A. N.A. N.A. N.A.
Great Pee Dee Bancorp SC 12/31/97 PEDE 16.13 61.3% N.A. N.A. N.A. N.A.
Coddle Creek Financial NC 12/31/97 P. Sheet 77.00 54.0% N.A. N.A. N.A. N.A.
Union Community Bancorp IN* 12/29/97 UCBC 14.69 46.9% $14.31 43.1% $14.25 42.5%
Warwick Community Bncrp AR 12/23/97 WSBI 15.63 56.3% 17.00 70.0% 16.63 66.3%
Staten Island Bancorp, Inc. NY* 12/22/97 SIB 19.06 58.8% 19.19 59.9% 21.00 75.0%
North Arkansas Bancshares AR 12/19/97 P. Sheet 12.50 25.0% 12.75 27.5% 12.81 28.1%
Community Natl. Corp.(8,9) TN 12/12/97 CNLK 11.56 15.6% 11.50 15.0% 12.00 20.0%
High Country Bancorp CO 12/10/97 HCBC 14.44 44.4% 15.25 52.5% 15.50 55.0%
Equality Bancorp, Inc.(8) MO* 12/02/97 EBI 13.50 35.0% 15.38 53.8% 14.50 45.0%
Landmark Financial Corp. NY 12/01/97 P. Sheet 11.88 18.8% 12.00 20.0% 12.00 20.0%
First Security Fed.Fin.,Inc. IL 10/31/97 FSFF 15.06 50.6% 15.13 51.3% 16.06 60.6%
Averages: $19.53 41.3% $14.72 43.7% $ 14.97 45.8%
Averages, Excluding 2nd Steps: $21.82 46.2% $15.09 46.3% $ 15.46 49.6%
Medians: $14.57 45.7% $15.13 51.3% $ 14.50 45.0%
Medians, Excluding 2nd Steps: $15.06 50.6% $15.13 51.3% $ 15.50 55.0%
- ------------------------------------------------------------------------------------------------------------------------
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) Second-step conversions.
(9) Simultaneously converted to commercial bank charter. January 2, 1998
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
RP Financial, LC.
Page 4.16
In examining the current pricing characteristics of institutions
completing their conversions during the last three months (see Table 4.3), we
note there exists a considerable difference in pricing ratios compared to the
universe of all publicly-traded thrifts. Specifically, the current average P/B
ratio of the conversions completed in the most recent three month period of
125.74 percent reflects a discount of 24.0 percent from the average P/B ratio of
all publicly-traded SAIF-insured thrifts (equal to 165.51 percent), and the
27.24 times core P/E ratio of the recent conversions was at a 29.9 percent
premium to the all SAIF-insured public average core P/E ratio of 20.97 times.
The pricing ratios of the better capitalized but lower earning (based on return
on equity measures) recently converted thrifts suggest that the investment
community has determined to discount their stocks on a book basis until the
earnings improve through redeployment and leveraging of the proceeds over the
longer term.
Similar to the market for converting thrifts, the limited number of
MHC offerings that have been completed during 1997 have experienced a favorable
market reception as well. Based on January 2, 1998 market prices, the three
publicly-traded MHC offerings that have been completed during 1997 (First
Carnegie of PA - April 1997, Pulaski SB of NJ - April 1997 and Peoples Home SB
of PA - July 1997) have each appreciated in price by more than 80.0 percent from
their IPO offering prices, reflecting an average price increase of 86.2 percent.
There were no publicly-traded MHC offerings completed during 1996.
In determining our valuation adjustment for marketing of the issue, we
considered trends in both the overall thrift market and the new issue market.
The overall market for thrift stocks is considered to be healthy, as thrift
stocks are currently exhibiting pricing ratios that are approaching historically
high levels. Investor interest in the new issue market has been favorable, as
most of the recently completed offerings have been oversubscribed and have
recorded price increases in initial post-conversion trading activity. Conditions
in the new issue market for MHC shares also are viewed as being favorable, based
on the positive market reception that has been experienced by the three
publicly-traded MHC offerings completed during 1997.
C. The Acquisition Market
----------------------
Also considered in the valuation was the potential impact on BCSB's
stock price of recently completed and pending acquisitions of other thrifts
operating in Maryland. As shown in Exhibit IV-4, there were eight Maryland
thrifts acquired during 1996 and year-to-date 1997, and there are currently no
acquisitions pending of Maryland thrifts.
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 4.3
Market Pricing Comparatives
Prices As of January 2, 1998
<TABLE>
<CAPTION>
Market Per Share Data
Capitalization --------------- Pricing Ratios(3)
--------------- Core Book ---------------------------------------
Price/ Market 12-Mth Value/
Financial Institution Share(1) Value EPS(2) Share P/E P/B P/A P/TB P/CORE
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- --------
($) ($Mil) ($) ($) (X) (%) (%) (%) (x)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts 24.29 183.75 1.08 14.89 20.01 165.51 20.36 169.34 20.97
Converted Last 3 Mths (no MHC) 15.80 152.03 0.55 12.59 27.24 125.74 31.49 126.22 27.24
Comparable Group
- ----------------
Converted Last 3 Mths (no MHC)
- ------------------------------
EBI Equality Bancorp of MO 14.12 35.10 0.53 9.95 26.64 141.91 14.07 141.91 26.64
FSFF First SecurityFed Fin of IL 15.75 100.93 0.61 12.80 25.82 123.05 33.26 123.05 25.82
PEDE Great Pee Dee Bancorp of SC 15.75 34.34 0.56 13.51 28.13 116.58 44.14 116.58 28.13
GFED Guaranty Fed Bancshares of MO 12.87 80.08 0.49 10.70 26.27 120.28 32.18 120.28 26.27
HCBC High Country Bancorp of CO 15.50 20.51 0.38 12.86 NM 120.53 23.46 120.53 NM
OTFC Oregon Trail Fin. Corp of OR 17.25 80.99 0.59 13.29 29.24 129.80 31.17 129.80 29.24
SIB Staten Island Bancorp of NY 20.18 867.36 0.65 14.19 27.27 142.21 35.17 146.55 NM
UCBC Union Community Bancorp of IN 14.31 43.53 0.58 13.40 24.67 106.79 38.96 106.79 24.67
WSBI Warwick Community Bncrp of NY 16.44 105.45 0.55 12.60 29.89 130.48 31.01 130.48 29.89
<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 1.51 30.18 1,165 13.33 0.76 0.90 7.92 0.87 7.62
Converted Last 3 Mths (no MHC) 0.10 0.70 18.50 461 25.56 0.41 1.13 4.46 1.11 4.39
Comparable Group
- ----------------
Converted Last 3 Mths (no MHC)
- ------------------------------
EBI Equality Bancorp of MO 0.00 0.00 0.00 249 9.92 0.29 0.53 5.33 0.53 5.33
FSFF First SecurityFed Fin of IL 0.00 0.00 0.00 303 27.03 NA 1.29 4.77 1.29 4.77
PEDE Great Pee Dee Bancorp of SC 0.30 1.90 53.57 78 37.86 0.18 1.57 4.15 1.57 4.15
GFED Guaranty Fed Bancshares of MO 0.30 2.33 61.22 249 26.75 0.64 1.23 4.58 1.23 4.58
HCBC High Country Bancorp of CO 0.00 0.00 0.00 87 19.46 0.23 0.58 2.95 0.58 2.95
OTFC Oregon Trail Fin. Corp of OR 0.00 0.00 0.00 260 24.02 0.07 1.07 4.44 1.07 4.44
SIB Staten Island Bancorp of NY 0.00 0.00 0.00 2,466 24.73 1.15 1.29 5.21 1.13 4.58
UCBC Union Community Bancorp of IN 0.30 2.10 51.72 112 36.48 0.16 1.58 4.33 1.58 4.33
WSBI Warwick Community Bncrp of NY 0.00 0.00 0.00 340 23.76 0.56 1.04 4.37 1.04 4.37
</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.
Page 4.18
Under other circumstances, the existence of thrift acquisition
activity in the Bank's market area might warrant an upward adjustment to value
to account for the likelihood of investors placing an acquisition premium on the
stock. However, the acquisition activity in BCSB's market was deemed to have a
minimal valuation impact for three reasons. First, BCSB's Board of Directors has
stated their intention to remain independent following the stock offering, a
factor underscored by the Board's decision to reorganize into MHC form. Second,
BCSB could not become an acquisition target for at least one year following a
second step conversion, pursuant to current conversion regulations. Finally, the
Bank has no immediate intentions to pursue a "second step" conversion.
* * * * * * * * * * *
In determining our valuation adjustment for marketing of the issue, we
considered trends in both the overall thrift market, the new issue market
including the new issue market for MHC shares, and the acquisition market (which
we considered to be not highly applicable to the Bank's valuation). Taking these
factors and trends into account, RP Financial concluded that no adjustment was
appropriate in the valuation analysis for purposes of marketing of the issue.
8. Management
----------
BCSB's management team has experience and expertise in all of the key areas
of the Bank's operations. Exhibit IV-5 provides summary resumes of BCSB's Board
of Directors and executive management. While the Bank does not have the
resources to develop a great deal of management depth, given its asset size and
the impact it would have on operating expenses, management and the Board have
been effective in implementing an operating strategy that can be well managed by
the Bank's present management structure.
Similarly, the returns, capital positions, and other operating measures of
the Peer Group companies are indicative of well-managed financial institutions,
which have Boards and management teams that have been effective in implementing
competitive operating strategies. Therefore, on balance, we concluded no
valuation adjustment relative to the Peer Group was appropriate for this factor.
9. Effect of Government Regulation and Regulatory Reform
-----------------------------------------------------
In summary, as a SAIF-insured savings bank operating in the MHC form of
ownership, BCSB will operate in substantially the same regulatory environment as
the Peer Group members -- all of whom are adequately capitalized institutions
and are operating with no apparent restrictions. Exhibit IV-6 reflects the
Bank's pro forma regulatory capital ratios. The one difference noted between
BCSB and the Peer Group was
<PAGE>
RP Financial, LC.
Page 4.19
in the area of regulatory policy regarding dividend waivers (see the discussion
above for "Dividends"). The Bank and ten of the Peer Group members are subject
to minority dilution in a second step conversion because of the current dividend
waiver policy, while seven of the Peer Group companies are not subject to the
current policy regarding dividend waivers as the result of "grandfathering"
under the previous OTS guidelines. Because a downward adjustment was already
applied for this factor in the "Dividends" section of this appraisal, no further
adjustment has been applied for the effect of government regulation and
regulatory reform.
Summary of Adjustments
- ----------------------
Overall, based on the factors discussed above, we concluded that the Bank's
pro forma market value should be discounted relative to the Peer Group as
follows:
<TABLE>
<CAPTION>
Key Valuation Parameters: Valuation Adjustment
------------------------ --------------------
<S> <C>
Financial Condition 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
</TABLE>
Basis of Valuation. Fully-Converted Pricing Ratios
- ---------------------------------------------------
As indicated in Chapter III, the valuation analysis included in this
section places all of the public MHC institutions on equal footing by restating
their financial data and pricing ratios on a "fully-converted" basis. We believe
there are a number of characteristics of MHC shares that make them different
from the shares of fully-converted companies. These factors include: (1) lower
aftermarket liquidity in the MHC shares since less than 50 percent of the shares
are available for trading; (2) guaranteed minority ownership interest, with no
chance of exercising voting control of the institution; (3) no possibility of
acquisition speculation to support stock prices; (4) the impact of "second step"
conversions on the pricing of MHC institutions; and (5) the current OTS policy
regarding the waiver of dividends by MHC institutions. The above characteristics
of MHC shares, three that have existed for some time and two resulting from more
recent developments (i.e., "second step" conversions and the dividend waiver
issue), have provided MHC shares with different trading characteristics versus
fully-converted companies. To account for the unique trading characteristics of
MHC shares, RP Financial has placed the financial data and pricing ratios of the
Peer Group on a fully-converted basis to make them
<PAGE>
RP Financial, LC.
Page 4.20
comparable for valuation purposes. Using the per share and pricing information
of the Peer Group on a fully-converted basis accomplishes two things. First,
such figures eliminate the distortions resulting when trying to compare
institutions that have a different public ownership interests outstanding.
Secondly, such an analysis provides ratios that are comparable to the pricing
information of fully-converted public companies, and more importantly, are
directly applicable to determining the pro forma market value range of the 100
percent ownership interest in BCSB as an MHC.
To calculate the fully-converted pricing information for MHCs, the reported
financial information for the public MHCs was adjusted as follows: (1) a second
step conversion was assumed, with all shares owned by the MHC assumed to be sold
at the January 2, 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 4.4 on the following page shows the calculation of per share
financial data (fully-converted basis) for each of the 17 public MHC
institutions that form the Peer Group.
Valuation Approaches
- --------------------
In applying the accepted valuation methodology promulgated by the OTS and
adopted by the FDIC, i.e., the pro forma market value approach, we considered
the three key pricing ratios in valuing BCSB's 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, we have incorporated the valuation parameters disclosed
in BCSB's offering circular for reinvestment rate, the effective tax rate and
stock benefit plan assumptions (summarized in Exhibits IV-7 and IV-8). Pursuant
to the minority stock offering, we have also incorporated the valuation
parameters disclosed in BCSB's offering circular for offering expenses and
funding of the MHC (equal to $250,000). The assumptions utilized in the pro
forma analysis in calculating the Bank's full conversion value are described
more fully below.
o Conversion Expenses. Have been assumed to equal 2 percent of the
-------------------
offering amount pursuant to a standard conversion offering. This
assumption approximates the average for large standard conversion
offerings completed in 1997 to date (i.e., offerings in excess of
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 4.4
Calculation of Implied Per Share Data --
Incorporating MHC Second Step Conversion
Comparable Insitution Analysis
For the Twelve Months Ended September 30, 1997
<TABLE>
<CAPTION>
Impact of
Second Step
Current Ownership Current Per Share Data (MHC Ratios) Conversion
------------------------------ ----------------------------------------- -----------
Total Public MHC Core Book Tangible Share
Shares Shares Shares EPS EPS Value Book Assets Price
---------- -------- ------- ------ ------ ------ -------- ------- ---------
(000) (000) (000) ($) ($) ($) ($) ($) ($000)
Publicly-Traded MHC Institutions
- --------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CHSV Commty Svgs, MHC of FL (48.5) 5,095 2,470 2,625 1.07 0.98 15.79 15.79 139.20 35.25
FFFL Fidelity FSB, MHC of FL (47.7) 6,783 3,224 3,559 0.93 0.79 12.65 12.57 154.16 31.50
FFSX First FS&LA. of MHC of IA (46.1) 2,833 1,303 1,530 1.18 1.15 14.08 13.96 161.26 30.50
GDWS Greater DV SB, MHC of PA (19.9) 3,272 650 2,622 0.68 0.68 8.85 8.85 76.04 30.75
HARS Harris SB, MHC of PA (24.3) 33,779 8,169 25,610 0.52 0.46 5.12 4.53 62.47 19.87
JKSB Jcksnville SB, MHC of IL (45.6) 1,272 580 692 0.80 0.?0 13.63 13.63 129.12 28.50
LFED Leeds FSB, MHC of MD (36.3) 5,182 1,883 3,299 0.64 0.64 9.16 9.16 55.08 21.88
NWSB Northwest SB, MHC of PA (30.7) 46,753 14,352 32,401 0.41 0.41 4.33 4.09 44.93 14.62
PBCT Peoples Bank, MHC of CT (40.1) 61,126 24,453 36,673 1.44 0.93 11.41 11.40 126.48 37.50
PBHC OswegoCity SB MHC of NY (46.1) 1,917 882 1,035 1.05 0.94 11.95 10.03 100.68 29.00
PHSB Ppls Home SB, MHC of PA (45.0) 2,760 1,242 1,518 0.56 0.54 10.22 10.22 74.79 18.87
PLSK Pulaski SB, MHC of NJ (46.0) 2,070 952 1,118 0.54 0.54 10.36 10.36 86.47 18.25
PULB Pulaski SB, MHC of MD (29.8) 2,095 624 1,471 1.03 0.90 11.39 11.39 85.64 31.37
SBFL SB Fngr Lakes, MHC of NY (33.1) 1,785 590 1,195 0.44 0.51 11.92 11.92 127.71 32.00
SKBD First Carnegie, MHC of PA (45.0) 2,300 1,035 1,265 0.33 0.33 10.52 10.52 63.97 18.75
WAYN Wayne S&L Co. MHC of OH (47.8) 2,255 1,075 1,180 0.81 0.76 10.58 10.58 110.97 29.00
WCFB Wbstr Cty FSB MHC of IA (45.2) 2,100 950 1,150 0.64 0.64 10.52 10.52 44.99 20.00
<CAPTION>
Impact of Second Step Conversion Pro Forma Per Share Data (Fully Converted)
------------------------------------ --------------------------------------------------
Gross Net Incr. Net Incr. Core Book Tangible
Procds.(1) Captial(2) Income(3) EPS EPS Value Book Assets
-------- -------- ------ ------ ------- -------- --------- ---------
($000) ($000) ($) ($) ($) ($) ($)
Publicly-Traded MHC Institutions
- --------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CHSV County Svgs, MHC of FL (48.5) 92,531 79,577 2,437 1.55 1.46 31.41 31.41 154.82
FFFL Fidelity FSB, MHC of FL (47.7) 112,109 96,413 2,952 1.37 1.23 26.86 26.78 168.37
FFSX First FS&LA. of MHC of IA (46.1) 46,665 40,132 1,229 1.61 1.58 28.25 28.13 175.43
GDWS Greater DV SB, MHC of PA (19.9) 80,627 69,339 2,123 1.33 1.33 30.04 30.04 97.23
HARS Harris SB, MHC of PA (24.3) 508,871 437,629 13,401 0.92 0.86 18.08 17.49 75.43
JKSB Jcksnville SB, MHC of IL (45.6) 19,722 16,961 519 1.21 1.21 26.96 26.96 142.45
LFED Leeds FSB, MHC of MD (36.3) 72,182 62,077 1,901 1.01 1.01 21.14 21.14 67.06
NWSB Northwest SB, MHC of PA (30.7) 473,703 407,384 12,474 0.68 0.68 13.04 12.80 53.64
PBCT Peoples Bank, MHC of CT (40.1) 1,375,238 1,182,704 36,216 2.03 1.52 30.76 30.75 145.83
PBHC OswegoCity SB MHC of NY (46.1) 30,015 25,813 790 1.46 1.35 25.42 23.50 114.15
PHSB Ppls Home SB, MHC of PA (45.0) 28,645 24,634 754 0.83 0.81 19.15 19.15 83.72
PLSK Pulaski SB, MHC of NJ (46.0) 20,404 17,547 537 0.80 0.80 18.84 18.84 94.95
PULB Pulaski SB, MHC of MD (29.8) 46,145 39,685 1,215 1.61 1.48 30.33 30.33 104.58
SBFL SB Fngr Lakes, MHC of NY (33.1) 38,240 32,686 1,007 1.00 1.07 30.34 30.34 146.13
SKBD First Carnegie, MHC of PA (45.0) 23,719 20,398 625 0.60 0.60 19.39 19.39 72.84
WAYN Wayne S&L Co. MHC of OH (47.8) 34,220 29,429 901 1.21 1.16 23.63 23.63 124.02
WCFB Wbstr Cty FSB MHC of IA (45.2) 23,000 19,780 605 0.93 0.93 19.94 19.94 54.41
</TABLE>
(1) Gross proceeds calculated as stock price multiplied by the number of shares
owned by the mutual holding company (i.e., non-public shares).
(2) Net increase in capital reflects gross proceeds less offering expenses,
contra-equity account for leveraged ESOP and deferred compensation account
for restricted stock plan:
Offering expense percent 2.00
ESOP percent purchase 8.00
Recognition plan percent 4.00
(3) Net increase in earnings reflects after-tax reinvestment income (assumes
ESOP and recognition plan do not generate reinvestment income), less
after-tax ESOP amortization and recognition plan vesting:
After-tax reinvestment 4.29
ESOP loan term (years) 10
Recog. plan vesting (yrs) 5
Effective tax rate 34.00
Source: Audited and unaudited financial statements, corporate reports and
offering circulars, and RP Financial, LC. calculations. The information
provided in this table has been obtained from sources we believe are
reliable, but we cannot guarantee the accuracy or completeness of such
information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP Financial, LC.
Page 4.22
$40 million of gross proceeds) and is the assumption utilized in the
calculation of the second step conversions for the Peer Group of
publicly-traded MHCs.
o Effective Tax Rate. The Bank, in consultation with its outside
------------------
auditors, has determined the marginal effective tax rate on the net
reinvestment benefit of the conversion proceeds to be 39 percent based
on the statutory Federal and state tax rate.
o Reinvestment Rate. The pro forma section in the prospectus
-----------------
incorporates a 5.44 percent reinvestment rate, equivalent to the one
year U.S. Treasury rate prevailing as of September 30, 1997. This
calculated rate is reasonably similar to the blended reinvestment rate
in the first 12 months of the business plan post-conversion,
reflecting the current anticipated use of conversion proceeds,
incorporating a flat interest rate scenario and the estimated impact
of deposit withdrawals to fund stock purchases.
o Stock Benefit Plans. The assumptions for the stock benefit plans,
-------------------
i.e., the Employee Stock Ownership Plan ("ESOP") and Recognition Plan
("Recognition Plan"), are consistent with the structure as approved by
the Bank's Board and the disclosure in the pro forma section of the
prospectus. Specifically, the ESOP is assumed to purchase 8 percent of
the stock in conversion at the initial public offering price, with the
Holding Company funded ESOP loan amortized on a straight-line basis
over 10 years. The Recognition Plan is assumed to purchase 4 percent
of the stock in the aftermarket at a price equivalent to the initial
public offering price.
o Planned Capital Expenditures. It is assumed that $1.25 million of the
----------------------------
net conversion proceeds will be deployed into non-interest earning
assets to reflect planned capital expenditures by the Bank during the
first year following the stock offering.
o Funding of the Foundation. The Holding Company intends to donate to a
-------------------------
charitable foundation, immediately following the Conversion,
authorized but unissued shares of the Holding Company stock equal to
$750,000. Accordingly, the percent of stock sold to the Foundation
varies throughout the valuation range. The pro forma after-tax impact
of the foundation structure has been incorporated into RP Financial's
pro forma valuation.
In our estimate of value, we assessed the relationship of the pro forma
pricing ratios relative to the Peer Group and the recent conversions in our
estimation of the pro forma market value.
RP Financial's valuation placed emphasis on the following:
o P/E Approach. The P/E approach is generally the best indicator of
------------
long-term value for a stock. Given the similarities between the Bank's
and the Peer Group's earnings composition and overall financial
condition, the P/E approach was carefully considered in this
valuation. At the same time, since reported earnings for both the Bank
and the Peer Group included certain unusual operating items, we also
made adjustments to earnings to arrive at a core earnings estimate and
the resulting price/core earnings ratio.
o P/B Approach. P/B ratios have generally served as a useful benchmark
------------
in the valuation of thrift stocks, with the greater determinant of
long term value being earnings. RP Financial considered the P/B
approach to be a reliable indicator of value given current market
conditions, particularly the market for new conversions (witness that
several recent conversions reported not meaningful P/E ratios)
o P/A Approach. P/A ratios are generally a less reliable indicator of
------------
market value, as investors do not place significant weight on the size
of total assets as a determinant of market value. Investors place
significantly greater weight on book value and earnings, which have
received greater weight in our valuation analysis. Furthermore, this
approach as set forth in the
<PAGE>
RP Financial, LC.
Page 4.23
regulatory valuation guidelines does not take into account the amount
of stock purchases funded by deposit withdrawals, thus understating
the pro forma P/A ratio. At the same time, the P/A ratio is an
indicator of franchise value, and, in the case of highly capitalized
institutions, the 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.
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 unreleased ESOP shares. For purposes of preparing the pro forma
pricing analyses, we have reflected all shares issued in the offering, including
all ESOP shares, to capture the full dilutive impact, particularly since the
ESOP shares are economically dilutive, receive dividends and can be voted.
However, we did consider the impact of the adoption of SOP 93-6 in the
valuation.
Based on the application of the three valuation approaches, taking into
consideration the valuation adjustments discussed above, RP Financial concluded
that the pro forma market value of a 100 percent interest in the Bank's
conversion stock was $43,250,000 at the midpoint, equal to 4,325,000 shares
issued at a per share value of $10.00 for the public shares. Pursuant to
conversion guidelines, the 15 percent offering range indicates a minimum value
of $36,762,500, and a maximum value of $49,737,500. Based on the $10.00 per
share offering price determined by the Board, this valuation range equates to an
offering of 3,676,250 shares at the minimum to 4,973,750 shares at the maximum.
1. Price-to-Earnings ("P/E"). The application of the P/E valuation method
-------------------------
requires calculating the Bank's pro forma market value by applying a valuation
P/E multiple (fully-converted basis) to the pro forma earnings base. Ideally,
the pro forma earnings base is composed principally of the Bank's recurring
earnings base, that is, earnings adjusted to exclude any one-time non-operating
items, plus the estimated after-tax earnings benefit of the reinvestment of net
conversion proceeds. BCSB's reported earnings were $1.977 million for the twelve
months ended September 30, 1997. In deriving BCSB's core earnings, the only
adjustments made to reported earnings were to eliminate gains on the sale of
investment securities ($51,000) and gains from real estate development
($35,000). On a tax effected basis, assuming an effective marginal tax rate of
39.0 percent, the elimination of the gains resulted in a $52,000 reduction to
the Bank's reported earnings. As shown below, after factoring in the adjustment,
BCSB's core earnings were determined to equal $1.925 million for the twelve
months ended September 30, 1997. (Note: see Exhibit IV-9 for the adjustments
applied to the Peer Group's earnings in the calculation of core earnings).
<PAGE>
RP Financial, LC.
Page 4.24
<TABLE>
<CAPTION>
Amount
------
($000)
<S> <C>
Net income $1,977
Gains on the sale of investments (31)
Gains on real estate development(1) (21)
----
Core earnings estimate $1,925
</TABLE>
(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 $43,250,000
midpoint value was 15.82 times and 16.13 times, respectively, which provided for
discounts of 27.0 percent and 30.6 percent relative to the Peer Group's average
reported and core P/E multiples (fully-converted basis) of 21.66 times and 23.24
times, respectively (see Table 4.5). The discounted earnings multiples are
consistent with the valuation adjustments outlined earlier, as well as taking
into consideration the resulting P/B ratio.
2. Price-to-Book ("P/B"). The application of the P/B valuation method
---------------------
requires calculating the Bank's pro forma market value by applying a valuation
P/B ratio (fully-converted basis) to BCSB's pro forma book value (fully-
converted basis). In applying the P/B approach, we considered both reported book
value and tangible book value. Based on the $43.250 million midpoint valuation,
BCSB's pro forma P/B and P/TB ratios were 71.25 percent and 71.31 percent,
respectively. In comparison to the average P/B and P/TB ratios for the Peer
Group of 107.71 percent and 108.65 percent, respectively, BCSB's ratios were
discounted by 33.9 percent and 34.4 percent. RP Financial considered such
discounts under the P/B approach to be reasonable, in light of the previously
referenced valuation adjustments and the nature of the calculation of the P/B
ratio which mathematically results in a ratio discounted to book value.
Additionally, the discounted P/B ratio is also warranted by the likelihood that
speculation of a second step conversion may be having an upward influence on the
current stock prices of some of the Peer Group companies. Comparatively, as a
newly formed MHC, speculation of a second step conversion is not expected to
have a material influence on the Bank's stock price.
RP Financial also considered the P/B ratios of the most recent MHC
conversions in its valuation analysis. The three most recently completed MHC
offerings include SKBO-First Carnegie of Pennsylvania, PHSB-Peoples Home SB of
Pennsylvania and PLSK-Pulaski SB of New Jersey. These companies indicated an
average P/B ratio of 97.4 percent at January 2, 1998. At the midpoint value of
$43,250,000, BCSB's pro forma P/B ratio (fully-converted basis) of 71.3 percent
is discounted by 26.8 percent from these companies.
<PAGE>
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 4.5
Public Market Pricing
Baltimore County Savings Bank and the Comparables
As of January 2, 1998
<TABLE>
<CAPTION>
Market Per Share Data
Capitalization ----------------
---------------- Core Book Pricing Ratios(3)
Price/ Market 12-Mth Value/ -----------------------------------------
Share(1) Value EPS(2) Share P/E P/B P/A P/TB P/CORE
-------- ------ ------ ------ ----- ----- ----- ------ --------
($) ($Mil) ($) ($) (X) (%) (%) (%) (X)
Baltimore County Savings Bank
- -----------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Range Maximum 10.00 49.74 0.57 13.32 17.43 75.10 16.91 75.16 17.76
Range Midpoint 10.00 43.25 0.63 14.03 15.82 71.25 14.99 71.31 16.31
Range Minimum 10.00 36.76 0.71 15.01 14.06 66.63 12.99 66.69 14.35
SAIF-Insured Thrifts(7)
- ------------------------
Averages 24.29 183.75 1.08 14.89 20.01 165.51 20.36 169.34 20.97
Medians --- --- --- --- 19.83 154.95 19.47 158.05 20.67
All Non-MHC State of MD(7)
- ---------------------------
Averages 28.20 73.26 1.41 15.57 20.94 177.72 18.10 178.32 22.56
Medians --- --- --- --- 20.94 174.42 19.56 174.42 24.08
Publicly-Traded MHC Institutions, Full Conversion Basis
- -------------------------------------------------------
Averages 26.33 282.10 1.12 24.33 21.66 107.71 25.14 108.65 23.24
Medians --- --- --- --- 21.66 105.71 25.41 105.71 23.11
Publicly-Traded MHC Institutions, Full Conversion Basis
- -------------------------------------------------------
CMSV Commty. Svgs, MHC of FL (48.5) 35.25 179.60 1.46 31.41 22.74 112.23 22.77 112.23 24.14
FFFL Fidelity FSB, MHC of FL (47.7) 31.50 213.66 1.23 26.86 22.99 117.27 18.71 117.63 25.61
SKBO First Carnegie, MHC of PA (45.0) 18.75 43.13 0.60 19.39 NM 96.70 25.74 96.70 NM
FFSX First FS&LA. MHC of IA (46.1) 30.50 86.41 1.58 28.25 18.94 107.96 17.39 108.43 19.30
GDVS Greater DV SB, MHC of PA (19.9) 30.75 100.61 1.33 30.04 23.12 102.36 31.63 102.36 23.12
HARS Harris SB, MHC of PA (24.3) 19.87 671.19 0.85 18.08 21.60 109.90 26.34 113.61 23.10
JXSB Jcksnville SB, MHC of IL (45.6) 28.50 36.25 1.21 26.96 23.55 105.71 20.01 105.71 23.55
LFED Leeds FSB, MHC of ND (36.3) 21.88 113.38 1.01 21.14 21.66 103.50 32.63 103.50 21.66
NWSB Northwest SB, MHC of PA (30.7) 14.62 683.53 0.68 13.04 21.50 112.12 27.26 114.22 21.50
PBHC OswegoCity SB MHC of NY (46.1) 29.00 55.59 1.35 25.42 19.86 114.08 25.41 123.40 21.48
PBCT Peoples Bank, MHC of CT (40.1) 37.50 2,292.23 1.52 30.76 18.47 121.95 25.71 121.95 24.67
PHSB Ppls Home SB, MHC of PA (45.0) 18.87 52.08 0.81 19.15 22.73 98.54 22.54 98.54 23.30
PULB Pulaski SB, MHC of MO (29.8) 31.37 65.72 1.48 30.33 19.48 103.43 30.00 103.43 21.20
PLSK Pulaski SB, MHC of NJ (46.0) 18.25 37.78 0.80 18.84 22.81 96.87 19.22 96.87 22.81
SBFL SB Finger Lakes MHC of NY (33.1) 32.00 57.12 1.07 30.34 NM 105.47 21.90 105.47 29.91
WAYN Wayne S&L Co. MHC of OH (47.8) 29.00 65.40 1.16 23.63 23.97 122.73 23.38 122.73 25.00
WCFB Wbstr Cty FSB MHC of IA (45.2) 20.00 42.00 0.93 19.94 21.51 100.30 36.76 100.30 21.51
<CAPTION>
Dividends(4) Financial Characteristics(6)
---------------------------------- ----------------------------------------------------
Reported Core
Amount/ Payout Total Equity/ HPAs/ ------------- ------------
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
- -----------------------------
Range Maximum 0.50 5.00 87.16 294 22.52 0.75 0.97 4.31 0.95 4.23
Range Midpoint 0.50 5.00 79.11 289 21.03 0.76 0.95 4.50 0.93 4.42
Range Minimum 0.50 5.00 70.32 283 19.49 0.77 0.92 4.74 0.91 4.64
SAIF-Insured Thrifts(7)
- ------------------------
Averages 0.36 1.51 30.18 1,165 13.33 0.76 0.90 7.92 0.87 7.62
Medians --- --- --- --- --- --- --- --- --- ---
All Non-MHC State of MD(7)
- ---------------------------
Averages 0.27 1.20 33.67 411 11.01 0.69 0.66 7.31 0.74 8.35
Medians --- --- --- --- --- --- --- --- --- ---
Publicly-Traded MHC Institutions, Full Conversion Basis
- -------------------------------------------------------
Averages 0.51 1.86 41.09 1,114 23.54 0.60 1.16 5.03 1.11 4.80
Medians --- --- --- --- --- --- --- --- --- ---
Publicly-Traded MHC Institutions, Full Conversion Basis
- -------------------------------------------------------
CMSV Commty, Svgs, MHC of FL (48.5) 0.90 2.55 61.64 789 20.29 0.41 1.04 5.03 0.98 4.74
FFFL Fidelity FSB, MHC of FL (47.7) 0.90 2.86 73.17 1,142 15.95 0.40 0.90 5.19 0.80 4.66
SKBO First Carnegie, MHC of PA (45.0) 0.30 1.60 50.00 168 26.62 NA 0.83 4.04 0.83 4.04
FFSX First FS&LA. MHC of IA (46.1) 0.48 1.57 30.38 497 16.10 0.22 0.91 5.83 0.89 5.72
GDVS Greater DV SB, MHC of PA (19.9) 0.36 1.17 27.07 318 30.90 1.82 1.41 4.48 1.41 4.48
HARS Harris SB, MHC of PA (24.3) 0.22 1.11 25.58 2,548 23.97 0.65 1.32 5.22 1.23 4.88
JXSB Jcksnville SB, MHC of IL (45.6) 0.45 1.58 37.19 181 18.93 0.79 0.89 4.54 0.89 4.54
LFED Leeds FSB, MHC of ND (36.3) 0.56 2.56 55.45 348 31.52 0.06 1.52 4.85 1.52 4.85
NWSB Northwest SB, MHC of PA (30.7) 0.16 1.09 23.53 2,508 24.31 0.77 1.32 5.28 1.32 5.28
PBHC OswegoCity SB MHC of NY (46.1) 0.28 0.97 20.74 219 22.27 0.91 1.30 5.68 1.20 5.43
PBCT Peoples Bank, MHC of CT (40.1) 0.76 2.03 50.00 8,914 21.09 0.76 1.41 6.80 1.06 5.09
PHSB Ppls Home SB, MHC of PA (45.0) 0.00 0.00 0.00 231 22.87 0.45 0.97 4.83 0.95 4.72
PULB Pulaski SB, MHC of MO (29.8) 1.10 3.51 74.32 219 29.00 NA 1.55 5.37 1.42 4.93
PLSK Pulaski SB, MHC of NJ (46.0) 0.30 1.64 37.50 197 19.84 0.65 0.87 4.94 0.87 4.94
SBFL SB Finger Lakes MHC of NY (33.1) 0.40 1.25 37.38 261 20.76 0.50 0.73 3.34 0.78 3.58
WAYN Wayne S&L Co. MHC of OH (47.8) 0.62 2.14 53.45 280 19.05 0.58 0.97 5.19 0.93 4.97
WCFB Wbstr Cty FSB MHC of IA (45.2) 0.80 4.00 NM 114 36.65 0.07 1.71 4.69 1.71 4.69
</TABLE>
(1) Current stock price of minority stock. Average of High/Low or Bid/Ask price
per share.
(2) EPS (estimated core earnings) is based on reported trailing twelve month
data, adjusted to omit non-operating gains and losses (including the SAIF
assessment) on a tax effected basis. Public MHC data reflects additional
earnings from reinvestment of proceeds of second step 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) RDA (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.
Page 4.26
3. Price-to-Assets ("P/A"). The P/A valuation methodology determines
-----------------------
market value by applying a valuation P/A ratio (fully-converted basis) to the
Bank's pro forma asset base, conservatively assuming no deposit withdrawals are
made to fund stock purchases. In all likelihood there will be deposit
withdrawals, which results in understating the pro forma P/A ratio which is
computed herein. At the midpoint of the valuation range, BCSB's full conversion
value equaled 14.99 percent of pro forma assets. Comparatively, the Peer Group
companies exhibited an average P/A ratio (fully-converted basis) of 25.14
percent, which implies a 40.4 percent discount being applied to the Bank's pro
forma P/A ratio (fully-converted basis).
* * * * * * * * * *
We believe that the Bank's pricing discounts relative to the Peer Group are
appropriately reflective of the downward valuation adjustments discussed above.
Valuation Conclusion
- --------------------
Based on the foregoing, it is our opinion that, as of January 2, 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 $43,250,000 at the midpoint, equal to 4,325,000 shares offered at a
per share value of $10.00. Pursuant to conversion guidelines, the 15 percent
offering range indicates a minimum value of $36,762,500, and a maximum value of
$49,737,500. Based on the $10.00 per share offering price determined by the
Board, this valuation range equates to total shares outstanding of 3,676,250 at
the minimum and 4,973,750 at the maximum. The Board of Directors has established
a public offering range such that the public ownership of the Holding Company
will constitute a 42 percent ownership interest prior to the issuance of shares
to the Foundation. Accordingly, the offering to the public of the minority stock
will equal $15,172,500 at the minimum, $17,850,000 at the midpoint, and
$20,527,500 at the maximum. Based on the public offering range, and inclusive of
the 75,000 shares issued to the Foundation, the public ownership of the shares
will represent 43.3 percent of the shares issued at the minimum of the valuation
range, 43.0 percent of the shares issued at the midpoint of the valuation range,
and 42.8 percent of the shares issued at the maximum of the valuation range,
with the MHC owning the remaining majority of the shares. The pro forma
valuation calculations relative to the Peer Group (fully-converted basis) are
shown in Table 4.5 and are detailed in Exhibit IV-7 and Exhibit IV-8; the pro
forma valuation calculations relative to the Peer Group based on reported
financials are shown in Table 4.6 and are detailed in Exhibits IV-10 and IV-11.
<PAGE>
RP FINANCIAL, LC.
- ----------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Table 4.6
Public Market Pricing
Baltimore County Savings Bank and the Comparables
As of January 2, 1998
<TABLE>
<CAPTION>
Market Per Share Data
Capitalization -------------- Pricing Ratios(3)
-------------- Core Book -----------------------------------
Price/ Market 12-Mth Value/
Share(1) Value EPS(2) Share P/E P/B P/A P/TB P/CORE
-------- ------ ------ ----- ----- ----- ----- ----- ------
($) ($Mil) ($) ($) (X) (%) (%) (%) (X)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Baltimore County Savings Bank
- -----------------------------
Range Maximum 10.00 21.28 0.46 8.29 21.60 120.60 18.48 120.75 22.10
Range Midpoint 10.00 18.60 0.52 9.00 19.21 111.12 16.21 111.26 19.56
Range Minimum 10.00 15.92 0.60 9.95 16.70 100.55 13.90 100.69 17.11
SAIF-Insured Thrifts(7)
- -----------------------
Averages 24.29 183.75 1.08 14.89 20.01 165.51 20.36 169.34 20.97
Medians --- --- --- --- 19.83 154.95 19.47 158.05 20.67
All Non-NHC State of MD(7)
- --------------------------
Averages 28.20 73.26 1.41 15.57 20.94 177.72 18.10 178.32 22.56
Medians --- --- --- --- 20.94 174.42 19.56 174.42 24.08
Comparable Group Averages
- -------------------------
Averages 26.33 104.10 0.71 10.73 26.50 246.27 29.27 243.53 26.52
Medians --- --- --- --- 26.04 242.68 28.80 250.60 26.52
State of MD
- -----------
EQSB Equitable FSB of Wheaton MD 53.00 31.96 3.70 26.71 14.13 198.43 10.15 198.43 14.32
HRBF Harbor Federal Bancorp of MD 25.25 42.75 0.91 16.75 27.75 150.75 19.68 150.75 27.75
NFSL Maryland Fed. Bancorp of MD 35.00 226.35 1.56 15.00 NM 233.33 19.56 236.33 22.44
WHGB WHG Bancshares of MD 18.75 26.10 0.55 14.24 NM 131.67 26.48 131.67 NM
WSB Washington SB, FSB of MD 9.00 39.13 0.35 5.16 NM 174.42 14.61 174.42 25.71
Comparable Group
- ----------------
CMSV Commty. Svgs, MHIC of FL (48.5) 35.25 87.07 0.98 15.79 HN 223.24 25.32 223.24 NM
FFFL Fidelity FSB, MHIC of FL (47.7) 31.50 101.55 0.79 12.65 NH 249.01 20.43 250.60 NH
SKBO First Carnegie, MHIC of PA (45.0) 18.75 19.41 0.33 10.52 NM 178.23 29.31 178.23 NH
FFSX First FS&LA, MHIC of IA (46.1) 30.50 39.74 1.15 14.08 25.85 216.62 18.91 218.48 26.52
GDYS Greater DV SB, MHIC of PA (19.9) 30.75 19.99 0.68 8.85 NH 347.46 40.44 347.46 HH
HARS Harris SB, MHIC of PA (24.3) 19.87 162.32 0.45 5.12 NH NH 31.81 NH HN
JXSB Jcksnville SB, MHIC of IL (45.6) 28.30 16.53 0.80 13.63 HN 209.10 22.07 209.10 ??
LFED Leeds FSB, MHIC of MD (36.3) 21.88 41.20 0.64 9.16 HN 238.86 39.72 238.85 HH
NWSB Northwest SB, MHIC of PA (30.7) 14.62 209.83 0.41 4.33 NH 337.64 32.54 NH NN
PBHC OswegoCity SB NHIC of NY (46.1) 29.00 25.58 0.94 11.93 27.62 242.68 28.80 289.13 NH
PBCT Peoples Bank, NHIC of CT (40.1) 37.50 916.99 0.93 11.41 26.04 328.66 29.65 328.95 HH
PHSB Ppls Hope SB, NHIC of PA (45.0) 18.87 23.44 0.54 10.22 NH 184.64 25.23 184.64 HN
PULB Pulaski SB, MHIC of MD (29.8) 31.37 19.57 0.90 11.39 HM 275.42 36.63 275.42 NH
PLSK Pulaski SB, NHIC of NJ (46.0) 18.25 17.37 0.54 10.36 MN 176.16 21.11 176.16 HH
SBFL SB Fngr Lakes, MHIC of NY (33.1) 32.00 18.88 0.31 11.92 NH 268.46 25.06 268.46 ??
WAYN Wayne S&L Co. MHIC of OH (47.8) 29.00 31.18 0.76 10.58 HH 274.10 26.13 274.10 NM
<CAPTION>
Financial Characteristics(6)
Dividends(4) --------------------------------------------------------------
-------------------------- Reported Core
Amount/ Payout Total Equity/ HPAs/ --------------- ---------------
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
- -----------------------------
Range Maximum 0.50 5.00 46.20 269 15.32 0.81 0.86 5.58 0.84 5.46
Range Midpoint 0.50 5.00 41.30 267 14.59 0.82 0.84 5.79 0.82 5.65
Range Minimum 0.50 5.00 36.17 264 13.83 0.83 0.83 6.02 0.81 5.88
SAIF-Insured Thrifts(7)
- -----------------------
Averages 0.36 1.51 30.18 1,165 13.33 0.75 0.90 7.92 0.87 7.62
Medians --- --- --- --- ---- --- --- --- --- ---
All Non-NHC State of MD(7)
- --------------------------
Averages 0.27 1.20 33.67 411 11.01 0.69 0.66 7.31 0.74 8.35
Medians --- --- --- --- ---- --- --- --- --- ---
Comparable Group Averages
- -------------------------
Averages 0.51 1.86 14.77 961 11.97 0.60 0.86 7.94 0.81 7.33
Medians --- --- --- --- ---- --- --- --- --- ---
State of MD
- -----------
EQSB Equitable FSB of Wheaton MD 0.00 0.00 0.00 315 5.11 0.?2 0.76 15.12 0.75 14.92
HRBF Harbor Federal Bancorp of MD 0.48 1.90 52.75 217 13.06 0.10 0.71 ?.50 0.71 5.50
NFSL Maryland Fed. Bancorp of MD 0.45 1.29 28.85 1,157 8.38 0.47 0.62 7.43 0.89 10.73
WHGB WHG Bancshares of MD 0.32 1.71 ?8.18 99 20.11 0.85 0.77 3.48 0.78 3.55
WSB Washington SB, FSB of MD 0.10 1.11 28.57 268 8.38 1.53 0.42 ?.04 0.59 7.06
Comparable Group
- ----------------
CMSV Commty. Svgs, MHIC of FL (48.5) 0.90 2.55 NM 709 11.34 0.41 0.80 7.04 0.73 6.45
FFFL Fidelity FSB, MHIC of FL (47.7) 0.90 2.86 NM 1,046 8.21 0.40 0.67 7.64 0.57 6.49
SKBO First Carnegie, MHIC of PA (45.0) 0.30 1.60 NM 147 16.45 NA 0.52 5.53 0.52 5.53
FFSX First FS&LA, MHIC of IA (46.1) 0.48 1.57 19.20 457 8.73 0.22 0.73 8.79 0.71 8.56
GDYS Greater DV SB, MHIC of PA (19.9) 0.36 1.17 10.52 249 11.64 1.82 0.93 7.97 0.93 7.97
HARS Harris SB, MHIC of PA (24.3) 0.22 1.11 11.57 2,110 8.20 0.65 0.92 11.11 0.81 9.83
JXSB Jcksnville SB, MHIC of IL (45.6) 0.45 1.58 25.65 164 10.56 0.79 0.65 6.02 0.65 6.02
LFED Leeds FSB, MHIC of MD (36.3) 0.56 2.56 NM 28? 16.63 0.06 1.18 7.24 1.18 7.24
NWSB Northwest SB, MHIC of PA (30.7) 0.16 1.09 11.98 2,101 9.54 0.77 0.96 9.85 0.96 9.85
PBHC OswegoCity SB NHIC of NY (46.1) 0.28 0.97 13.70 193 11.87 0.91 1.06 9.23 0.95 8.26
PBCT Peoples Bank, NHIC of C? (40.1) 0.76 2.03 NM 7,731 9.02 0.76 1.16 13.69 0.75 8.84
PHSB Ppls Hope SB, NHIC of PA (45.0) 0.00 0.00 0.00 206 13.66 0.45 0.73 6.80 0.71 6.55
PULB Pulaski SB, MHIC of MD (29.8) 1.10 3.51 NM 179 13.30 NA 1.21 9.31 1.06 8.14
PLSK Pulaski SB, NHIC of NJ (46.0) 0.30 1.64 25.55 179 11.98 0.65 0.64 6.99 0.64 6.99
SBFL SB Fngr Lakes, MHIC of NY (33.1) 0.40 1.25 NM 228 9.33 0.50 0.37 3.83 0.43 4.44
WAYN Wayne S&L Co. MHIC of OH (47.8) 0.62 2.14 NM 2?0 9.53 0.58 0.73 7.89 0.68 7.40
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Table 4.6
Public Market Pricing
Baltimore County Savings Bank and the Comparables
As of January 2, 1998
Market Per share Data
Capitalization -------------- Pricing Ratios(3)
-------------- Core Book ------------------------------------------
Price/ Market 12-Hth Value/
Share(1) Value EPS(2) Share P/E P/B P/A P/TB P/CORE
------- ------ ------ ------ -------- ------- ------- ------- ---------
($) ($Mil) ($) ($) (X) (%) (%) (%) (X)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
WCFB Wbstr Cty FSB HHC of TA (45.2) 20.00 19.00 0.64 10.52 NM 190.11 44.45 190.11 NM
<CAPTION>
Dividends(4) Financial Characteristics(6)
---------------------- --------------------------------------------------------
Reported Core
Amount/ Payout Total Equity/ NPAs/ -------------- --------------
Share Yield Ratio(5) Assets Assets Assets RDA RDE RDA RDE
------ ----- -------- ------ ------ ------ ----- ----- ----- -----
($) (%) (%) ($Mil) (%) (%) (%) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
WCFB Wbstr Cty FSB HHC of TA (45.2) 0.80 4.00 NM 94 23.38 0.07 1.43 6.14 1.43 6.14
</TABLE>
(1) Average of high/low or bid/ask price per share.
(2) EPS (core basis) is based on actual trailing twelve month date, 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/IB -
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) RDA (return on assets) and RDE (return on equity) are indicated ratios based
on trailing twelve month common earnings and average common equity and total
assets balances.
(7) Excludes from averages and medians those companies the subject of actual or
rumored acquisition activities or unusual operating characteristics.
Source: Corporate reports, offering circulars, and RP Financial, Inc.
calculations. The information provided in this report has been obtained
from sources we believe are reliable, but we cannot guarantee the
accuracy or completeness of such information.
<PAGE>
EXHIBITS
<PAGE>
RP Financial, LC.
LIST OF EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<C> <S>
I-1 Map of Office Locations
I-2 Audited Financial Statements
I-3 Key Operating Ratios
I-4 Investment Portfolio Composition
I-5 Yields and Costs
I-6 Loan Loss Allowance Activity
I-7 Fixed Rate and Adjustable Rate Loans
I-8 NPV Analysis
I-9 Loan Portfolio Composition
I-10 Loan Originations, Purchases, and Sales
I-11 Contractual Maturity By Loan Type
I-12 Non-Performing Assets
I-13 Deposit Composition
I-14 Time Deposit Rate/Maturity
II-1 Description of Office Facilities
II-2 Historical Interest Rates
III-1 General Characteristics of Publicly-Traded Institutions
III-2 Financial Analysis of All Publicly-Traded MHCs
IV-1 Stock Prices: As of January 2, 1998
</TABLE>
<PAGE>
RP Financial, LC.
LIST OF EXHIBITS(continued)
<TABLE>
<C> <S>
IV-2 Historical Stock Price Indices
IV-3 Historical Thrift Stock Indices
IV-4 Market Area Acquisition Activity
IV-5 Director and Senior Management Summary Resumes
IV-6 Pro Forma Regulatory Capital Ratios
IV-7 Pro Forma Analysis Sheet: Fully Converted Basis
IV-8 Pro Forma Effect of Conversion Proceeds: Fully Converted Basis
IV-9 Peer Group Core Earnings Analysis
IV-10 Pro Forma Analysis Sheet: Minority Stock Offering
IV-11 Pro Forma Effects: Minority Stock Offering
V-1 Firm Qualifications Statement
</TABLE>
<PAGE>
EXHIBIT I-1
Baltimore County Savings Bank, F.S.B.
Map of Office Locations
<PAGE>
[MAP OF BALTIMORE COUNTY SB BRANCH LOCATIONS APPEARS HERE]
<PAGE>
EXHIBIT I-2
Baltimore County Savings Bank, F.S.B.
Audited Financial Statements
[Incorporated by Reference]
<PAGE>
EXHIBIT I-3
Baltimore County Savings Bank, F.S.B.
Key Operating Ratios
<TABLE>
<CAPTION>
At or for the
Year Ended September 30,
------------------------------------------------------------------
1997 1996 1995 1994 1993
------ ------ ------ ----- ------
<S> <C> <C> <C> <C> <C>
Performance Ratios:
Return on average assets (net income divided
by average total assets)........................ .76% .47% .68% .91% 1.12%
Return on average retained earnings (net
income divided by average retained
earnings)....................................... 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)............ 3.41 3.26 3.52 4.12 4.47
Net interest margin (net interest income
divided by average interest-earning assets)..... 3.67 3.49 3.74 4.24 4.57
Ratio of average interest-earning assets to
average interest-bearing liabilities............ 106.20 104.99 105.20 103.48 102.51
Ratio of non-interest expense to average
total assets.................................... 2.39 2.87 2.53 2.40 2.39
Asset Quality Ratios:
Nonperforming assets to total assets at
end of period................................... .76 1.07 .96 1.41 2.10
Nonperforming loans to gross loans at
end of period................................... 1.11 1.38 .58 .76 1.88
Allowance for loan losses to gross loans
at end of period................................ .59 .56 .50 .39 .43
Allowance for loan losses to nonperforming
loans at end of period.......................... 53.07 40.49 87.07 51.77 23.13
Provision for loan losses to gross loans......... .17 .26 .16 (.10) (.33)
Net Charge-offs to average loans outstanding..... (.15) (.30) (.01) .05 .17
Capital Ratios:
Retained earnings to total assets at end
of period....................................... 9.48 8.45 8.60 8.80 7.84
Average retained earnings to average assets...... 8.75 8.36 8.62 8.09 7.02
</TABLE>
Source: BCSB's prospectus.
<PAGE>
EXHIBIT I-4
Baltimore County Savings Bank, F.S.B.
Investment Portfolio Composition
<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.................. $ 10,981 5.40% $ 4,250 6.43% $ 14,343 7.53% $ 749 7.75%
FHLB stock.................... -- -- -- -- -- -- 1,433 7.21
Mortgage-backed securities.... 1,262 7.20 19,250 6.35 12,212 6.95 4,465 8.08
--------- --------- --------- ---------
Total........................ $ 12,243 5.59 $ 23,500 6.36 $ 26,555 7.26 $ 6,647 7.86
========= ========= ========= =========
<CAPTION>
Total Investment Portfolio
-----------------------------
Carrying Market Average
Value Value Yield
------- ----- ------
(Dollars in thousands)
<S> <C> <C> <C>
Securities held to maturity:
U.S. government and agency
obligations.................. $ 30,323 $ 30,382 6.61%
FHLB stock.................... 1,433 1,433 7.21
Mortgage-backed securities.... 37,389 36,752 6.78
--------- ---------
Total........................ $ 68,945 $ 68,567 6.71
========= =========
</TABLE>
Source: BCSB's prospectus.
<PAGE>
EXHIBIT I-5
Baltimore County Savings Bank, F.S.B.
Yields and Costs
<TABLE>
<CAPTION>
Year Ended September 30,
-------------------------------------
At September 30, 1997 1997
--------------------- -------------------------------------
Average
Yield/ Average Yield/
Balance Cost Balance Interest Cost
---------- ------ ---------- ---------- -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans receivable (1).......................... $ 158,676 8.48% $ 156,227 $ 13,240 8.47%
Mortgage backed securities.................... 37,189 6.78 37,440 2,428 6.49
Investment securities (2) and FHLB stock...... 31,756 6.64 39,177 2,877 7.34
Other interest-earning assets................. 15,308 6.00 16,150 912 5.65
--------- --------- --------
Total interest earning assets............... 242,929 7.87 248,994 19,457 7.81
Non-interest-earning assets.................... 8,809 12,317
--------- ---------
Total assets................................ $ 251,738 $ 261,311
========= =========
Interest-bearing liabilities:
Deposits...................................... $ 224,656 4.37 $ 232,929 10,312 4.43
Other liabilities............................. 727 .52 1,523 10 .66
--------- --------- --------
Total interest-bearing liabilities.......... 225,383 4.36 234,452 10,322 4.40
Non-interest-bearing liabilities............... 2,497 3,989 --------
--------- ---------
Total liabilities........................... 227,880 238,441
Retained earnings.............................. 23,858 22,870
--------- ---------
Total liabilities and retained earnings..... $ 251,738 $ 261,311
========= =========
Net interest income............................ $ 9,135
========
Interest rate spread........................... 3.51% 3.41%
==== ======
Net interest margin (3)........................ 3.67%
======
Ratio of average interest-earning assets
to average interest-bearing liabilities....... 106.20%
======
<CAPTION>
Year Ended September 30,
----------------------------------------------------------------------------------
1996 1995
---------------------------------------- --------------------------------------
Average Average
Average Yield/ Average Yield/
Balance Interest Cost Balance Interest Cost
----------- ---------- ------- ---------- ---------- -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans receivable (1).......................... $ 149,571 $ 13,094 8.75% $ 137,845 $ 12,017 8.72%
Mortgage backed securities.................... 36,936 2,309 6.25 37,220 2,381 6.40
Investment securities (2) and FHLB stock...... 34,966 2,439 6.98 22,344 1,548 6.93
Other interest-earning assets................. 20,349 1,222 6.01 20,803 1,180 5.67
--------- --------- --------- ---------
Total interest earning assets............... 241,822 19,064 7.88 218,212 17,126 7.85
Non-interest-earning assets.................... 12,636 12,305
--------- ---------
Total assets................................ $ 254,458 $ 230,517
========= =========
Interest-bearing liabilities:
Deposits...................................... $ 228,913 10,621 4.64 $ 204,097 8,833 4.33
Other liabilities............................. 1,406 15 1.07 3,330 141 4.23
--------- --------- --------- --------
Total interest-bearing liabilities.......... 230,319 10,636 4.62 207,427 8,974 4.33
--------- --------
Non-interest-bearing liabilities............... 2,861 3,213
--------- ---------
Total liabilities........................... 233,180 210,640
Retained earnings.............................. 21,278 19,877
--------- ---------
Total liabilities and retained earnings..... $ 254,458 $ 230,517
========= =========
Net interest income............................ $ 8,428 $ 8,152
========= =========
Interest rate spread........................... 3.26% 3.52%
======= =======
Net interest margin (3)........................ 3.49% 3.74%
======= =======
Ratio of average interest-earning assets
to average interest-bearing liabilities....... 104.99% 105.20%
======= =======
</TABLE>
- ---------------
(1) Includes nonaccrual loans.
(2) Consists of U.S. Government and agency securities and, for the years
ended September 30, 1996 and 1995, investments in mutual funds.
(3) Represents net interest income divided by the average balance of
interest-earning assets.
Source: BCSB's prospectus.
<PAGE>
EXHIBIT I-6
Baltimore County Savings Bank, F.S.B.
Loan Loss Allowance Activity
The following table sets forth an analysis of the Bank's allowance for loan
losses for the periods indicated.
<TABLE>
<CAPTION>
Year Ended September 30,
--------------------------------------------------
1997 1996 1995 1994 1993
------ ------ ------ ------ ------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Balance at beginning of period........... $ 926 $ 788 $ 542 $ 613 $ 836
------ ------ ------ ------ ------
Loans charged-off:
Real estate mortgage:
Single-family residential.............. -- -- -- -- --
Multi-family residential............... -- -- -- -- --
Commercial............................. -- (4) -- -- --
Construction........................... -- -- -- -- --
Consumer................................ (392) (394) (178) (71) (67)
------ ------ ------ ------ ------
Total charge-offs (392) (398) (178) (71) (67)
Recoveries:
Real estate mortgage:
Single-family residential.............. -- -- -- -- --
Multi-family residential............... -- -- -- -- --
Commercial............................. -- -- -- -- --
Construction........................... -- -- -- -- --
Consumer................................ 158 102 169 137 309
------ ------ ------ ------ ------
Total recoveries......................... 158 102 169 137 309
Net loans charged off.................... (234) (296) (9) 66 242
Provision (recovery) for loan losses..... 286 434 255 (137) (465)
------ ------ ------ ------ ------
Balance at end of period................. $ 978 $ 926 $ 788 $ 542 $ 613
====== ====== ====== ====== ======
Ratio of net charge-offs to average
loans outstanding during the period..... (.15)% (.20)% (.01)% .05% .17%
====== ====== ====== ====== ======
</TABLE>
Source: BCSB's prospectus.
<PAGE>
EXHIBIT I-7
Baltimore County Savings Bank, F.S.B.
Fixed Rate and Adjustable Rate Loans
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>
Source: BCSB's prospectus.
<PAGE>
EXHIBIT I-8
Baltimore County Savings Bank, F.S.B.
NPV Analysis
<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 $ 15,539 $ (12,779) (45.0)% 6.43% (455) bp
+300 bp 18,839 (9,478) (33.0)% 7.67 (332) bp
+200 bp 22,202 (6,115) (22.0) 8.88 (210) bp
+100 bp 25,474 (2,843) (10.0) 10.03 (96) bp
0 bp 28,317 -- -- 10.98 --
- -100 bp 30,214 1,897 7.0 11.59 +61 bp
- -200 bp 32,211 3,893 14.0 12.22 +123 bp
- -300 bp 34,496 6,178 22.0 12.92 +193 bp
- -400 bp 37,750 9,433 33.0 13.91 +293 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.
Source: BCSB's prospectus.
<PAGE>
EXHIBIT I-9
Baltimore County Savings Bank, F.S.B.
Loan Portfolio Composition
<TABLE>
<CAPTION>
At September 30,
-----------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993
------------------ ----------------- ----------------- ---------------- -----------------
Amount % Amount % Amount % Amount % Amount %
------ --- ------ --- ------ --- ------ --- ------ ---
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Real estate loans:
Single-family residential(1)...... $ 103,677 62.30% $ 94,275 56.74% $ 87,575 55.87% $ 82,594 59.86 $ 95,546 67.69%
Construction...................... 8,645 5.19 11,427 6.87 7,065 4.51 9,853 7.14 9,707 6.87
Single-family rental property
loans........................... 6,409 3.85 7,065 4.25 8,045 5.13 8,593 6.23 9,456 6.70
Commercial(2)..................... 10,169 6.11 10,316 6.21 11,174 7.13 10,921 7.91 12,060 8.54
Commercial lines of credit......... 60 .04 262 .16 234 .15 110 .08 65 .05
Consumer loans:
Automobile........................ 32,633 19.61 39,925 24.03 40,793 26.02 24,797 17.97 13,395 9.48
Home equity lines of credit....... 3,986 2.40 1,855 1.12 842 .54 125 .09 -- --
Savings account................... 825 .50 1,029 .62 1,022 .65 995 .72 1,019 .72
--------- ------ --------- ------ --------- ------ --------- ------ -------- ------
166,404 100.00% 166,154 100.00% 156,750 100.00% 137,988 100.00% 141,248 100.00%
====== ====== ====== ====== ======
Less:
Undisbursed portion of loans
in process...................... 2,807 5,088 3,425 3,509 1,612
Deferred loan origination fees.... 567 823 1,166 1,539 2,180
Unearned interest................. 3,376 4,757 5,576 3,188 1,446
Allowance for loan losses......... 978 926 788 542 613
--------- --------- --------- --------- --------
Total........................... $ 158,676 $ 154,560 $ 145,795 $ 129,210 $135,397
========= ========= ========= ========= ========
</TABLE>
- -------------------
(1) Includes fixed-rate second mortgage loans.
(2) Includes acquisition and development loans.
Source: BCSB's prospectus.
<PAGE>
EXHIBIT I-10
Baltimore County Savings Bank, F.S.B.
Loan Originations, Purchases, and Sales
<TABLE>
<CAPTION>
Year ended September 30,
-----------------------------------
1997 1996 1995
------ ------ ------
(In thousands)
<S> <C> <C> <C>
Loans originated:
Real estate loans:
Single-family residential........... $ 22,507 $ 27,594 $ 13,727
Single-family rental property loans. 135 157 249
Commercial.......................... 1,650 91 282
Construction........................ 1,228 2,969 3,045
Commercial lines of credit........... -- 68 132
Consumer loans:
Automobiles......................... 14,070 21,677 33,334
Home equity......................... 11,871 8,347 4,092
Savings account..................... 319 495 488
-------- -------- --------
Total loans originated............. $ 51,780 $ 61,398 $ 55,349
======== ======== ========
Loans purchased:
Real estate loans.................... $ -- $ -- $ --
Other loans.......................... -- -- --
-------- -------- --------
Total loans purchased.............. $ -- $ -- $ --
======== ======== ========
Loans sold:
Whole loans.......................... $ -- $ -- $ --
Participation loans.................. 225 4,914 94
-------- -------- --------
Total loans sold................... $ 225 $ 4,914 $ 94
======== ======== ========
</TABLE>
Source: BCSB's prospectus
<PAGE>
EXHIBIT I-11
Baltimore County Savings Bank, F.S.B.
Contractual Maturity By Loan Type
<TABLE>
<CAPTION>
Due During the Year Ending Due After Due After
September 30, 3 Through 5 Through
--------------------------- 5 Years After 10 Years After
1998 1999 2000 September 30, 1997 September 30, 1997
---- ---- ---- ------------------ ------------------
(In thousands)
<S> <C> <C> <C> <C> <C>
Real estate loans:
Single-family residential.................. $ 7,500 $ 7,886 $ 7,770 $ 12,871 $ 25,166
Single-family rental property.............. 274 290 292 573 1,455
Commercial................................. 641 700 735 1,470 2,859
Construction............................... 4,144 54 97 133 435
Commercial lines of credit.................. 60 -- -- -- --
Consumer:
Automobiles................................ 9,354 8,635 6,694 6,295 1,634
Home equity................................ -- -- -- -- --
Savings accounts........................... 468 233 124 -- --
-------- -------- -------- --------- ---------
Total..................................... $ 22,441 $ 17,798 $ 15,712 $ 21,342 $ 31,549
======== ======== ======== ========= =========
</TABLE>
<TABLE>
<CAPTION>
Due After
10 through Due After 15
15 Years After Years After
September 30, 1997 September 30, 1997 Total
------------------ ------------------ -------
<S> <C> <C> <C>
Real estate loans:
Single-family residential.................. $ 18,627 $ 23,857 $ 103,677
Single-family rental property.............. 1,563 1,962 6,409
Commercial................................. 2,269 1,495 10,169
Construction............................... 632 3,150 8,645
Commercial lines of credit.................. -- -- 60
Consumer:
Automobiles................................ 21 -- 32,633
Home equity................................ -- 3,986 3,986
Savings accounts........................... -- -- 825
--------- --------- ----------
Total..................................... $ 23,112 $ 34,450 $ 166,404
========= ========= ==========
</TABLE>
Source: BCSB's prospectus
<PAGE>
EXHIBIT I-12
Baltimore County Savings Bank, F.S.B.
Non-Performing Assets
<TABLE>
<CAPTION>
Year Ended September 30,
------------------------------------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Loans accounted for on a nonaccrual basis:(1)
Real estate:
Single-family residential....................... $ 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........................................... $ 1,843 $ 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...................... $ 1,843 $ 2,287 $ 905 $ 1,047 $ 2,650
========== ========== ========== ========== ==========
Percentage of gross loans......................... 1.11% 1.38% 0.58% 0.76% 1.88%
========== ========== ========== ========== ==========
Percentage of total assets........................ 0.73% 0.88% 0.38% 0.48% 1.22%
========== ========== ========== ========== ==========
Other non-performing assets(2).................... $ 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.
Source: BCSB's prospectus.
<PAGE>
EXHIBIT I-13
Baltimore County Savings Bank, F.S.B.
Deposit Composition
<TABLE>
<CAPTION>
Balance at Balance at Balance at
September 30, % of Increase September 30, % of Increase September 30, % of
1997 Deposits (Decrease) 1996 Deposits (Decrease) 1995 Deposits
------------- -------- ---------- ------------- -------- ---------- ------------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NOW.................................... $ 24,203 10.77% $ 207 $ 23,996 10.28% $ 1,035 $ 22,961 10.54%
Money market deposit................... 10,055 4.48 (516) 10,571 4.54 137 10,434 4.79
Passbook savings deposits.............. 60,657 27.00 (3,841) 64,498 27.64 240 64,258 29.49
Certificates of deposit................ 118,509 52.75 (8,669) 127,178 54.51 12,508 114,670 52.64
Certificates of deposit $100,000 and
over................................. 10,485 4.67 3,959 6,526 2.80 1,377 5,149 2.36
Accrued interests payable.............. 747 .33 205 542 .23 146 396 .18
--------- ------ --------- --------- ------ ---------- --------- ------
$ 224,656 100.00% $ (8,655) $ 233,311 100.00% $ 15,443 $ 217,868 100.00%
========= ====== ========= ========= ====== ========== ========= ======
</TABLE>
Source: BCSB's prospectus
<PAGE>
EXHIBIT I-14
Baltimore County Savings Bank, F.S.B.
Time Deposit Rate/Maturity
The following table sets forth the amount and maturities of time deposits at
September 30, 1997.
<TABLE>
<CAPTION>
Amount Due
------------------------------------------------------------------------
Less Than After
Rate One Year 1-2 Years 2-3 Years 3 Years Total
- ---- -------- --------- --------- ------- -----
<S> <C> <C> <C> <C> <C>
(In thousands)
4.01 - 6% ...................... $ 91,899 $ 17,482 $ 1,469 $ 5,179 $ 116,029
6.01 - 8% ...................... 936 889 10,139 874 12,838
8.01 10% ...................... 9 -- 118 -- 127
-------- --------- --------- ------- ---------
$ 92,844 $ 18,371 $ 11,726 $ 6,053 $ 128,994
======== ========= ========= ======= =========
</TABLE>
Source: BCSB's prospectus
<PAGE>
EXHIBIT II-1
Baltimore County Savings Bank, F.S.B.
Description of Office Facilities
<TABLE>
<CAPTION>
Book Value at Deposits at
Year Owned or September 30, Approximate September 30,
Opened Leased 1997 Square Footage 1997
------ -------- ------------- -------------- -------------
(Deposits in thousands)
<S> <C> <C> <C> <C> <C>
Main Office:
Perry Hall 1955 Owned (1) $ 416,856 8,000 $ 94,417
Branch Offices:
Bell Air 1975 Leased -- 2,000 26,120
Dundalk 1976 Leased -- 1,700 30,943
York Road 1977 Leased -- 1,155 13,770
Timonium 1978 Leased -- 1,250 29,450
Catonsville 1981 Leased -- 1,750 21,654
Severna Park (2) 1980 Leased -- 1,237 8,302
Administrative Office:
4111 E. Joppa Road 1994 Owned 1,373,934 18,000 N/A
</TABLE>
- ------------------
(1) Building is owned, but land is leased.
(2) The deposits for this branch were sold in October 1997.
Source: BSCB's prospectus
<PAGE>
EXHIBIT II-2
Historical Interest Rates
<PAGE>
<TABLE>
<CAPTION>
Exhibit II-2
Historical Interest Rates(1)
Prime 90 Day One Year 30 Year
Year/Qtr. Ended Rate T-Bill T-Bill T-Bond
--------------- ---- ------ ------ ------
<S> <C> <C> <C> <C>
1991: Quarter 1 8.75% 5.92% 6.24% 8.26%
Quarter 2 8.50% 5.72% 6.35% 8.43%
Quarter 3 8.00% 5.22% 5.38% 7.80%
Quarter 4 6.50% 3.95% 4.10% 7.47%
1992: Quarter 1 6.50% 4.15% 4.53% 7.97%
Quarter 2 6.50% 3.65% 4.06% 7.79%
Quarter 3 6.00% 2.75% 3.06% 7.38%
Quarter 4 6.00% 3.15% 3.59% 7.40%
1993: Quarter 1 6.00% 2.95% 3.18% 6.93%
Quarter 2 6.00% 3.09% 3.45% 6.67%
Quarter 3 6.00% 2.97% 3.36% 6.03%
Quarter 4 6.00% 3.06% 3.59% 6.34%
1994: Quarter 1 6.25% 3.56% 4.44% 7.09%
Quarter 2 7.25% 4.22% 5.49% 7.61%
Quarter 3 7.75% 4.79% 5.94% 7.82%
Quarter 4 8.50% 5.71% 7.21% 7.88%
1995: Quarter 1 9.00% 5.86% 6.47% 7.43%
Quarter 2 9.00% 5.57% 5.63% 6.63%
Quarter 3 8.75% 5.42% 5.68% 6.51%
Quarter 4 8.50% 5.09% 5.14% 5.96%
1996: Quarter 1 8.25% 5.14% 5.38% 6.67%
Quarter 2 8.25% 5.16% 5.68% 6.87%
Quarter 3 8.25% 5.03% 5.69% 6.92%
Quarter 4 8.25% 5.18% 5.49% 6.64%
1997: Quarter 1 8.50% 5.32% 6.00% 7.10%
Quarter 2 8.50% 5.17% 5.66% 6.78%
Quarter 3 8.50% 5.10% 5.44% 6.40%
Quarter 4 8.50% 5.34% 5.48% 5.92%
January 2, 1998 8.50% 5.29% 5.42% 5.84%
</TABLE>
(1) End of period data.
Source: SNL Securities.
<PAGE>
EXHIBIT III-1
General Characteristics of Publicly-Traded Institutions
<PAGE>
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
January 7, 1998(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
- ------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ------ ------
($Mil) ($) ($Mil)
California Companies
- --------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AHM Ahmanson and Co. H.F. of CA NYSE Nationwide M.B. 46,800 368 12-31 10/72 64.69 6,107
GDW Golden West Fin. Corp. of CA NYSE Nationwide M.B. 39,229 246 12-31 05/59 96.94 5,503
GSB Glendale Fed. Bk, FSB of CA NYSE CA Div. 16,433 154 06-30 10/83 37.62 1,898
CSA Coast Savings Financial of CA NYSE California R.E. 9,040 92 12-31 12/85 67.50 1,258
DSL Downey Financial Corp. of CA NYSE Southern CA Thrift 5,854 85 12-31 01/71 28.87 772
FED FirstFed Fin. Corp. of CA NYSE Los Angeles CA R.E. 4,105 25 12-31 12/83 38.69 410
BPLS Bank Plus Corp. of CA OTC Los Angeles CA R.E. 3,920 37 12-31 / 12.87 249
WES Westcorp Inc. of Orange CA NYSE California Div. 3,757 26 12-31 05/86 17.25 453
BVCC Bay View Capital Corp. of CA OTC San Francisco CA M.B. 3,162 41 12-31 05/86 37.25 463
PFFB PFF Bancorp of Pomona CA OTC Southern CA Thrift 2,615 23 03-31 03/96 20.50 367
CENF CENFED Financial Corp. of CA OTC Los Angeles CA Thrift 2,305 18 12-31 10/91 44.00 262
AFFFZ America First Fin. Fund of CA OTC San Francisco CA Div. 2,251 36 12-31 / 54.00 325
HEMT HF Bancorp of Hemet CA OTC Southern CA Thrift 1,050 19 06-30 06/95 18.25 115
REDF RedFed Bancorp of Redlands CA OTC Southern CA Thrift 967 14 12-31 04/94 19.81 142
ITLA Imperial Thrift & Loan of CA (3) OTC Los Angeles CA R.E. 902 9 12-31 / 19.25 151
HTHR Hawthorne Fin. Corp. of CA OTC Southern CA Thrift 891 6 12-31 / 20.37 63
QCBC Quaker City Bancorp of CA OTC Los Angeles CA R.E. 847 8 06-30 12/93 20.50 96
PROV Provident Fin. Holdings of CA OTC Southern CA M.B. 641 9 06-30 06/96 21.00 102
HBNK Highland Federal Bank of CA OTC Los Angeles CA R.E. 516 8 12-31 / 32.75 75
MBBC Monterey Bay Bancorp of CA OTC West Central CA Thrift 410 7 12-31 02/95 19.75 64
SGVB SGV Bancorp of W. Covina CA OTC Los Angeles CA Thrift 409 8 06-30 06/95 17.75 42
BYFC Broadway Fin. Corp. of CA OTC Los Angeles CA Thrift 125 3 12-31 01/96 13.25 11
<CAPTION>
Florida Companies
- -----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
OCN Ocwen Financial Corp. of FL OTC Southeast FL Div. 2,956 1 12-31 / 25.00 1,513
BANC BankAtlantic Bancorp of FL OTC Southeastern FL M.B. 2,845 60 12-31 11/83 17.00 379
BKUNA BankUnited SA of FL OTC Miami FL Thrift 2,145 14 09-30 12/85 15.37 147
FFPB First Palm Beach Bancorp of FL OTC Southeast FL Thrift 1,808 40 09-30 09/93 43.12 218
HARB Harbor FSB, MHC of FL (46.6) OTC Eastern FL Thrift 1,131 23 09-30 01/94 66.75 332
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
January 7, 1998(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
- ------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ------ ------
($Mil) ($) ($Mil)
Florida Companies (continued)
- -----------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FFFL Fidelity FSB, MHC of FL (47.7) OTC Southeast FL Thrift 1,046 20 12-31 01/94 31.50 214
CMSV Commty. Svgs, MHC of FL (48.5) OTC Southeast FL Thrift 709 20 12-31 10/94 35.25 180
FFLC FFLC Bancorp of Leesburg FL OTC Central FL Thrift 383 9 12-31 01/94 21.75 83
Mid-Atlantic Companies
- ----------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
DME Dime Bancorp, Inc. of NY (3) NYSE NY,NJ,FL M.B. 19,413 91 12-31 08/86 28.75 2,918
SVRN Sovereign Bancorp of PA OTC PA,NJ,DE M.B. 14,601 120 12-31 08/86 20.25 1,808
GPT GreenPoint Fin. Corp. of NY (3) NYSE New York City NY Thrift 13,094 74 12-31 01/94 71.88 3,078
ASFC Astoria Financial Corp. of NY OTC NY City, NY Thrift 7,904 45 12-31 11/93 56.44 1,166
LISB Long Island Bancorp, Inc of NY OTC Long Island NY M.B. 5,931 36 09-30 04/94 50.12 1,204
ALBK ALBANK Fin. Corp. of Albany NY OTC Upstate NY,MA,VT Thrift 3,717 72 12-30 04/92 49.62 639
ROSE T R Financial Corp. of NY (3) OTC New York City NY Thrift 3,692 15 12-31 06/93 33.44 588
RSLN Roslyn Bancorp, Inc. of NY (3) OTC Long Island NY M.B. 3,474 6 12-31 01/97 24.12 1,053
NYB New York Bancorp, Inc. of NY NYSE Southeastern NY Thrift 3,244 29 09-30 01/88 39.12 834
SIB Staten Island Bancorp of NY (3) NYSE New York City Thrift 2,466 P 16 12-31 12/97 20.18 867
MLBC ML Bancorp of Villanova PA OTC Philadelphia PA M.B. 2,316 18 03-31 08/94 29.94 355
CMSB Cmnwealth Bancorp of PA OTC Philadelphia PA M.B. 2,278 56 06-30 06/96 20.37 331
HARS Harris SB, MHC of PA (24.3) OTC Harrisburg PA M.B. 2,110 31 12-31 01/94 19.87 671
NWSB Northwest SB, MHC of PA (30.7) OTC Pennsylvania Thrift 2,101 53 06-30 11/94 14.62 684
RELY Reliance Bancorp, Inc. of NY OTC New York City NY Thrift 2,035 28 06-30 03/94 36.31 316
HAVN Haven Bancorp of Woodhaven NY OTC New York City NY Thrift 1,833 20 12-31 09/93 22.94 201
QCSB Queens County Bancorp of NY (3) OTC New York City NY Thrift 1,541 13 12-31 11/93 39.12 591
JSB JSB Financial, Inc. of NY NYSE New York City NY Thrift 1,531 13 12-31 06/90 50.37 499
WSFS WSFS Financial Corp. of DE (3) OTC Wilmington Div. 1,496 16 12-31 11/86 20.00 249
OCFC Ocean Fin. Corp. of NJ OTC Eastern NJ Thrift 1,489 10 12-31 07/96 37.50 307
DIME Dime Community Bancorp of NY OTC New York City NY Thrift 1,385 15 06-30 06/96 22.37 282
PFSB PennFed Fin. Services of NJ OTC Northern NJ Thrift 1,364 17 06-30 07/94 33.12 160
MFSL Maryland Fed. Bancorp of MD OTC Pr. Georges Co. Thrift 1,157 J 25 02-28 06/87 35.00 226
YFED York Financial Corp. of PA OTC PA,MD Thrift 1,156 22 06-30 02/84 25.75 227
FSLA First SB SLA MHC of NJ (47.5) OTC Eastern NJ Thrift 1,045 16 12-31 07/92 48.50 388
PVSA Parkvale Financial Corp of PA OTC Southwestern PA Thrift 1,005 28 06-30 07/87 32.62 167
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
January 7, 1998(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
- ------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ------ ------
($Mil) ($) ($Mil)
Mid-Atlantic Companies (continued)
- ----------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FFIC Flushing Fin. Corp. of NY (3) OTC New York City NY Thrift 960 7 12-31 11/95 23.25 186
PSBK Progressive Bank, Inc. of NY (3) OTC Southeast NY Thrift 885 17 12-31 08/84 37.75 145
PKPS Poughkeepsie Fin. Corp. of NY OTC Southeast NY Thrift 884 13 12-31 11/85 11.00 139
PWBC PennFirst Bancorp of PA OTC Western PA Thrift 822 9 12-31 06/90 19.69 105
MBB MSB Bancorp of Middletown NY (3) AMEX Southeastern NY Thrift 814 J 16 12-31 09/92 35.75 102
GAF GA Financial Corp. of PA AMEX Pittsburgh PA Thrift 802 13 12-31 03/96 18.87 150
IBSF IBS Financial Corp. of NJ OTC Southwest NJ Thrift 735 10 09-30 10/94 17.50 192
SFIN Statewide Fin. Corp. of NJ OTC Northern NJ Thrift 703 16 12-31 10/95 23.50 108
FBBC First Bell Bancorp of PA OTC Pittsburgh PA Thrift 681 7 12-31 06/95 19.00 124
TSBS Peoples Bcrp, MHC of NJ (35.9) OTC Central NJ Thrift 639 14 12-31 08/95 43.00 389
THRD TF Financial Corp. of PA OTC Philadelphia PA Thrift 625 14 06-30 07/94 29.00 119
FSNJ Bayonne Banchsares of NJ OTC Northern NJ Thrift 609 4 03-31 08/97 13.56 122
FMCO FMS Financial Corp. of NJ OTC Southern NJ Thrift 582 18 12-31 12/88 34.25 82
AHCI Ambanc Holding Co., Inc. of NY (3) OTC East-Central NY Thrift 529 12 12-31 12/95 19.25 83
PULS Pulse Bancorp of S. River NJ OTC Central NJ Thrift 526 4 09-30 09/86 27.00 83
FSPG First Home Bancorp of NJ OTC NJ,DE Thrift 525 10 12-31 04/87 30.00 81
LVSB Lakeview SB of Paterson NJ OTC Northern NJ Thrift 518 8 07-31 12/93 25.25 105
PFNC Progress Financial Corp. of PA OTC Southeastern PA Thrift 437 9 12-31 07/83 16.50 66
CNY Carver Bancorp, Inc. of NY AMEX New York, NY Thrift 416 7 03-31 10/94 16.62 38
RARB Raritan Bancorp. of Raritan NJ (3) OTC Central NJ Thrift 407 6 12-31 03/87 27.25 65
SHEN First Shenango Bancorp of PA OTC Western PA Thrift 401 4 12-31 04/93 34.25 71
FSBI Fidelity Bancorp, Inc. of PA OTC Southwestern PA Thrift 381 8 09-30 06/88 29.25 45
FKFS First Keystone Fin. Corp of PA OTC Philadelphia PA Thrift 373 5 09-30 01/95 37.00 45
PBCI Pamrapo Bancorp, Inc. of NJ OTC Northern NJ Thrift 372 8 12-31 11/89 26.00 74
FOBC Fed One Bancorp of Wheeling WV OTC Northern WV,OH Thrift 358 9 12-31 01/95 28.00 66
HARL Harleysville SA of PA OTC Southeastern PA Thrift 345 4 09-30 08/87 29.37 49
WSBI Warwick Community Bncrp of NY (3) OTC Southeast NY Thrift 340 P 4 05-31 12/97 16.44 105
LFBI Little Falls Bancorp of NJ OTC New Jersey Thrift 324 6 12-31 01/96 20.50 53
CVAL Chester Valley Bancorp of PA OTC Southeastern PA Thrift 322 7 06-30 03/87 30.00 65
EQSB Equitable FSB of Wheaton MD OTC Central MD Thrift 315 4 09-30 09/93 53.00 32
YFCB Yonkers Fin. Corp. of NY OTC Yonkers NY Thrift 313 4 09-30 04/96 19.75 60
FIBC Financial Bancorp, Inc. of NY OTC New York, NY Thrift 297 5 09-30 08/94 24.12 41
CATB Catskill Fin. Corp. of NY (3) OTC Albany NY Thrift 290 4 09-30 04/96 18.12 84
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
January 7, 1998(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
- ------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ------ ------
($Mil) ($) ($Mil)
Mid-Atlantic Companies (continued)
- ----------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
LFED Leeds FSB, MHC of MD (36.3) OTC Baltimore MD Thrift 285 1 06-30 05/94 21.88 113
FBER First Bergen Bancorp of NJ OTC Northern NJ Thrift 285 4 09-30 04/96 19.75 57
WVFC WVS Financial Corp. of PA (3) OTC Pittsburgh PA Thrift 282 5 06-30 11/93 35.12 61
PHFC Pittsburgh Home Fin. of PA OTC Pittsburgh PA Thrift 273 6 09-30 04/96 18.25 36
WSB Washington SB, FSB of MD AMEX Southeastern MD Thrift 268 J 4 07-31 / 9.00 39
WYNE Wayne Bancorp of NJ OTC Northern NJ Thrift 267 0 12-31 06/96 26.75 54
IFSB Independence FSB of DC OTC Washington DC Ret. 258 J 2 12-31 06/85 17.00 22
GDVS Greater DV SB,MHC of PA (19.9) (3) OTC Southeast PA Thrift 249 7 12-31 03/95 30.75 101
SKAN Skaneateles Bancorp Inc of NY (3) OTC Northwest NY Thrift 248 9 12-31 06/86 22.25 32
ESBK The Elmira SB FSB of Elmira NY (3) OTC NY,PA Thrift 228 6 12-31 03/85 30.00 22
SBFL SB Fngr Lakes MHC of NY (33.1) OTC Western NY Thrift 228 4 04-30 11/94 32.00 57
HRBF Harbor Federal Bancorp of MD OTC Baltimore MD Thrift 217 9 03-31 08/94 25.25 43
LARL Laurel Capital Group of PA OTC Southwestern PA Thrift 210 6 06-30 02/87 32.50 47
PHSB Ppls Home SB, MHC of PA (45.0) OTC Western PA Thrift 206 9 12-31 07/97 18.87 52
PBHC OswegoCity SB MHC of NY (46.1) (3) OTC Upstate NY Thrift 193 5 12-31 11/95 29.00 56
PEEK Peekskill Fin. Corp. of NY OTC Southeast NY Thrift 181 3 06-30 12/95 16.87 54
PLSK Pulaski SB, MHC of NJ (46.0) OTC New Jersey Thrift 179 6 12-31 04/97 18.25 38
SFED SFS Bancorp of Schenectady NY OTC Eastern NY Thrift 174 3 12-31 06/95 26.87 33
AFED AFSALA Bancorp, Inc. of NY OTC Central NY Thrift 160 5 12-31 10/96 18.56 27
SKBO First Carnegie,MHC of PA (45.0) OTC Western PA Thrift 147 J 3 03-31 04/97 18.75 43
PRBC Prestige Bancorp of PA OTC Southwestern PA Thrift 138 4 12-31 06/96 20.00 18
TPNZ Tappan Zee Fin., Inc. of NY OTC Southeast NY Thrift 124 J 1 03-31 10/95 18.75 28
GOSB GSB Financial Corp. of NY OTC Southeast NY Thrift 117 2 09-30 07/97 17.50 39
WWFC Westwood Fin. Corp. of NJ OTC Northern NJ Thrift 110 2 03-31 06/96 28.25 18
AFBC Advance Fin. Bancorp of WV OTC Northern Neck WV Thrift 106 2 06-30 01/97 17.50 19
WHGB WHG Bancshares of MD OTC Baltimore MD Thrift 99 5 09-30 04/96 18.75 26
SHSB SHS Bancorp, Inc. of PA OTC Pittsburgh Thrift 90 P 4 12-31 10/97 16.87 14
ALBC Albion Banc Corp. of Albion NY OTC Western NY Thrift 71 2 09-30 07/93 40.50 10
PWBK Pennwood SB of PA (3) OTC Pittsburgh PA Thrift 48 3 12-31 07/96 19.75 11
</TABLE>
Mid-West Companies
- ------------------
<PAGE>
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
January 7, 1998(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
- ------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ------ ------
($Mil) ($) ($Mil)
Mid-West Companies (continued)
- ------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
COFI Charter One Financial of OH OTC OH,MI Div. 15,197 221 12-31 01/88 62.37 3,091
CFB Commercial Federal Corp. of NE NYSE NE,CO,KS,OK,IA M.B. 7,207 107 06-30 12/84 35.69 1,155
SPBC St. Paul Bancorp, Inc. of IL OTC Chicago IL Div. 4,549 52 12-31 05/87 26.50 905
MAFB MAF Bancorp of IL OTC Chicago IL Thrift 3,371 20 12-31 01/90 35.75 545
CTZN CitFed Bancorp of Dayton OH OTC Dayton OH M.B. 3,295 35 03-31 01/92 39.50 513
GTFN Great Financial Corp. of KY OTC Kentucky M.B. 2,894 45 12-31 03/94 50.37 696
FLGS Flagstar Bancorp, Inc of MI OTC MI Thrift 2,033 15 12-31 / 19.81 271
ABCW Anchor Bancorp Wisconsin of WI OTC Wisconsin M.B. 1,955 35 03-31 07/92 36.00 326
DNFC D&N Financial Corp. of MI OTC MI Ret. 1,754 37 12-31 02/85 25.94 235
STFR St. Francis Cap. Corp. of WI OTC Milwaukee WI Thrift 1,661 23 09-30 06/93 50.75 266
FTFC First Fed. Capital Corp. of WI OTC Southern WI M.B. 1,560 44 12-31 11/89 33.75 309
FISB First Indiana Corp. of IN OTC Central IN M.B. 1,547 28 12-31 08/83 29.50 312
ABCL Allied Bancorp of IL OTC Chicago IL M.B. 1,371 14 09-30 07/92 26.75 215
JSBA Jefferson Svgs Bancorp of MO OTC St. Louis MO,TX Thrift 1,292 J 32 12-31 04/93 21.00 210
AADV Advantage Bancorp of WI OTC WI,IL Thrift 1,037 15 09-30 03/92 69.25 224
OFCP Ottawa Financial Corp. of MI OTC Western MI Thrift 867 26 12-31 08/94 32.50 174
CFSB CFSB Bancorp of Lansing MI OTC Central MI Thrift 860 17 12-31 06/90 26.25 200
NASB North American SB of MO OTC KS,MO M.B. 737 J 7 09-30 09/85 53.13 118
GSBC Great Southern Bancorp of MO OTC Southwest MO Thrift 728 25 06-30 12/89 24.75 200
HOMF Home Fed Bancorp of Seymour IN OTC Southern IN Thrift 694 16 06-30 01/88 26.75 136
SFSL Security First Corp. of OH OTC Northeastern OH R.E. 681 13 03-31 01/88 21.00 159
FNGB First Northern Cap. Corp of WI OTC Northeast WI Thrift 657 20 12-31 12/83 14.00 124
MSBK Mutual SB, FSB of Bay City MI OTC Michigan M.B. 654 22 12-31 07/92 12.75 55
FFYF FFY Financial Corp. of OH OTC Youngstown OH Thrift 611 10 06-30 06/93 33.25 137
EMLD Emerald Financial Corp of OH OTC Cleveland OH Thrift 604 13 12-31 / 22.50 114
AVND Avondale Fin. Corp. of IL OTC Chicago IL Ret. 597 5 12-31 04/95 16.44 57
HFFC HF Financial Corp. of SD OTC South Dakota Thrift 575 19 06-30 04/92 27.00 76
FDEF First Defiance Fin.Corp. of OH OTC Northwest OH Thrift 574 9 06-30 10/95 15.50 139
HMNF HMN Financial, Inc. of MN OTC Southeast MN Thrift 569 7 12-31 06/94 31.50 133
FFBH First Fed. Bancshares of AR OTC Northern AR Thrift 547 12 12-31 05/96 23.50 115
FFOH Fidelity Financial of OH OTC Cincinnati OH Thrift 529 4 12-31 03/96 15.50 86
FCBF FCB Fin. Corp. of Neenah WI OTC Eastern WI Thrift 523 J 6 03-31 09/93 29.87 116
HFGI Harrington Fin. Group of IN OTC Eastern IN Thrift 521 3 06-30 / 12.75 42
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
January 7, 1998(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
- ------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ------ ------
($Mil) ($) ($Mil)
Mid-West Companies (continued)
- ------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CAFI Camco Fin. Corp. of OH OTC Eastern OH M.B. 502 11 12-31 / 27.00 87
FBCI Fidelity Bancorp of Chicago IL OTC Chicago IL Thrift 498 5 09-30 12/93 24.75 69
CBCI Calumet Bancorp of Chicago IL OTC Chicago IL Thrift 488 5 06-30 02/92 34.00 108
FFSX First FS&LA. MHC of IA (46.1) OTC Western IA Thrift 457 13 06-30 07/92 30.50 86
PERM Permanent Bancorp of IN OTC Southwest IN Thrift 434 12 03-31 04/94 29.75 63
SFSB SuburbFed Fin. Corp. of IL OTC IL,IN Thrift 433 12 12-31 03/92 46.50 59
HALL Hallmark Capital Corp. of WI OTC Milwaukee WI Thrift 418 3 06-30 01/94 16.75 48
MCBS Mid Continent Bancshares of KS OTC Central KS M.B. 405 9 09-30 06/94 45.62 90
CASH First Midwest Fin. Corp. of IA OTC IA,SD R.E. 405 12 09-30 09/93 22.12 60
FMBD First Mutual Bancorp of IL OTC Central IL Thrift 402 12 12-31 07/95 23.00 81
PMFI Perpetual Midwest Fin. of IA OTC EastCentral IA Thrift 402 5 12-31 03/94 28.87 54
WOFC Western Ohio Fin. Corp. of OH OTC Western OH Thrift 397 6 12-31 07/94 27.25 64
ASBI Ameriana Bancorp of IN OTC Eastern IN,OH Thrift 393 8 12-31 03/87 19.87 64
FFHH FSF Financial Corp. of MN OTC Southern MN Thrift 388 11 09-30 10/94 21.00 63
CBSB Charter Financial Inc. of IL OTC Southern IL Thrift 387 8 09-30 12/95 25.31 105
PFSL Pocahnts Fed, MHC of AR (47.0) OTC Northeast AR Thrift 383 6 09-30 04/94 43.50 71
PVFC PVF Capital Corp. of OH OTC Cleveland OH R.E. 383 9 06-30 12/92 20.50 53
FFKY First Fed. Fin. Corp. of KY OTC Central KY Thrift 383 8 06-30 07/87 22.75 95
SWBI Southwest Bancshares of IL OTC Chicago IL Thrift 375 6 12-31 06/92 29.75 79
INBI Industrial Bancorp of OH OTC Northern OH Thrift 354 10 12-31 08/95 18.00 93
HBFW Home Bancorp of Fort Wayne IN OTC Northeast IN Thrift 346 9 09-30 03/95 28.62 71
SMFC Sho-Me Fin. Corp. of MO OTC Southwest MO Thrift 345 8 12-31 07/94 51.00 76
HBEI Home Bancorp of Elgin IL OTC Northern IL Thrift 343 5 12-31 09/96 17.87 123
KNK Kankakee Bancorp of IL AMEX Illinois Thrift 340 9 12-31 01/93 37.00 53
HMCI Homecorp, Inc. of Rockford IL OTC Northern IL Thrift 327 9 12-31 06/90 28.25 48
WFI Winton Financial Corp. of OH OTC Cincinnati OH R.E. 317 J 5 09-30 08/88 20.37 40
WCBI WestCo Bancorp of IL OTC Chicago IL Thrift 309 1 12-31 06/92 27.00 67
FSFF First SecurityFed Fin of IL OTC Chicago Thrift 303 P 5 12-31 10/97 15.75 101
GFCO Glenway Financial Corp. of OH OTC Cincinnati OH Thrift 293 6 06-30 11/90 18.75 43
PFDC Peoples Bancorp of Auburn IN OTC Northeastern IN Thrift 291 6 09-30 07/87 22.00 75
CBK Citizens First Fin.Corp. of IL AMEX Central IL Thrift 278 7 12-31 05/96 21.00 54
EFBI Enterprise Fed. Bancorp of OH OTC Cincinnati OH Thrift 275 5 09-30 10/94 34.25 68
FBCV 1st Bancorp of Vincennes IN OTC Southwestern IN M.B. 261 1 06-30 04/87 30.75 32
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ----------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
January 7, 1998(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
- ------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ------ ------
($Mil) ($) ($Mil)
Mid-West Companies (continued)
- ------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
MFBC MFB Corp. of Mishawaka IN OTC Northern IN Thrift 256 4 09-30 03/94 28.62 47
WAYN Wayne S&L Co. MHC of OH (47.8) OTC Central OH Thrift 250 6 03-31 06/93 29.00 65
EBI Equality Bancorp of MO NYSE St Louis Thrift 249 P 3 03-31 12/97 14.12 35
GFED Guaranty Fed Bancshares of MO OTC Southwest MO Thrift 249 P 4 06-30 12/97 12.87 80
CAPS Capital Savings Bancorp of MO OTC Central MO Thrift 242 8 06-30 12/93 24.25 46
FFED Fidelity Fed. Bancorp of IN OTC Southwestern IN Thrift 235 4 06-30 08/87 10.25 29
OHSL OHSL Financial Corp. of OH OTC Cincinnati, OH Thrift 235 4 12-31 02/93 27.00 33
FFHS First Franklin Corp. of OH OTC Cincinnati OH Thrift 231 7 12-31 01/88 31.25 37
LARK Landmark Bancshares of KS OTC Central KS Thrift 228 J 5 09-30 03/94 23.00 39
MBLF MBLA Financial Corp. of MO OTC Northeast MO Thrift 224 2 06-30 06/93 30.62 39
BFFC Big Foot Fin. Corp. of IL OTC Chicago IL Thrift 215 3 07-31 12/96 21.12 53
FFFD North Central Bancshares of IA OTC Central IA Thrift 215 4 12-31 03/96 19.75 64
CMRN Cameron Fin. Corp. of MO OTC Northwest MO Thrift 212 3 09-30 04/95 20.12 52
MFFC Milton Fed. Fin. Corp. of OH OTC Southwest OH Thrift 210 2 09-30 10/94 15.37 35
MWFD Midwest Fed. Fin. Corp of WI OTC Central WI Thrift 207 J 9 12-31 07/92 28.37 46
WEFC Wells Fin. Corp. of Wells MN OTC Southcentral MN Thrift 205 7 12-31 04/95 18.62 36
FFBZ First Federal Bancorp of OH OTC Eastern OH Thrift 204 6 09-30 06/92 20.25 32
HCBB HCB Bancshares of AR OTC Southern AR Thrift 200 J 6 06-30 05/97 14.75 39
LSBI LSB Fin. Corp. of Lafayette IN OTC Central IN Thrift 200 4 12-31 02/95 27.25 25
NEIB Northeast Indiana Bncrp of IN OTC Northeast IN Thrift 190 3 12-31 06/95 21.75 38
FFWC FFW Corporation of Wabash IN OTC Central IN Thrift 182 3 06-30 04/93 18.00 26
MARN Marion Capital Holdings of IN OTC Central IN Thrift 180 2 06-30 03/93 26.25 47
PULB Pulaski SB, MHC of MO (29.8) OTC St. Louis MO Thrift 179 5 09-30 05/94 31.37 66
PFED Park Bancorp of Chicago IL OTC Chicago IL Thrift 175 3 12-31 08/96 18.87 46
EGLB Eagle BancGroup of IL OTC Central IL Thrift 172 3 12-31 07/96 18.87 23
FFWD Wood Bancorp of OH OTC Northern OH Thrift 167 6 06-30 08/93 23.50 50
BWFC Bank West Fin. Corp. of MI OTC Southeast MI Thrift 165 3 06-30 03/95 16.25 43
JXSB Jcksnville SB,MHC of IL (45.6) OTC Central IL Thrift 164 4 12-31 04/95 28.50 36
SMBC Southern Missouri Bncrp of MO OTC Southeast MO Thrift 163 8 06-30 04/94 20.50 33
FBSI First Bancshares of MO OTC Southcentral MO Thrift 163 6 06-30 12/93 31.50 34
HMLK Hemlock Fed. Fin. Corp. of IL OTC Chicago IL Thrift 162 3 12-31 04/97 17.12 36
QCFB QCF Bancorp of Virginia MN OTC Northeast MN Thrift 157 J 2 06-30 04/95 29.75 41
MWBI Midwest Bancshares, Inc. of IA OTC Southeast IA Thrift 150 4 12-31 11/92 18.25 19
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
January 7, 1998(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
- ------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ------ ------
($Mil) ($) ($Mil)
Mid-West Companies (continued)
- ------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
WEHO Westwood Hmstd Fin Corp of OH OTC Cincinnati OH Thrift 143 2 12-31 09/96 15.63 43
RIVR River Valley Bancorp of IN OTC Southeast IN Thrift 140 J 3 12-31 12/96 18.75 22
GTPS Great American Bancorp of IL OTC East Central IL Thrift 140 3 12-31 06/95 19.00 32
FKKYD Frankfort First Bancorp of KY OTC Frankfort KY Thrift 133 3 06-30 07/95 17.75 29
CLAS Classic Bancshares of KY OTC Eastern KY Thrift 130 J 3 03-31 12/95 16.75 22
MIFC Mid Iowa Financial Corp. of IA OTC Central IA Thrift 126 J 6 09-30 10/92 11.50 19
PTRS Potters Financial Corp of OH OTC Northeast OH Thrift 123 4 12-31 12/93 21.00 20
NBSI North Bancshares of Chicago IL OTC Chicago IL Thrift 122 2 12-31 12/93 18.25 26
HFSA Hardin Bancorp of Hardin MO OTC Western MO Thrift 117 3 03-31 09/95 18.25 16
FFSL First Independence Corp. of KS OTC Southeast KS Thrift 113 2 09-30 10/93 14.25 14
ASBP ASB Financial Corp. of OH OTC Southern OH Thrift 112 1 06-30 04/95 13.25 23
UCBC Union Community Bancorp of IN OTC W.Central IN Thrift 112 P 1 12-31 12/97 14.31 44
BDJI First Fed. Bancorp. of MN OTC Northern MN Thrift 111 5 09-30 04/95 22.00 22
HFFB Harrodsburg 1st Fin Bcrp of KY OTC Central KY Thrift 109 J 2 09-30 10/95 16.75 34
DCBI Delphos Citizens Bancorp of OH OTC Northwest OH Thrift 108 1 09-30 11/96 20.50 40
CBES CBES Bancorp of MO OTC Western MO Thrift 107 2 06-30 09/96 21.75 22
FTNB Fulton Bancorp of MO OTC Central MO Thrift 104 2 06-30 10/96 22.12 38
AMFC AMB Financial Corp. of IN OTC Northwest IN Thrift 103 4 12-31 04/96 16.50 16
PSFC Peoples Sidney Fin. Corp of OH OTC WestCentral OH Thrift 103 2 06-30 04/97 18.00 32
MONT Montgomery Fin. Corp. of IN OTC Westcentral IN Thrift 102 4 06-30 07/97 13.06 22
FTSB Fort Thomas Fin. Corp. of KY OTC Northern KY Thrift 98 2 09-30 06/95 14.87 22
CNSB CNS Bancorp of MO OTC Central MO Thrift 97 5 12-31 06/96 19.00 31
NWEQ Northwest Equity Corp. of WI OTC Northwest WI Thrift 97 3 03-31 10/94 20.75 17
INCB Indiana Comm. Bank, SB of IN OTC Central IN Ret. 96 3 06-30 12/94 20.50 19
THR Three Rivers Fin. Corp. of MI AMEX Southwest MI Thrift 95 J 4 06-30 08/95 22.25 18
GFSB GFS Bancorp of Grinnell IA OTC Central IA Thrift 94 1 06-30 01/94 17.06 17
WCFB Wbstr Cty FSB MHC of IA (45.2) OTC Central IA Thrift 94 1 12-31 08/94 20.00 42
CIBI Community Inv. Bancorp of OH OTC NorthCentral OH Thrift 94 3 06-30 02/95 16.16 15
HHFC Harvest Home Fin. Corp. of OH OTC Southwest OH Thrift 94 3 09-30 10/94 14.50 13
FFDF FFD Financial Corp. of OH OTC Northeast OH Thrift 88 1 06-30 04/96 18.25 26
KYF Kentucky First Bancorp of KY AMEX Central KY Thrift 88 2 06-30 08/95 14.81 19
HZFS Horizon Fin'l. Services of IA OTC Central IA Thrift 88 3 06-30 06/94 12.00 10
SFFC StateFed Financial Corp. of IA OTC Des Moines IA Thrift 88 2 06-30 01/94 14.50 23
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
January 7, 1998(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
- ------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ------ ------
($Mil) ($) ($Mil)
Mid-West Companies (continued)
- ------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PFFC Peoples Fin. Corp. of OH OTC Northeast OH Thrift 86 J 2 09-30 09/96 15.00 22
LOGN Logansport Fin. Corp. of IN OTC Northern IN Thrift 86 1 12-31 06/95 17.25 22
PSFI PS Financial of Chicago IL OTC Chicago IL Thrift 86 1 12-31 11/96 21.37 46
SOBI Sobieski Bancorp of S. Bend IN OTC Northern IN Thrift 84 3 06-30 03/95 24.25 19
FFBI First Financial Bancorp of IL OTC Northern IL M.B. 84 2 12-31 10/93 21.00 9
PCBC Perry Co. Fin. Corp. of MO OTC EastCentral MO Thrift 81 J 1 09-30 02/95 23.37 19
MSBF MSB Financial Corp. of MI OTC Southcentral MI Thrift 77 2 06-30 02/95 19.00 23
HCFC Home City Fin. Corp. of OH OTC Southwest OH Thrift 70 1 06-30 12/96 18.50 17
MIVI Miss. View Hold. Co. of MN OTC Central MN Thrift 70 J 1 09-30 03/95 18.50 14
ATSB AmTrust Capital Corp. of IN OTC Northcentral IN Thrift 70 2 06-30 03/95 14.25 7
CKFB CKF Bancorp of Danville KY OTC Central KY Thrift 60 1 12-31 01/95 18.87 17
NSLB NS&L Bancorp of Neosho MO OTC Southwest MO Thrift 60 2 09-30 06/95 18.50 13
LXMO Lexington B&L Fin. Corp. of MO OTC West Central MO Thrift 59 J 1 09-30 06/96 17.37 20
MRKF Market Fin. Corp. of OH OTC Cincinnati OH Thrift 56 2 09-30 03/97 16.00 21
CSBF CSB Financial Group Inc of IL (3) OTC Centralia IL Thrift 49 2 09-30 10/95 13.50 12
FLKY First Lancaster Bncshrs of KY OTC Central KY Thrift 47 1 06-30 07/96 16.00 15
RELI Reliance Bancshares Inc of WI (3) OTC Milwaukee WI Thrift 47 1 06-30 04/96 9.62 24
HBBI Home Building Bancorp of IN OTC Southwest IN Thrift 42 2 09-30 02/95 21.00 7
HWEN Home Financial Bancorp of IN OTC Central IN Thrift 41 1 06-30 07/96 18.50 9
LONF London Financial Corp. of OH OTC Central OH Thrift 38 1 09-30 04/96 16.75 9
JOAC Joachim Bancorp of MO OTC Eastern MO Thrift 35 1 03-31 12/95 16.00 12
<CAPTION>
New England Companies
- ---------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PBCT Peoples Bank, MHC of CT (40.1) (3) OTC Southwestern CT Div. 7,731 97 12-31 07/88 37.50 2,292
WBST Webster Financial Corp. of CT OTC Central CT Thrift 6,811 77 12-31 12/86 66.87 906
PHBK Peoples Heritage Fin Grp of ME (3) OTC ME,NH,MA Div. 6,056 132 12-31 12/86 44.75 1,230
CFX CFX Corp of NH (3) AMEX NH,MA M.B. 2,821 43 12-31 02/87 29.81 715
EGFC Eagle Financial Corp. of CT OTC Western CT Thrift 2,097 19 09-30 02/87 54.69 345
SISB SIS Bancorp Inc of MA (3) OTC Central MA Div. 1,453 24 12-31 02/95 39.00 218
ANDB Andover Bancorp, Inc. of MA (3) OTC MA,NH M.B. 1,281 12 12-31 05/86 39.75 205
FESX First Essex Bancorp of MA (3) OTC MA,NH Div. 1,210 15 12-31 08/87 22.00 166
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- ------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
January 7, 1998(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
- ------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ------ ------
($Mil) ($) ($Mil)
New England Companies (continued)
- ---------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AFCB Affiliated Comm BC, Inc of MA OTC MA Thrift 1,129 12 12-31 10/95 37.00 240
MDBK Medford Bank of Medford, MA (3) OTC Eastern MA Thrift 1,106 16 12-31 03/86 39.50 179
FAB FirstFed America Bancorp of MA AMEX MA, RI M.B. 1,036 12 03-31 01/97 21.75 189
FFES First FS&LA of E. Hartford CT OTC Central CT Thrift 987 12 12-31 06/87 38.25 103
BFD BostonFed Bancorp of MA AMEX Boston MA M.B. 961 10 12-31 10/95 22.00 124
MASB MassBank Corp. of Reading MA (3) OTC Eastern MA Thrift 933 14 12-31 05/86 48.00 171
DIBK Dime Financial Corp. of CT (3) OTC Central CT Thrift 922 11 12-31 07/86 29.62 153
MECH Mechanics SB of Hartford CT (3) OTC Hartford CT Thrift 831 14 12-31 06/96 26.12 138
PBKB People's SB of Brockton MA (3) OTC Southeastern MA Thrift 717 14 12-31 10/86 23.00 76
NSSB Norwich Financial Corp. of CT (3) OTC Southeastern CT Thrift 701 19 12-31 11/86 31.75 172
NSSY Norwalk Savings Society of CT (3) OTC Southwest CT Thrift 617 M 7 12-31 06/94 37.75 92
BKC American Bank of Waterbury CT (3) AMEX Western CT Thrift 610 15 12-31 12/81 48.37 112
MWBX MetroWest Bank of MA (3) OTC Eastern MA Thrift 586 11 12-31 10/86 8.87 124
SOSA Somerset Savings Bank of MA (3) OTC Eastern MA R.E. 520 5 12-31 07/86 4.87 81
SWCB Sandwich Co-Op. Bank of MA (3) OTC Southeastern MA Thrift 512 11 12-31 07/86 43.00 83
ABBK Abington Savings Bank of MA (3) OTC Southeastern MA M.B. 502 8 12-31 06/86 20.00 74
EIRE Emerald Island Bancorp, MA (3) OTC Eastern MA R.E. 443 9 02-31 09/86 32.19 72
BKCT Bancorp Connecticut of CT (3) OTC Central CT Thrift 424 3 12-31 07/86 21.88 111
WRNB Warren Bancorp of Peabody MA (3) OTC Eastern MA R.E. 364 6 12-31 07/86 22.62 86
LSBX Lawrence Savings Bank of MA (3) OTC Northeastern MA Thrift 353 5 12-31 05/86 16.25 70
CEBK Central Co-Op. Bank of MA (3) OTC Eastern MA Thrift 344 J 8 03-31 10/86 29.25 57
NHTB NH Thrift Bancshares of NH OTC Central NH Thrift 319 10 12-31 05/86 21.00 44
NMSB Newmil Bancorp. of CT (3) OTC Eastern CT Thrift 317 13 06-30 02/86 13.00 50
NBN Northeast Bancorp of ME (3) OTC Eastern ME Thrift 265 8 06-30 08/87 18.62 36
ANE Alliance Bancorp of CT (3) AMEX Northern CT Thrift 242 7 12-31 12/86 16.62 27
HIFS Hingham Inst. for Sav. of MA (3) OTC Eastern MA Thrift 216 5 12-31 12/88 28.75 37
IPSW Ipswich SB of Ipswich MA (3) OTC Northwest MA Thrift 203 5 12-31 05/93 15.63 37
HPBC Home Port Bancorp, Inc. of MA (3) OTC Southeastern MA Thrift 201 2 12-31 08/88 23.19 43
FCME First Coastal Corp. of ME (3) OTC Southern ME Thrift 149 7 12-31 / 14.87 20
KSBK KSB Bancorp of Kingfield ME (3) OTC Western ME M.B. 146 J 8 12-31 06/93 22.50 28
MFLR Mayflower Co-Op. Bank of MA (3) OTC Southeastern MA Thrift 129 4 04-30 12/87 25.00 22
NTMG Nutmeg FS&LA of CT OTC CT M.B. 105 3 12-31 / 10.75 11
FCB Falmouth Co-Op Bank of MA (3) AMEX Southeast MA Thrift 96 2 09-30 03/96 20.50 30
</TABLE>
<PAGE>
RP FINANCIAL, LC.
---------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
January 7, 1998(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
- ------- ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ------ ------
($Mil) ($) ($Mil)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
New England Companies (continued)
- ----------------------------------
MCBN Mid-Coast Bancorp of ME OTC Eastern ME Thrift 61 2 03-31 11/89 30.00 7
North-West Companies
--------------------
WAMU Washington Mutual Inc. of WA (3) OTC WA,OR,ID,UT,MT Div. 95,608 290 12-31 03/83 65.12 16,747
WFSL Washington FS&LA of Seattle WA OTC Western US Thrift 5,720 89 09-30 11/82 32.00 1,520
IWBK Interwest SB of Oak Harbor WA OTC Western WA Div. 2,047 31 12-31 / 38.00 306
STSA Sterling Financial Corp. of WA OTC WA,OR M.B. 1,870 41 06-30 / 22.00 166
FWWB First Savings Bancorp of WA (3) OTC Central WA Thrift 1,074 J 16 03-31 11/95 27.50 282
KFBI Klamath First Bancorp of OR OTC Southern OR Thrift 980 7 09-30 10/95 21.75 218
HRZB Horizon Financial Corp. of WA (3) OTC Northwest WA Thrift 531 12 03-31 08/86 18.25 136
FMSB First Mutual SB of Bellevue WA (3) OTC Western WA M.B. 451 6 12-31 12/85 18.50 75
CASB Cascade SB of Everett WA OTC Seattle WA Thrift 426 11 06-30 08/92 13.25 45
RVSB Riverview Bancorp of WA OTC Southwest WA Thrift 282 9 03-31 10/97 17.87 110
OTFC Oregon Trail Fin. Corp of OR OTC Baker City Thrift 260 P 2 06-30 10/97 17.25 81
FBNW FirstBank Corp of Clarkston WA OTC West. WA/East ID Thrift 178 5 03-31 07/97 18.87 37
EFBC Empire Federal Bancorp of MT OTC Southern MT Thrift 110 P 3 12-31 01/97 17.25 45
South-East Companies
--------------------
FFCH First Fin. Holdings Inc. of SC OTC CHARLESTON SC Div. 1,713 32 09-30 11/83 53.37 340
LIFB Life Bancorp of Norfolk VA OTC Southeast VA Thrift 1,486 20 12-31 10/94 36.12 356
FLFC First Liberty Fin. Corp. of GA OTC Georgia M.B. 1,269 31 9-30 12/83 32.87 254
EBSI Eagle Bancshares of Tucker GA OTC Atlanta GA Thrift 873 14 03-31 04/86 22.00 125
HFNC HFNC Financial Corp. of NC OTC Charlotte NC Thrift 867 8 06-30 12/95 15.37 264
CNIT Cenit Bancorp of Norfolk VA OTC Southeastern VA Thrift 702 19 12-31 08/92 78.50 130
PALM Palfed, Inc. of Aiken SC OTC Southwest SC Thrift 669 19 12-31 12/85 28.50 151
VABF Va. Beach Fed. Fin. Corp of VA OTC Southeast VA M.B. 605 12 12-31 11/80 18.75 93
FFFC FFVA Financial Corp. of VA OTC Southern VA Thrift 567 11 12-31 10/94 38.97 176
CFCP Coastal Fin. Corp. of SC OTC SC Thrift 494 9 09-30 09/90 23.50 109
FSPT FirstSpartan Fin. Corp. of SC OTC Northwestern SC Thrift 482 5 06-30 07/97 40.12 178
</TABLE>
<PAGE>
RP FINANCIAL, LC.
------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
January 7, 1998(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ----- ------ ------
($Mil) ($) ($Mil)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
South-East Companies (continued)
--------------------------------
TSH Teche Holding Company of LA AMEX Southern LA Thrift 404 9 09-30 04/95 22.81 78
CFBC Community First Bnkg Co. of GA OTC Westcentral GA Thrift 395 12 12-31 07/97 43.25 104
COOP Cooperative Bk.for Svgs. of NC OTC Eastern NC Thrift 360 16 03-31 08/91 23.37 70
FSTC First Citizens Corp of GA OTC Western GA M.B. 337 9 03-31 03/86 35.00 96
SOPN First SB, SSB, Moore Co. of NC OTC Central NC Thrift 295 5 06-30 01/94 24.50 90
UFRM United FS&LA of Rocky Mount NC OTC Eastern NC M.B. 286 9 12-31 07/80 19.00 58
ANA Acadiana Bancshares of LA (3) AMEX Southern LA Thrift 274 4 12-31 07/96 23.37 63
PERT Perpetual of SC, MHC (46.8) OTC Northwest SC Thrift 256 J 6 09-30 10/93 63.00 95
SSFC South Street Fin. Corp. of NC (3) OTC South Central NC Thrift 241 2 09-30 10/96 19.00 85
FLAG Flag Financial Corp of GA OTC Western GA M.B. 238 4 12-31 12/86 20.12 41
MERI Meritrust FSB of Thibodaux LA OTC Southeast LA Thrift 233 8 12-31 / 69.00 53
CFTP Community Fed. Bancorp of MS OTC Northeast MS Thrift 216 2 09-30 03/96 20.00 93
ESX Essex Bancorp of VA AMEX VA,NC M.B. 192 4 12-31 07/90 3.94 4
CFFC Community Fin. Corp. of VA OTC Central VA Thrift 183 4 03-31 03/88 27.62 35
FTF Texarkana Fst. Fin. Corp of AR AMEX Southwest AR Thrift 179 5 09-30 07/95 25.00 45
GSFC Green Street Fin. Corp. of NC OTC Southern NC Thrift 178 3 09-30 04/96 18.00 77
FGHC First Georgia Hold. Corp of GA OTC Southeastern GA Thrift 156 J 9 09-30 02/87 8.81 27
BFSB Bedford Bancshares of VA OTC Southern VA Thrift 139 3 09-30 08/94 34.75 40
GSLA GS Financial Corp. of LA OTC New Orleans LA Thrift 131 3 12-31 04/97 19.50 67
PDB Piedmont Bancorp of NC AMEX Central NC Thrift 127 2 06-30 12/95 10.75 30
CFNC Carolina Fincorp of NC (3) OTC Southcentral NC Thrift 114 4 06-30 11/96 18.56 34
KSAV KS Bancorp of Kenly NC OTC Central NC Thrift 110 3 12-31 12/93 24.00 21
CCFH CCF Holding Company of GA OTC Atlanta GA Thrift 109 5 12-31 07/95 20.12 18
TWIN Twin City Bancorp of TN OTC Northeast TN Thrift 107 3 12-31 01/95 15.50 20
SRN Southern Banc Company of AL AMEX Northeast AL Thrift 105 J 4 06-30 10/95 18.12 22
SSM Stone Street Bancorp of NC AMEX Central NC Thrift 105 2 12-31 04/96 22.12 42
CENB Century Bancshares of NC (3) OTC Charlotte NC Thrift 101 1 06-30 12/96 84.75 34
SZB SouthFirst Bancshares of AL AMEX Central AL Thrift 97 J 2 09-30 02/95 22.37 19
PEDE Great Pee Dee Bancorp of SC OTC Northeast SC Thrift 78 P 1 06-30 12/97 15.75 34
SCBS Southern Commun. Bncshrs of AL OTC NorthCentral AL Thrift 71 1 09-30 12/96 18.25 21
SSB Scotland Bancorp of NC AMEX S. Central NC Thrift 64 2 09-30 04/96 10.12 19
SCCB S. Carolina Comm. Bnshrs of SC OTC Central SC Thrift 46 1 06-30 07/94 22.50 16
MBSP Mitchell Bancorp of NC (3) OTC Western NC Thrift 35 1 12-31 07/96 17.00 16
</TABLE>
<PAGE>
RP FINANCIAL, LC.
------------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-1
Characteristics of Publicly-Traded Thrifts
January 7, 1998(1)
<TABLE>
<CAPTION>
Primary Operating Total Fiscal Conv. Stock Market
Ticker Financial Institution Exchg. Market Strat.(2) Assets Offices Year Date Price Value
------ ----------------------------------- ------ ----------------- -------- ------ ------- ---- ---- ----- ------
($Mil) ($) ($Mil)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CBSA Coastal Bancorp of Houston TX OTC Houston TX M.B. 2,930 37 12-31 / 34.87 174
FBHC Fort Bend Holding Corp. of TX OTC Eastcentral TX M.B. 319 5 03-31 06/93 22.00 36
JXVL Jacksonville Bancorp of TX OTC East Central TX Thrift 234 6 09-30 04/96 22.75 56
FFDB FirstFed Bancorp of AL OTC Central AL Thrift 176 7 03-31 11/91 21.00 24
ETFS East Texas Fin. Serv. of TX OTC Northeast TX Thrift 116 2 09-30 01/95 23.75 24
GUPB GFSB Bancorp of Gallup NM OTC Northwest NM Thrift 110 1 06-30 06/95 21.62 17
AABC Access Anytime Bancorp of NM OTC Eastern NM Thrift 106 3 12-31 08/86 11.00 13
<CAPTION>
Western Companies (Excl CA)
---------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FFBA First Colorado Bancorp of Co OTC Denver CO Thrift 1,513 26 12-31 01/96 23.62 389
WSTR WesterFed Fin. Corp. of MT OTC MT Thrift 999 35 06-30 01/94 26.75 149
GBCI Glacier Bancorp of MT OTC Western MT Div. 574 16 12-31 03/84 24.75 169
UBMT United Fin. Corp. of MT OTC Central MT Thrift 103 4 12-31 09/86 25.50 31
TRIC Tri-County Bancorp of WY OTC Southeastern WY Thrift 88 2 12-31 09/93 15.00 18
HCBC High Country Bancorp of CO OTC Salida Thrift 87 P 2 12-31 12/97 15.50 21
CRZY Crazy Woman Creek Bncorp of WY OTC Northeast WY Thrift 60 1 09-30 03/96 15.44 15
</TABLE>
Other Areas
-----------
NOTES: (1) Or most recent date available (M=March, S=September, D=December,
J=June, E=Estimated, and P=Pro Forma)
(2) Operating strategies are: Thrift=Traditional Thrift, M.B.=Mortgage
Banker, R.E.=Real Estate Developer, Div.=Diversified, and
Ret.=Retail Banking.
(3) FDIC savings bank.
Source: Corporate offering circulars, SNL Securities Quarterly Thrift Report,
and financial reports of publicly Traded Thrifts.
Date of Last Update: 01/07/98
<PAGE>
EXHIBIT III-2
Financial Analysis of All Publicly-Traded MHCs
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit III-2
Market Pricing Comparatives
Prices As of January 2, 1998
<TABLE>
<CAPTION>
Market Per Share Data
Capitalization --------------- Pricing Ratios(3)
--------------- Core Book ---------------------------------------
Price/ Market 12-Mth Value/
Financial Institution Share(1) Value EPS(2) Share P/E P/B P/A P/TB P/CORE
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- --------
($) ($Mil) ($) ($) (X) (%) (%) (%) (x)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SAIF-Insured Thrifts 24.29 183.75 1.08 14.89 20.01 165.51 20.36 169.34 20.97
MHC Institutions 26.33 104.10 0.71 10.73 26.50 246.27 29.27 243.53 26.52
Comparable Group
- ----------------
MHC Institutions
- ----------------
CMSV Commty. Svgs, MHC of FL (48.5) 35.25 87.07 0.98 15.79 NM 223.24 25.32 223.24 NM
FFFL Fidelity FSB, MHC of FL (47.7) 31.50 101.56 0.79 12.65 NM 249.01 20.43 250.60 NM
SKBO First Carnegie, MHC of PA (45.0) 18.75 19.41 0.33 10.52 NM 178.23 29.31 178.23 NM
FFSX First FS & LA, MHC of IA (46.1) 30.50 39.74 1.15 14.08 25.85 216.62 18.91 218.48 26.52
FSLA First SB SLA MHC of NJ (47.5)(7) 48.50 165.09 1.19 12.39 NM NM 37.18 NM NM
GDVS Greater DV SB, MHC of PA (19.9) 30.75 19.99 0.68 8.85 NM 347.46 40.44 347.46 NM
HARB Harbor FSB, MHC of FL (46.6)(7) 66.75 154.59 2.66 19.47 24.91 342.84 29.35 NM 25.09
HARS Harris SB, MHC of PA (24.3) 19.87 162.32 0.46 5.12 NM NM 31.81 NM NM
JXSB Jcksnville SB, MHC of IL (45.6) 28.50 16.53 0.80 13.63 NM 209.10 22.07 209.10 NM
LFED Leeds FSB, MHC of MD (36.3) 21.88 41.20 0.64 9.16 NM 238.86 39.72 238.86 NM
NWSB Northwest SB, MHC of PA (30.7) 14.62 209.83 0.41 4.33 NM 337.64 32.54 NM NM
PBHC Oswego City SB MHC of NY (46.1) 29.00 25.58 0.94 11.95 27.62 242.68 28.80 289.13 NM
PBCT Peoples Bank, MHC of CT (40.1) 37.50 916.99 0.93 11.41 26.04 328.66 29.65 328.95 NM
TSBS Peoples Bcrp, MHC of NJ (35.9)(7) 43.00 139.62 0.61 11.97 NM NM 60.88 NM NM
PERT Perpetual of SC, MHC (46.8)(7) 63.00 44.42 1.58 20.13 NM 312.97 37.01 312.97 NM
PFSL Pocahnts Fed, MHC of AR (47.0)(7) 43.50 33.45 1.44 14.86 29.79 292.73 18.52 292.73 NM
PHSB Ppls Home SB, MHC of PA (45.0) 18.87 23.44 0.54 10.22 NM 184.64 25.23 184.64 NM
PULB Pulaski SB, MHC of MO (29.8) 31.37 19.57 0.90 11.39 NM 275.42 36.63 275.42 NM
PLSK Pulaski SB, MHC of NJ (46.0) 18.25 17.37 0.54 10.36 NM 176.16 21.11 176.16 NM
SBFL SB Fngr Lakes MHC of NY (33.1) 32.00 18.88 0.51 11.92 NM 268.46 25.06 268.46 NM
WAYN Wayne S&L Co. MHC of OH (47.8) 29.00 31.18 0.76 10.58 NM 274.10 26.13 274.10 NM
WCFB Wbstr Cty FSB MHC of IA (45.2) 20.00 19.00 0.64 10.52 NM 190.11 44.45 190.11 NM
<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 1.51 30.18 1,165 13.33 0.76 0.90 7.92 0.87 7.62
MHC Institutions 0.51 1.86 14.77 961 11.97 0.60 0.86 7.94 0.81 7.33
Comparable Group
- ----------------
MHC Institutions
- ----------------
CMSV Commty. Svgs, MHC of FL (48.5) 0.90 2.55 NM 709 11.34 0.41 0.80 7.04 0.73 6.45
FFFL Fidelity FSB, MHC of FL (47.7) 0.90 2.86 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 1.60 NM 147 16.45 NA 0.52 5.53 0.52 5.53
FFSX First FS&LA. MHC of IA (46.1) 0.48 1.57 19.20 457 8.73 0.22 0.73 8.79 0.71 8.56
FSLA First SB SLA MHC of NJ (47.5)(7) 0.48 0.99 17.15 1,045 9.50 0.57 0.90 9.64 0.94 10.06
GDVS Greater DV SB, MHC of PA (19.9) 0.36 1.17 10.52 249 11.64 1.82 0.93 7.97 0.93 7.97
HARB Harbor FSB, MHC of FL (46.6)(7) 1.40 2.10 24.51 1,131 8.56 0.43 1.22 14.68 1.21 14.58
HARS Harris SB, MHC of PA (24.3) 0.22 1.11 11.57 2,110 8.20 0.65 0.92 11.11 0.81 9.83
JXSB Jcksnville SB, MHC of IL (45.6) 0.45 1.58 25.65 164 10.56 0.79 0.65 6.02 0.65 6.02
LFED Leeds FSB, MHC of MD (36.3) 0.56 2.56 NM 285 16.63 0.06 1.18 7.24 1.18 7.24
NWSB Northwest SB, MHC of PA (30.7) 0.16 1.09 11.98 2,101 9.64 0.77 0.96 9.86 0.96 9.86
PBHC OswegoCity SB MHC of NY (46.1) 0.28 0.97 13.70 193 11.87 0.91 1.06 9.23 0.95 8.26
PBCT Peoples Bank, MHC of CT (40.1) 0.76 2.03 NM 7,731 9.02 0.76 1.16 13.69 0.75 8.84
TSBS Peoples Bcrp, MHC of NJ (35.9)(7) 0.35 0.81 20.60 639 16.95 0.91 1.30 7.51 0.91 5.27
PERT Perpetual of SC, MHC (46.8)(7) 1.40 2.22 NM 256 11.82 0.12 0.78 6.37 1.05 8.60
PFSL Pocahnts Fed, MHC of AR (47.0)(7) 0.90 2.07 29.45 383 6.33 0.16 0.63 10.08 0.62 9.94
PHSB Ppls Home SB, MHC of PA (45.0) 0.00 0.00 0.00 206 13.66 0.45 0.73 6.80 0.71 6.55
PULB Pulaski SB, MHC of MO (29.8) 1.10 3.51 NM 179 13.30 NA 1.21 9.31 1.06 8.14
PLSK Pulaski SB, MHC of NJ (46.0) 0.30 1.64 25.55 179 11.98 0.65 0.64 6.99 0.64 6.99
SBFL SB Fngr Lakes MHC of NY (33.1) 0.40 1.25 NM 228 9.33 0.50 0.37 3.83 0.43 4.44
WAYN Wayne S&L Co. MHC of OH (47.8) 0.62 2.14 NM 250 9.53 0.58 0.73 7.89 0.68 7.40
WCFB Wbstr Cty FSB MHC of IA (45.2) 0.80 4.00 NM 94 23.38 0.07 1.43 6.14 1.43 6.14
</TABLE>
(1) Average of High/Low or Bid/Ask price per share.
(2) EPS (estimate core basis) is based on actual trailing twelve month data,
adjusted to omit non-operating items (including the SAIF assessment) on a
tax effected basis.
(3) P/E = Price to earnings; P/B = Price to book; P/A = Price to assets; P/TB =
Price to tangible book value; and P/CORE = Price to estimated core earnings.
(4) Indicated twelve month dividend, based on last quarterly dividend declared.
(5) Indicated dividend as a percent of trailing twelve month estimated core
earnings.
(6) ROA (return on assets) and ROE (return on equity) are indicated ratios based
on trailing twelve month earnings and average equity and assets balances.
(7) Excludes from averages those companies the subject of actual or rumored
acquisition activities or unusual operating characteristics.
Source: Corporate reports, offering circulars, and RP Financial, LC.
calculations. The information provided in this report has been obtained
from sources we believe are reliable, but we cannot guarantee the
accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
EXHIBIT IV-1
Stock Prices:
As of January 2, 1998
<PAGE>
<TABLE>
<CAPTION>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1
Weekly Thrift Market Line - Part One
Prices As Of January 2, 1998
Market Capitalization Price Change Data
----------------------- -----------------------------------------------
52 Week (1) % Change From
Shares Market --------------- -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Market Averages. SAIF-Insured Thrifts(no MHC)
- ---------------------------------------------
SAIF-Insured Thrifts(298) 24.26 5,864 190.3 24.26 24.26 23.54 3.02 263.66 0.00
NYSE Traded Companies(11) 42.69 34,443 1,870.3 42.69 42.69 41.23 3.39 286.58 0.00
AMEX Traded Companies(16) 19.31 3,147 59.8 19.31 19.31 18.74 2.75 351.97 0.00
NASDAQ Listed OTC Companies(271) 23.88 4,977 136.4 23.88 23.88 23.19 3.02 257.84 0.00
California Companies(21) 30.49 20,146 987.6 30.49 30.49 29.49 3.22 147.05 0.00
Florida Companies(5) 24.45 20,239 467.8 24.45 24.45 23.54 3.70 245.86 0.00
Mid-Atlantic Companies(59) 26.79 6,418 182.0 26.79 26.79 25.99 2.96 256.92 0.00
Mid-West Companies(145) 22.21 3,855 109.6 22.22 22.21 21.64 2.85 281.01 0.00
New England Companies(9) 30.09 4,841 197.7 30.09 30.09 29.02 3.41 469.19 0.00
North-West Companies(8) 22.55 10,725 302.3 22.56 22.55 21.90 3.28 136.22 0.00
South-East Companies(37) 25.22 3,339 83.0 25.23 25.22 24.42 2.87 280.65 0.00
South-West Companies(7) 22.43 1,898 49.3 22.43 22.43 21.32 4.77 62.96 0.00
Western Companies (Excl CA)(7) 20.94 4,792 113.0 20.94 20.94 20.24 3.95 390.35 0.00
Thrift Strategy(242) 22.97 3,651 93.9 22.98 22.97 22.30 2.97 237.99 0.00
Mortgage Banker Strategy(34) 31.50 15,884 697.0 31.50 31.50 30.60 3.09 345.55 0.00
Real Estate Strategy(9) 23.60 6,471 142.8 23.60 23.60 23.23 1.40 195.18 0.00
Diversified Strategy(9) 35.61 30,268 1,084.2 35.61 35.61 34.05 5.52 241.35 0.00
Retail Banking Strategy(4) 19.79 4,615 104.8 19.79 19.79 19.29 3.89 473.23 0.00
Companies Issuing Dividends(252) 24.76 5,659 194.0 24.76 24.76 24.04 3.08 283.91 0.00
Companies Without Dividends(46) 21.46 7,001 170.1 21.46 21.46 20.82 2.68 146.87 0.00
Equity/Assets (greater than) 6%(23) 28.92 19,888 717.2 28.92 28.92 27.57 4.64 201.68 0.00
Equity/Assets 6-12%(143) 26.94 5,932 219.1 26.94 26.94 26.21 2.60 284.14 0.00
Equity/Assets (less than) 12%(132) 21.07 3,736 86.0 21.07 21.07 20.47 3.17 221.61 0.00
Converted Last 3 Mths (no MHC)(7) 15.08 3,765 56.5 15.19 15.08 14.05 10.20 0.00 0.00
Actively Traded Companies(39) 35.02 19,412 863.0 35.02 35.02 33.76 3.46 295.99 0.00
Market Value Below $20 Million(45) 18.46 875 15.0 18.46 18.46 17.94 2.58 255.59 0.00
Holding Company Structure(263) 24.37 5,653 188.8 24.37 24.37 23.63 3.14 248.98 0.00
Assets Over $1 Billion(60) 34.70 19,901 774.5 34.70 34.70 33.41 3.88 288.49 0.00
Assets $500 Million-$1 Billion(47) 25.15 5,518 123.0 25.15 25.15 24.53 2.84 317.25 0.00
Assets $250-$500 Million(64) 24.68 2,829 65.5 24.68 24.68 23.99 2.55 240.49 0.00
Assets less than $250 Million(127) 19.39 1,553 28.8 19.40 19.39 18.88 2.95 182.57 0.00
Goodwill Companies(120) 28.09 10,333 345.5 28.09 28.09 27.17 3.44 289.22 0.00
Non-Goodwill Companies(178) 21.82 3,030 91.9 21.83 21.82 21.24 2.76 228.43 0.00
Acquirors of FSLIC Cases(10) 41.59 39,098 2,130.4 41.59 41.59 40.15 3.89 333.04 0.00
</TABLE>
<TABLE>
<CAPTION>
Current Per Share Financials
----------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- -------- ------- ------- ------- -------
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
Market Averages. SAIF-Insured Thrifts(no MHC)
- ---------------------------------------------
SAIF-Insured Thrifts(298) 1.13 1.10 15.11 14.69 142.02
NYSE Traded Companies(11) 2.46 2.27 21.35 20.59 304.41
AMEX Traded Companies(16) 0.60 0.71 14.05 13.85 107.51
NASDAQ Listed OTC Companies(271) 1.11 1.08 14.94 14.52 138.15
California Companies(21) 1.64 1.51 17.12 16.44 253.58
Florida Companies(5) 1.17 0.85 11.42 10.73 171.97
Mid-Atlantic Companies(59) 1.32 1.29 16.21 15.57 164.91
Mid-West Companies(145) 1.01 0.99 14.68 14.41 119.86
New England Companies(9) 1.21 1.40 17.26 16.40 240.58
North-West Companies(8) 1.07 1.02 13.72 13.23 129.11
South-East Companies(37) 0.96 0.94 14.54 14.30 109.40
South-West Companies(7) 1.36 1.32 15.18 14.43 195.12
Western Companies (Excl CA)(7) 0.94 0.94 14.14 13.57 91.98
Thrift Strategy(242) 1.04 1.03 15.20 14.85 126.87
Mortgage Banker Strategy(34) 1.62 1.50 15.42 14.48 223.26
Real Estate Strategy(9) 1.50 1.41 13.51 13.22 192.93
Diversified Strategy(9) 1.93 1.73 14.11 13.56 195.62
Retail Banking Strategy(4) -0.40 -0.49 12.47 11.90 188.65
Companies Issuing Dividends(252) 1.17 1.15 15.31 14.85 139.72
Companies Without Dividends(46) 0.86 0.83 13.98 13.77 154.74
Equity/Assets (greater than) 6%(23) 1.59 1.54 13.47 12.37 276.68
Equity/Assets 6-12%(143) 1.34 1.29 14.96 14.33 176.60
Equity/Assets (less than) 12%(132) 0.86 0.85 15.49 15.36 90.01
Converted Last 3 Mths (no MHC)(7) 0.53 0.53 12.36 12.36 54.50
Actively Traded Companies(39) 1.86 1.86 16.86 16.18 215.66
Market Value Below $20 Million(45) 0.77 0.79 14.40 14.36 111.33
Holding Company Structure(263) 1.10 1.07 15.38 14.97 139.24
Assets Over $1 Billion(60) 1.75 1.70 16.74 15.52 233.55
Assets $500 Million-$1 Billion(47) 1.23 1.13 14.33 13.83 153.91
Assets $250-$500 Million(64) 1.19 1.16 15.64 15.24 147.87
Assets less than $250 Million(127) 0.80 0.80 14.45 14.39 96.99
Goodwill Companies(120) 1.38 1.34 15.32 14.24 184.01
Non-Goodwill Companies(178) 0.96 0.94 14.98 14.98 115.39
Acquirors of FSLIC Cases(10) 2.39 2.32 19.49 18.30 299.70
</TABLE>
(1) Average of high/low or bid/ask price per share.
(2) Or since offering price if converted or first listed in 1994 or 1995.
Percent change figures are actual year-to-date and are not annualized.
(3) EPS (earnings per share) is based on actual trailing twelve month data and
is not shown on a pro forma basis.
(4) Excludes intangibles (such as goodwill, value of core deposits, etc.).
(5) ROA (return on assets) and ROE (return on equity) are indicated ratios
based on trailing twelve month common earnings and average common equity
and assets balances.
(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 January 2, 1998
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
----------------------- -----------------------------------------------
52 Week (1) % Change From
Shares Market --------------- -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
Market Averages. BIF-Insured Thrifts(no MHC)
- --------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BIF-Insured Thrifts(62) 27.53 13,066 559.4 27.54 27.51 26.90 1.41 277.10 0.00
NYSE Traded Companies(3) 40.27 62,433 2,287.9 40.52 39.90 39.77 0.72 185.79 0.00
AMEX Traded Companies(6) 27.22 2,023 57.9 27.22 27.22 27.34 -0.45 143.61 0.00
NASDAQ Listed OTC Companies(53) 26.78 10,945 494.5 26.78 26.78 26.08 1.60 291.43 0.00
California Companies(1) 19.25 7,847 151.1 19.25 19.25 18.00 6.94 0.00 0.00
Mid-Atlantic Companies(18) 28.06 19,144 624.6 28.11 27.99 26.45 2.11 198.39 0.00
Mid-West Companies(2) 11.56 1,687 18.0 11.56 11.56 11.25 2.55 0.00 0.00
New England Companies(32) 27.09 4,460 131.2 27.09 27.09 26.97 0.66 304.57 0.00
North-West Companies(4) 32.34 69,731 4,310.0 32.34 32.34 31.72 0.62 189.73 0.00
South-East Companies(5) 32.54 2,076 46.6 32.54 32.54 32.15 2.43 0.00 0.00
Thrift Strategy(46) 26.87 5,828 189.0 26.89 26.84 26.15 1.47 267.55 0.00
Mortgage Banker Strategy(7) 25.60 26,545 725.3 25.60 25.60 25.35 1.34 304.58 0.00
Real Estate Strategy(4) 20.94 5,823 118.5 20.94 20.94 20.38 3.19 571.22 0.00
Diversified Strategy(5) 38.17 62,040 3,721.8 38.17 38.17 37.84 0.20 221.42 0.00
Companies Issuing Dividends(52) 29.48 13,781 631.7 29.48 29.48 29.13 1.38 277.32 0.00
Companies Without Dividends(10) 17.36 9,333 181.9 17.44 17.23 15.27 1.52 274.12 0.00
Equity/Assets (less than) 6%(5) 30.50 75,354 4,005.3 30.50 30.50 29.57 3.25 224.93 0.00
Equity/Assets 6-12%(40) 28.83 6,295 241.6 28.83 28.83 28.66 0.66 295.62 0.00
Equity/Assets (greater than) 12%(17) 24.06 8,287 181.4 24.11 23.99 22.60 2.37 59.81 0.00
Converted Last 3 Mths (no MHC)(2) 18.31 24,698 486.4 18.69 17.75 10.09 -0.50 0.00 0.00
Actively Traded Companies(17) 33.24 29,071 1,487.5 33.24 33.24 33.04 0.48 325.04 0.00
Market Value Below $20 Million(3) 16.75 801 13.1 16.75 16.75 16.08 4.02 0.00 0.00
Holding Company Structure(42) 26.71 14,263 647.9 26.73 26.68 25.97 1.31 256.14 0.00
Assets Over $1 Billion(15) 36.79 42,413 2,026.4 36.85 36.71 36.53 0.54 257.93 0.00
Assets $500 Million-$1 Billion(17) 28.06 5,320 121.2 28.06 28.06 27.99 0.19 261.53 0.00
Assets $250-$500 Million(13) 21.70 3,572 72.0 21.70 21.70 19.90 1.43 312.82 0.00
Assets less than $250 Million(17) 23.62 1,523 30.4 23.62 23.62 23.09 3.04 271.67 0.00
Goodwill Companies(32) 30.75 21,487 1,005.9 30.78 30.71 30.40 1.26 278.26 0.00
Non-Goodwill Companies(30) 24.31 4,645 112.9 24.31 24.31 23.40 1.56 275.00 0.00
<CAPTION>
Current Per Share Financials
----------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- -------- ------- ------- ------- -------
($) ($) ($) ($) ($)
Market Averages. BIF-Insured Thrifts(no MHC)
- --------------------------------------------
<S> <C> <C> <C> <C> <C>
BIF-Insured Thrifts(62) 1.49 1.46 15.19 14.59 146.19
NYSE Traded Companies(3) 1.81 1.74 18.07 13.18 184.80
AMEX Traded Companies(6) 1.48 1.31 16.77 16.49 145.06
NASDAQ Listed OTC Companies(53) 1.47 1.45 14.88 14.52 143.92
California Companies(1) 1.52 1.52 12.32 12.27 114.89
Mid-Atlantic Companies(18) 1.22 1.20 14.84 13.81 145.10
Mid-West Companies(2) 0.26 0.25 11.05 10.69 36.41
New England Companies(32) 1.84 1.74 13.93 13.44 161.31
North-West Companies(4) 0.79 1.14 13.32 12.67 164.74
South-East Companies(5) 1.42 1.41 27.07 27.07 100.38
Thrift Strategy(46) 1.51 1.44 15.91 15.30 138.56
Mortgage Banker Strategy(7) 1.31 1.31 11.72 11.40 147.45
Real Estate Strategy(4) 1.78 1.67 11.27 11.24 105.38
Diversified Strategy(5) 1.44 1.70 14.76 13.68 226.69
Companies Issuing Dividends(52) 1.49 1.46 15.91 15.22 157.87
Companies Without Dividends(10) 1.47 1.43 11.41 11.27 85.22
Equity/Assets (less than) 6%(5) 0.99 1.11 10.09 9.61 197.39
Equity/Assets 6-12%(40) 1.81 1.74 14.50 13.67 169.56
Equity/Assets (greater than) 12%(17) 1.00 1.00 18.07 17.89 84.40
Converted Last 3 Mths (no MHC)(2) 0.65 0.60 13.40 13.19 55.20
Actively Traded Companies(17) 1.86 1.85 15.74 15.00 196.87
Market Value Below $20 Million(3) 0.56 0.58 14.54 14.29 58.18
Holding Company Structure(42) 1.40 1.40 15.29 14.94 130.71
Assets Over $1 Billion(15) 1.62 1.68 15.97 14.36 191.18
Assets $500 Million-$1 Billion(17) 1.75 1.65 15.41 15.01 169.88
Assets $250-$500 Million(13) 1.23 1.19 12.26 12.00 109.78
Assets less than $250 Million(17) 1.37 1.32 16.44 16.29 116.73
Goodwill Companies(32) 1.58 1.56 15.46 14.26 182.16
Non-Goodwill Companies(30) 1.40 1.36 14.91 14.91 110.23
</TABLE>
(1) Average of high/low or bid/ask price per share.
(2) Or since offering price if converted or first listed in 1994 or 1995.
Percent change figures are actual year-to-date and are not annualized
(3) EPS (earnings per share) is based on actual trailing twelve month data and
is not shown on a pro forma basis.
(4) Excludes intangibles (such as goodwill, value of core deposits, etc.).
(5) ROA (return on assets) and ROE (return on equity) are indicated ratios
based on trailing twelve month common earnings and average common equity
and assets balances.
(6) Annualized, based on last regular quarterly cash dividend announcement.
(7) Indicated dividend as a percent of trailing twelve month earnings.
(8) Excluded from averages due to actual or rumored acquisition activities
or unusual operating characteristics.
(9) For MHC institutions, market value reflects share price multiplied by public
(non-MHC) shares.
* All thrifts are SAIF insured unless otherwise noted with an asterisk.
Parentheses following market averages indicate the number of
institutions included in the respective averages. All figures have been
adjusted for stock splits, stock dividends, and secondary offerings.
Source: Corporate reports and offering circulars for publicly traded companies,
and RP Financial, Inc. calculations. The information provided in this
report has been obtained from sources we believe are reliable, but we
cannot guarantee the accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
<TABLE>
<CAPTION>
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 January 2, 1998
Market Capitalization Price Change Data
----------------------- -----------------------------------------------
52 Week (1) % Change From
Shares Market --------------- -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Market Averages. MHC Institutions
- ---------------------------------
SAIF-Insured Thrifts(19) 25.03 8,362 57.6 25.03 25.03 25.16 -0.52 357.27 0.00
BIF-Insured Thrifts(3) 32.42 22,105 320.9 32.42 32.42 32.42 -0.20 376.49 0.00
NASDAQ Listed OTC Companies(22) 26.33 10,787 104.1 26.33 26.33 26.44 -0.47 366.88 0.00
Florida Companies(3) 33.38 5,939 94.3 33.38 33.38 32.81 1.72 0.00 0.00
Mid-Atlantic Companies(11) 22.67 11,091 59.8 22.67 22.67 22.77 -0.30 0.00 0.00
Mid-West Companies(6) 27.87 2,111 25.2 27.87 27.87 28.50 -2.29 357.27 0.00
New England Companies(1) 37.50 61,126 917.0 37.50 37.50 36.50 2.74 376.49 0.00
Thrift Strategy(20) 26.02 5,898 46.0 26.02 26.02 26.23 -0.80 357.27 0.00
Mortgage Banker Strategy(1) 19.87 33,779 162.3 19.87 19.87 19.62 1.27 0.00 0.00
Diversified Strategy(1) 37.50 61,126 917.0 37.50 37.50 36.50 2.74 376.49 0.00
Companies Issuing Dividends(21) 26.80 11,289 109.1 26.80 26.80 26.93 -0.56 366.88 0.00
Companies Without Dividends(1) 18.87 2,760 23.4 18.87 18.87 18.69 0.96 0.00 0.00
Equity/Assets 6-12%(16) 28.06 14,078 137.3 28.06 28.06 28.04 0.16 366.88 0.00
Equity/Assets >12%(6) 22.17 2,887 24.5 22.17 22.17 22.61 -1.97 0.00 0.00
Holding Company Structure(2) 29.00 1,917 25.6 29.00 29.00 30.00 -3.33 0.00 0.00
Assets Over $1 Billion(6) 25.87 37,110 347.7 25.87 25.87 25.41 1.61 376.49 0.00
Assets $500 Million-$1 Billion(2) 35.25 5,095 87.1 35.25 35.25 34.62 1.82 0.00 0.00
Assets $250-$500 Million(5) 27.13 3,423 37.4 27.13 27.13 27.75 -2.42 357.27 0.00
Assets less than $250 Million(9) 25.28 2,175 20.0 25.28 25.28 25.56 -0.99 0.00 0.00
Goodwill Companies(9) 27.17 25,532 242.7 27.17 27.17 27.15 0.12 366.88 0.00
Non-Goodwill Companies(13) 25.87 2,744 28.5 25.87 25.87 26.06 -0.79 0.00 0.00
MHC Institutions(22) 26.33 10,787 104.1 26.33 26.33 26.44 -0.47 366.88 0.00
</TABLE>
<TABLE>
<CAPTION>
Current Per Share Financials
----------------------------------------
Tangible
Trailing 12 Mo. Book Book
12 Mo. Core Value/ Value/ Assets/
Financial Institution EPS(3) EPS(3) Share Share(4) Share
- --------------------- -------- ------- ------- ------- -------
($) ($) ($) ($) ($)
<S> <C> <C> <C> <C> <C>
Market Averages. MHC Institutions
- ---------------------------------
SAIF-Insured Thrifts(19) 0.71 0.68 10.73 10.66 95.77
BIF-Insured Thrifts(3) 1.06 0.85 10.74 10.09 101.07
NASDAQ Listed OTC Companies(22) 0.77 0.71 10.73 10.56 96.70
Florida Companies(3) 1.00 0.89 14.22 14.18 146.68
Mid-Atlantic Companies(11) 0.57 0.56 9.16 8.85 76.90
Mid-West Companies(6) 0.89 0.85 12.04 12.02 106.40
New England Companies(1) 1.44 0.93 11.41 11.40 126.48
Thrift Strategy(20) 0.74 0.71 11.06 10.91 97.00
Mortgage Banker Strategy(1) 0.52 0.46 5.12 4.53 62.47
Diversified Strategy(1) 1.44 0.93 11.41 11.40 126.48
Companies Issuing Dividends(21) 0.78 0.72 10.77 10.58 98.07
Companies Without Dividends(1) 0.56 0.54 10.22 10.22 74.79
Equity/Assets 6-12%(16) 0.82 0.75 10.89 10.64 109.96
Equity/Assets >12%(6) 0.64 0.61 10.36 10.36 64.89
Holding Company Structure(2) 1.05 0.94 11.95 10.03 100.68
Assets Over $1 Billion(6) 0.83 0.65 8.38 8.15 97.01
Assets $500 Million-$1 Billion(2) 1.07 0.98 15.79 15.79 139.20
Assets $250-$500 Million(5) 0.88 0.85 11.27 11.23 109.10
Assets less than $250 Million(9) 0.67 0.65 11.04 10.83 87.71
Goodwill Companies(9) 0.92 0.78 9.92 9.43 108.33
Non-Goodwill Companies(13) 0.69 0.67 11.18 11.18 90.36
MHC Institutions(22) 0.77 0.71 10.73 10.56 96.70
</TABLE>
(1) Average of high/low or bid/ask price per share.
(2) Or since offering price if converted or first listed in 1994 or 1995.
Percent change figures are actual year-to-date and are not annualized
(3) EPS (earnings per share) is based on actual trailing twelve month data and
is not shown on a pro forma basis.
(4) Excludes intangibles (such as goodwill, value of core deposits, etc.).
(5) ROA (return on assets) and ROE (return on equity) are indicated ratios
based on trailing twelve month common earnings and average common equity
and assets balances.
(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 January 2, 1998
<TABLE>
<CAPTION>
Price Change Data
Market Capitalization -------------------------------------------------
----------------------- 52 Week (1) % Change From
Shares Market --------------- -------------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NYSE Traded Companies
- ---------------------
AHM Ahmanson and Co. H.F. of CA 64.69 94,411 6,107.4 64.69 64.69 64.12 0.89 245.01 0.00
CSA Coast Savings Financial of CA(8) 67.50 18,644 1,258.5 67.50 67.50 65.69 2.76 483.91 0.00
CFB Commercial Federal Corp. of NE 35.69 32,373 1,155.4 35.69 35.69 33.06 7.96 867.21 0.00
DME Dime Bancorp, Inc. of NY* 28.75 101,492 2,917.9 28.75 28.75 28.75 0.00 185.79 0.00
DSL Downey Financial Corp. of CA 28.87 26,754 772.4 28.87 28.87 28.37 1.76 165.84 0.00
EBI Equality Bancorp of MO 14.12 2,486 35.1 14.12 14.12 14.75 -4.27 N.A. 0.00
FED FirstFed Fin. Corp. of CA 38.69 10,585 409.5 38.69 38.69 36.44 6.17 139.57 0.00
GSB Glendale Fed. Bk, FSB of CA 37.62 50,456 1,898.2 37.62 37.62 36.31 3.61 131.51 0.00
GDW Golden West Fin. Corp. of CA 96.94 56,770 5,503.3 96.94 96.94 92.62 4.66 270.14 0.00
GPT GreenPoint Fin. Corp. of NY* 71.88 42,826 3,078.3 71.88 71.88 70.37 2.15 N.A. 0.00
JSB JSB Financial, Inc. of NY 50.37 9,898 498.6 50.37 50.37 49.44 1.88 338.00 0.00
NYB New York Bancorp, Inc. of NY(8) 39.12 21,319 834.0 39.12 39.12 37.87 3.30 451.76 0.00
SIB Staten Island Bancorp of NY* 20.18 42,981 867.4 20.94 19.06 20.18 0.00 N.A. N.A.
WES Westcorp Inc. of Orange CA 17.25 26,256 452.9 17.25 17.25 16.00 7.81 135.33 0.00
AMEX Traded Companies
- ---------------------
ANA Acadiana Bancshares of LA* 23.37 2,697 63.0 23.37 23.37 23.37 0.00 N.A. 0.00
ANE Alliance Bancorp of CT* 16.62 1,627 27.0 16.62 16.62 17.00 -2.24 129.24 0.00
BKC American Bank of Waterbury CT* 48.37 2,313 111.9 48.37 48.37 48.75 -0.78 157.97 0.00
BFD BostonFed Bancorp of MA 22.00 5,650 124.3 22.00 22.00 21.00 4.76 N.A. 0.00
CFX CFX Corp of NH(8)* 29.81 23,977 714.8 29.81 29.81 30.00 -0.63 150.50 0.00
CNY Carver Bancorp, Inc. of NY 16.62 2,314 38.5 16.62 16.62 15.87 4.73 165.92 0.00
CBK Citizens First Fin. Corp. of IL 21.00 2,584 54.3 21.00 21.00 18.62 12.78 N.A. 0.00
ESX Essex Bancorp of VA(8) 3.94 1,058 4.2 3.94 3.94 3.50 12.57 -76.48 0.00
FCB Falmouth Co-Op Bank of MA* 20.50 1,455 29.8 20.50 20.50 20.25 1.23 N.A. 0.00
FAB FirstFed America Bancorp of MA 21.75 8,707 189.4 21.75 21.75 21.25 2.35 N.A. 0.00
GAF GA Financial Corp. of PA 18.87 7,973 150.5 18.87 18.87 18.37 2.72 N.A. 0.00
KNK Kankakee Bancorp of IL 37.00 1,426 52.8 37.00 37.00 36.37 1.73 270.00 0.00
KYF Kentucky First Bancorp of KY 14.81 1,303 19.3 14.81 14.81 14.56 1.72 N.A. 0.00
MBB MSB Bancorp of Middletown NY(8)* 35.75 2,844 101.7 35.75 35.75 33.81 5.74 257.50 0.00
PDB Piedmont Bancorp of NC 10.75 2,751 29.6 10.75 10.75 10.50 2.38 N.A. 0.00
SSB Scotland Bancorp of NC 10.12 1,914 19.4 10.12 10.12 10.12 0.00 N.A. 0.00
SZB SouthFirst Bancshares of AL 22.37 848 19.0 22.37 22.37 21.50 4.05 N.A. 0.00
SRN Southern Banc Company of AL 18.12 1,230 22.3 18.12 18.12 17.75 2.08 N.A. 0.00
SSM Stone Street Bancorp of NC 22.12 1,898 42.0 22.12 22.12 22.12 0.00 N.A. 0.00
TSH Teche Holding Company of LA 22.81 3,438 78.4 22.81 22.81 22.87 -0.26 N.A. 0.00
FTF Texarkana Fst. Fin. Corp of AR 25.00 1,787 44.7 25.00 25.00 25.12 -0.48 N.A. 0.00
THR Three Rivers Fin. Corp. of MI 22.25 824 18.3 22.25 22.25 20.69 7.54 N.A. 0.00
WSB Washington SB, FSB of MD 9.00 4,348 39.1 9.00 9.00 9.50 -5.26 620.00 0.00
NASDAQ Listed OTC Companies
- ---------------------------
FBCV 1st Bancorp of Vincennes IN 30.75 1,038 31.9 30.75 30.75 29.75 3.36 N.A. 0.00
AFED AFSALA Bancorp, Inc. of NY 18.56 1,440 26.7 18.56 18.56 18.62 -0.32 N.A. 0.00
ALBK ALBANK Fin. Corp. of Albany NY 49.62 12,872 638.7 49.62 49.62 48.00 3.37 113.42 0.00
AMFC AMB Financial Corp. of IN 16.50 964 15.9 16.50 16.50 15.87 3.97 N.A. 0.00
ASBP ASB Financial Corp. of OH 13.25 1,700 22.5 13.25 13.25 13.50 -1.85 N.A. 0.00
ABBK Abington Savings Bank of MA* 20.00 3,680 73.6 20.00 20.00 20.50 -2.44 504.23 0.00
AABC Access Anytime Bancorp of NM 11.00 1,217 13.4 11.00 11.00 11.00 0.00 62.96 0.00
AFBC Advance Fin. Bancorp of WV 17.50 1,084 19.0 17.50 17.50 17.62 -0.68 N.A. 0.00
AADV Advantage Bancorp of WI(8) 69.25 3,236 224.1 69.25 69.25 67.25 2.97 652.72 0.00
AFCB Affiliated Comm BC, Inc of MA(8) 37.00 6,493 240.2 37.00 37.00 37.37 -0.99 N.A. 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 3.94 3.37 20.17 17.13 495.70
CSA Coast Savings Financial of CA(8) 2.94 3.14 25.21 24.92 484.90
CFB Commercial Federal Corp. of NE 2.02 2.02 13.72 12.28 222.63
DME Dime Bancorp, Inc. of NY* 1.30 1.28 10.38 9.88 191.28
DSL Downey Financial Corp. of CA 1.49 1.43 15.61 15.41 218.81
EBI Equality Bancorp of MO 0.53 0.53 9.95 9.95 100.33
FED FirstFed Fin. Corp. of CA 2.19 2.18 20.01 19.82 387.78
GSB Glendale Fed. Bk, FSB of CA 1.76 2.11 18.39 16.46 325.68
GDW Golden West Fin. Corp. of CA 5.93 5.83 45.36 45.36 691.01
GPT GreenPoint Fin. Corp. of NY* 3.38 3.30 29.63 15.88 305.75
JSB JSB Financial, Inc. of NY 2.97 2.64 35.91 35.91 154.68
NYB New York Bancorp, Inc. of NY(8) 2.40 2.46 7.93 7.93 152.17
SIB Staten Island Bancorp of NY* 0.74 0.65 14.19 13.77 57.38
WES Westcorp Inc. of Orange CA 1.31 0.28 13.00 12.97 143.10
AMEX Traded Companies
- ---------------------
ANA Acadiana Bancshares of LA* 0.97 0.94 17.22 17.22 101.60
ANE Alliance Bancorp of CT* 1.15 1.06 10.95 10.68 148.69
BKC American Bank of Waterbury CT* 3.27 2.76 23.23 22.38 263.69
BFD BostonFed Bancorp of MA 1.16 1.05 14.48 13.94 170.04
CFX CFX Corp of NH(8)* 0.58 0.78 10.25 9.88 117.66
CNY Carver Bancorp, Inc. of NY -0.26 0.02 15.09 14.50 179.59
CBK Citizens First Fin.Corp. of IL 0.63 0.56 14.79 14.79 107.57
ESX Essex Bancorp of VA(8) 0.20 0.18 0.03 -0.14 181.37
FCB Falmouth Co-Op Bank of MA* 0.52 0.47 15.67 15.67 66.25
FAB FirstFed America Bancorp of MA 0.06 0.54 14.52 14.52 118.99
GAF GA Financial Corp. of PA 0.94 0.91 14.72 14.58 100.63
KNK Kankakee Bancorp of IL 2.15 2.11 27.25 25.69 238.38
KYF Kentucky First Bancorp of KY 0.78 0.77 11.29 11.29 67.60
MBB MSB Bancorp of Middletown NY(8)* 0.79 0.52 21.15 10.38 286.18
PDB Piedmont Bancorp of NC -0.11 0.25 7.56 7.56 46.00
SSB Scotland Bancorp of NC 0.66 0.65 7.61 7.61 33.65
SZB SouthFirst Bancshares of AL -0.03 0.25 16.06 16.06 114.72
SRN Southern Banc Company of AL 0.12 0.43 14.58 14.43 85.72
SSM Stone Street Bancorp of NC 0.86 0.86 16.32 16.32 55.20
TSH Teche Holding Company of LA 1.12 1.07 15.81 15.81 117.54
FTF Texarkana Fst. Fin. Corp of AR 1.61 1.61 15.32 15.32 100.01
THR Three Rivers Fin. Corp. of MI 0.62 0.90 15.54 15.48 115.45
WSB Washington SB, FSB of MD 0.25 0.35 5.16 5.16 61.61
NASDAQ Listed OTC Companies
- ---------------------------
FBCV 1st Bancorp of Vincennes IN 1.84 0.91 21.75 21.33 251.38
AFED AFSALA Bancorp, Inc. of NY 0.85 0.85 14.32 14.32 111.39
ALBK ALBANK Fin. Corp. of Albany NY 2.89 2.87 26.69 23.51 288.76
AMFC AMB Financial Corp. of IN 0.98 0.69 14.95 14.95 107.25
ASBP ASB Financial Corp. of OH 0.64 0.60 10.30 10.30 66.15
ABBK Abington Savings Bank of MA* 1.14 1.02 9.71 8.80 136.31
AABC Access Anytime Bancorp of NM 1.26 1.17 7.51 7.51 86.80
AFBC Advance Fin. Bancorp of WV 0.83 0.81 15.02 15.02 97.52
AADV Advantage Bancorp of WI(8) 3.30 2.96 30.59 28.46 320.60
AFCB Affiliated Comm BC, Inc of MA(8) 1.78 1.76 16.97 16.87 173.81
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of January 2, 1998
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
----------------------- -----------------------------------------------
52 Week (1) % Change From
Shares Market --------------- -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
ALBC Albion Banc Corp. of Albion NY 40.50 250 10.1 40.50 40.50 34.00 19.12 211.54 0.00
ABCL Allied Bancorp of IL 26.75 8,020 214.5 26.75 26.75 26.50 0.94 301.05 0.00
ATSB AmTrust Capital Corp. of IN 14.25 526 7.5 14.25 14.25 13.75 3.64 N.A. 0.00
AHCI Ambanc Holding Co., Inc. of NY* 19.25 4,306 82.9 19.25 19.25 18.75 2.67 N.A. 0.00
ASBI Ameriana Bancorp of IN 19.87 3,231 64.2 19.87 19.87 20.12 -1.24 115.28 0.00
AFFFZ America First Fin. Fund of CA(8) 54.00 6,011 324.6 54.00 54.00 49.37 9.38 188.00 0.00
ABCW Anchor Bancorp Wisconsin of WI 36.00 9,054 325.9 36.00 36.00 35.62 1.07 145.06 0.00
ANDB Andover Bancorp, Inc. of MA* 39.75 5,149 204.7 39.75 39.75 40.50 -1.85 269.77 0.00
ASFC Astoria Financial Corp. of NY 56.44 20,666 1,166.4 56.44 56.44 55.87 1.02 115.01 0.00
AVND Avondale Fin. Corp. of IL 16.44 3,495 57.5 16.44 16.44 16.00 2.75 N.A. 0.00
BKCT Bancorp Connecticut of CT* 21.88 5,086 111.3 21.88 21.88 20.25 8.05 278.55 0.00
BPLS Bank Plus Corp. of CA 12.87 19,341 248.9 12.87 12.87 12.44 3.46 N.A. 0.00
BWFC Bank West Fin. Corp. of MI 16.25 2,630 42.7 16.25 16.25 15.75 3.17 N.A. 0.00
BANC BankAtlantic Bancorp of FL 17.00 22,276 378.7 17.00 17.00 15.63 8.77 308.65 0.00
BKUNA BankUnited SA of FL 15.37 9,533 146.5 15.37 15.37 15.31 0.39 183.06 0.00
BVCC Bay View Capital Corp. of CA 37.25 12,421 462.7 37.25 37.25 33.50 11.19 88.61 0.00
FSNJ Bayonne Banchsares of NJ 13.56 8,993 121.9 13.56 13.56 12.75 6.35 N.A. 0.00
BFSB Bedford Bancshares of VA 34.75 1,142 39.7 34.75 34.75 33.00 5.30 230.95 0.00
BFFC Big Foot Fin. Corp. of IL 21.12 2,513 53.1 21.12 21.12 19.00 11.16 N.A. 0.00
BYFC Broadway Fin. Corp. of CA 13.25 831 11.0 13.25 13.25 13.00 1.92 N.A. 0.00
CBES CBES Bancorp of MO 21.75 1,025 22.3 21.75 21.75 22.37 -2.77 N.A. 0.00
CCFH CCF Holding Company of GA 20.12 902 18.1 20.12 20.12 21.00 -4.19 N.A. 0.00
CENF CENFED Financial Corp. of CA(8) 44.00 5,959 262.2 44.00 44.00 43.25 1.73 180.61 0.00
CFSB CFSB Bancorp of Lansing MI 26.25 7,630 200.3 26.25 26.25 23.75 10.53 337.50 0.00
CKFB CKF Bancorp of Danville KY 18.87 903 17.0 18.87 18.87 18.87 0.00 N.A. 0.00
CNSB CNS Bancorp of MO 19.00 1,653 31.4 19.00 19.00 21.25 -10.59 N.A. 0.00
CSBF CSB Financial Group Inc of IL* 13.50 902 12.2 13.50 13.50 13.00 3.85 N.A. 0.00
CBCI Calumet Bancorp of Chicago IL 34.00 3,166 107.6 34.00 34.00 32.75 3.82 154.30 0.00
CAFI Camco Fin. Corp. of OH 27.00 3,214 86.8 27.00 27.00 26.00 3.85 N.A. 0.00
CMRN Cameron Fin. Corp. of MO 20.12 2,562 51.5 20.12 20.12 21.00 -4.19 N.A. 0.00
CAPS Capital Savings Bancorp of MO(8) 24.25 1,892 45.9 24.25 24.25 23.25 4.30 83.02 0.00
CFNC Carolina Fincorp of NC* 18.56 1,851 34.4 18.56 18.56 17.87 3.86 N.A. 0.00
CASB Cascade SB of Everett WA 13.25 3,387 44.9 13.25 13.25 13.25 0.00 3.52 0.00
CATB Catskill Fin. Corp. of NY* 18.12 4,657 84.4 18.12 18.12 18.75 -3.36 N.A. 0.00
CNIT Cenit Bancorp of Norfolk VA 78.50 1,654 129.8 78.50 78.50 77.00 1.95 394.33 0.00
CEBK Central Co-Op. Bank of MA* 29.25 1,965 57.5 29.25 29.25 27.25 7.34 457.14 0.00
CENB Century Bancshares of NC* 84.75 407 34.5 84.75 84.75 85.00 -0.29 N.A. 0.00
CBSB Charter Financial Inc. of IL(8) 25.31 4,150 105.0 25.31 25.31 25.00 1.24 N.A. 0.00
COFI Charter One Financial of OH 62.37 49,563 3,091.2 62.37 62.37 61.31 1.73 256.40 0.00
CVAL Chester Valley Bancorp of PA 30.00 2,166 65.0 30.00 30.00 28.50 5.26 164.78 0.00
CTZN CitFed Bancorp of Dayton OH 39.50 12,984 512.9 39.50 39.50 39.00 1.28 558.33 0.00
CLAS Classic Bancshares of KY 16.75 1,300 21.8 16.75 16.75 15.75 6.35 N.A. 0.00
CMSB Cmnwealth Bancorp of PA 20.37 16,243 330.9 20.37 20.37 20.50 -0.63 N.A. 0.00
CBSA Coastal Bancorp of Houston TX 34.87 4,992 174.1 34.87 34.87 32.00 8.97 N.A. 0.00
CFCP Coastal Fin. Corp. of SC 23.50 4,647 109.2 23.50 23.50 22.25 5.62 135.00 0.00
CMSV Commty. Svgs, MHC of FL (48.5) 35.25 5,095 87.1 35.25 35.25 34.62 1.82 N.A. 0.00
CFTP Community Fed. Bancorp of MS 20.00 4,629 92.6 20.00 20.00 19.75 1.27 N.A. 0.00
CFFC Community Fin. Corp. of VA 27.62 1,275 35.2 27.62 27.62 27.00 2.30 294.57 0.00
CFBC Community First Bnkg Co. of GA 43.25 2,414 104.4 43.25 43.25 39.62 9.16 N.A. 0.00
CIBI Community Inv. Bancorp of OH 16.16 916 14.8 16.16 16.16 16.00 1.00 N.A. 0.00
COOP Cooperative Bk.for Svgs. of NC 23.37 2,983 69.7 23.37 23.37 23.75 -1.60 367.40 0.00
CRZY Crazy Woman Creek Bncorp of WY 15.44 955 14.7 15.44 15.44 15.12 2.12 N.A. 0.00
DNFC D&N Financial Corp. of MI 25.94 9,069 235.2 25.94 25.94 26.62 -2.55 196.46 0.00
DCBI Delphos Citizens Bancorp of OH 20.50 1,960 40.2 20.50 20.50 17.75 15.49 N.A. 0.00
DIME Dime Community Bancorp of NY 22.37 12,625 282.4 22.37 22.37 23.37 -4.28 N.A. 0.00
</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)
- ---------------------------------------
ALBC Albion Banc Corp. of Albion NY 1.31 1.29 24.26 24.26 283.24
ABCL Allied Bancorp of IL 1.06 1.18 16.10 15.90 170.97
ATSB AmTrust Capital Corp. of IN 0.54 0.31 14.48 14.33 132.48
AHCI Ambanc Holding Co., Inc. of NY* -0.61 -0.69 13.98 13.98 122.92
ASBI Ameriana Bancorp of IN 1.13 1.03 13.63 13.63 121.64
AFFFZ America First Fin. Fund of CA(8) 7.31 7.39 31.32 30.99 374.40
ABCW Anchor Bancorp Wisconsin of WI 2.09 1.95 13.82 13.58 215.90
ANDB Andover Bancorp, Inc. of MA* 2.51 2.45 20.20 20.20 248.71
ASFC Astoria Financial Corp. of NY 2.96 2.80 29.51 24.96 382.48
AVND Avondale Fin. Corp. of IL -3.37 -3.43 13.18 13.18 170.79
BKCT Bancorp Connecticut of CT* 1.12 1.02 8.96 8.96 83.33
BPLS Bank Plus Corp. of CA 0.65 0.54 9.16 9.15 202.69
BWFC Bank West Fin. Corp. of MI 0.59 0.32 8.87 8.87 62.68
BANC BankAtlantic Bancorp of FL 1.22 0.64 7.03 5.81 127.72
BKUNA BankUnited SA of FL 0.49 0.44 7.03 5.53 225.05
BVCC Bay View Capital Corp. of CA 1.42 1.59 14.81 12.37 254.59
FSNJ Bayonne Banchsares of NJ 0.25 0.35 10.58 10.58 67.73
BFSB Bedford Bancshares of VA 1.39 1.38 17.18 17.18 121.87
BFFC Big Foot Fin. Corp. of IL 0.42 0.42 14.97 14.97 85.62
BYFC Broadway Fin. Corp. of CA 0.38 0.48 14.77 14.77 150.11
CBES CBES Bancorp of MO 1.18 1.07 17.60 17.60 104.03
CCFH CCF Holding Company of GA 0.15 -0.16 12.92 12.92 121.22
CENF CENFED Financial Corp. of CA(8) 2.41 2.17 21.51 21.48 386.76
CFSB CFSB Bancorp of Lansing MI 1.32 1.24 8.69 8.69 112.71
CKFB CKF Bancorp of Danville KY 1.22 0.91 15.69 15.69 66.30
CNSB CNS Bancorp of MO 0.47 0.47 14.34 14.34 58.93
CSBF CSB Financial Group Inc of IL* 0.27 0.23 12.92 12.19 53.81
CBCI Calumet Bancorp of Chicago IL 2.27 2.23 25.01 25.01 154.25
CAFI Camco Fin. Corp. of OH 1.73 1.46 14.98 13.87 156.25
CMRN Cameron Fin. Corp. of MO 0.98 0.98 17.43 17.43 82.94
CAPS Capital Savings Bancorp of MO(8) 1.20 1.18 11.70 11.70 128.04
CFNC Carolina Fincorp of NC* 0.70 0.68 13.92 13.92 61.63
CASB Cascade SB of Everett WA 0.65 0.65 8.36 8.36 125.91
CATB Catskill Fin. Corp. of NY* 0.84 0.85 15.41 15.41 62.19
CNIT Cenit Bancorp of Norfolk VA 3.39 3.15 29.47 26.99 424.25
CEBK Central Co-Op. Bank of MA* 1.45 1.47 17.40 15.57 175.28
CENB Century Bancshares of NC* 4.19 4.20 75.12 75.12 248.00
CBSB Charter Financial Inc. of IL(8) 1.31 1.44 14.08 12.54 93.26
COFI Charter One Financial of OH 3.64 3.56 21.63 19.86 306.62
CVAL Chester Valley Bancorp of PA 1.38 1.32 12.89 12.89 148.81
CTZN CitFed Bancorp of Dayton OH 1.98 1.98 15.92 14.47 253.74
CLAS Classic Bancshares of KY 0.51 0.69 14.93 12.63 100.19
CMSB Cmnwealth Bancorp of PA 1.02 0.86 13.02 10.15 140.25
CBSA Coastal Bancorp of Houston TX 2.40 2.47 20.36 17.12 586.85
CFCP Coastal Fin. Corp. of SC 1.25 1.08 6.97 6.97 106.31
CMSV Commty. Svgs, MHC of FL (48.5) 1.07 0.98 15.79 15.79 139.20
CFTP Community Fed. Bancorp of MS 0.66 0.65 12.47 12.47 46.65
CFFC Community Fin. Corp. of VA 1.50 1.51 18.99 18.99 143.75
CFBC Community First Bnkg Co. of GA 1.29 1.29 29.10 28.71 163.45
CIBI Community Inv. Bancorp of OH 1.01 1.01 12.10 12.10 102.98
COOP Cooperative Bk.for Svgs. of NC 0.73 0.73 9.27 9.27 120.53
CRZY Crazy Woman Creek Bncorp of WY 0.72 0.73 14.88 14.88 62.78
DNFC D&N Financial Corp. of MI 1.52 1.41 10.33 10.23 193.41
DCBI Delphos Citizens Bancorp of OH 0.82 0.82 14.65 14.65 55.00
DIME Dime Community Bancorp of NY 1.10 1.07 14.81 12.76 109.73
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of January 2, 1998
<TABLE>
<CAPTION>
Market Capitalization Price Change Data
----------------------- -----------------------------------------------
% Change From
Shares Market 52 Week (1) -----------------------
Price/ Outst- Capital- --------------- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
DIBK Dime Financial Corp. of CT* 29.62 5,162 152.9 29.62 29.62 30.00 -1.27 182.10 0.00
EGLB Eagle BancGroup of IL 18.87 1,198 22.6 18.87 18.87 18.87 0.00 N.A. 0.00
EBSI Eagle Bancshares of Tucker GA 22.00 5,666 124.7 22.00 22.00 20.19 8.96 203.45 0.00
EGFC Eagle Financial Corp. of CT(8) 54.69 6,316 345.4 54.69 54.69 50.87 7.51 525.03 0.00
ETFS East Texas Fin. Serv. of TX 23.75 1,026 24.4 23.75 23.75 23.00 3.26 N.A. 0.00
EMLD Emerald Financial Corp of OH 22.50 5,072 114.1 22.50 22.50 20.50 9.76 N.A. 0.00
EIRE Emerald Island Bancorp, MA(8)* 32.19 2,250 72.4 32.19 32.19 32.12 0.22 322.44 0.00
EFBC Empire Federal Bancorp of MT 17.25 2,592 44.7 17.25 17.25 16.37 5.38 N.A. 0.00
EFBI Enterprise Fed. Bancorp of OH 34.25 1,986 68.0 34.25 34.25 30.62 11.85 N.A. 0.00
EQSB Equitable FSB of Wheaton MD 53.00 603 32.0 53.00 53.00 48.87 8.45 N.A. 0.00
FCBF FCB Fin. Corp. of Neenah WI 29.87 3,879 115.9 29.87 29.87 28.81 3.68 N.A. 0.00
FFDF FFD Financial Corp. of OH 18.25 1,445 26.4 18.25 18.25 18.00 1.39 N.A. 0.00
FFLC FFLC Bancorp of Leesburg FL 21.75 3,835 83.4 21.75 21.75 21.75 0.00 N.A. 0.00
FFFC FFVA Financial Corp. of VA(8) 38.97 4,522 176.2 38.97 38.97 38.50 1.22 N.A. 0.00
FFWC FFW Corporation of Wabash IN 18.00 1,430 25.7 18.00 18.00 19.00 -5.26 N.A. 0.00
FFYF FFY Financial Corp. of OH 33.25 4,122 137.1 33.25 33.25 32.75 1.53 N.A. 0.00
FMCO FMS Financial Corp. of NJ 34.25 2,388 81.8 34.25 34.25 32.87 4.20 280.56 0.00
FFHH FSF Financial Corp. of MN 21.00 3,010 63.2 21.00 21.00 20.50 2.44 N.A. 0.00
FOBC Fed One Bancorp of Wheeling WV 28.00 2,373 66.4 28.00 28.00 26.25 6.67 180.00 0.00
FBCI Fidelity Bancorp of Chicago IL 24.75 2,795 69.2 24.75 24.75 23.12 7.05 N.A. 0.00
FSBI Fidelity Bancorp, Inc. of PA 29.25 1,555 45.5 29.25 29.25 28.75 1.74 278.40 0.00
FFFL Fidelity FSB, MHC of FL (47.7) 31.50 6,783 101.6 31.50 31.50 31.00 1.61 N.A. 0.00
FFED Fidelity Fed. Bancorp of IN 10.25 2,791 28.6 10.25 10.25 10.00 2.50 45.39 0.00
FFOH Fidelity Financial of OH 15.50 5,580 86.5 15.50 15.50 15.37 0.85 N.A. 0.00
FIBC Financial Bancorp, Inc. of NY 24.12 1,710 41.2 24.12 24.12 24.50 -1.55 N.A. 0.00
FBSI First Bancshares of MO 31.50 1,093 34.4 31.50 31.50 26.37 19.45 147.06 0.00
FBBC First Bell Bancorp of PA 19.00 6,511 123.7 19.00 19.00 18.62 2.04 N.A. 0.00
FBER First Bergen Bancorp of NJ 19.75 2,865 56.6 19.75 19.75 19.00 3.95 N.A. 0.00
SKBO First Carnegie,MHC of PA(45.0) 18.75 2,300 19.4 18.75 18.75 19.12 -1.94 N.A. 0.00
FSTC First Citizens Corp of GA 35.00 2,742 96.0 35.00 35.00 34.00 2.94 324.24 0.00
FCME First Coastal Corp. of ME* 14.87 1,359 20.2 14.87 14.87 15.00 -0.87 N.A. 0.00
FFBA First Colorado Bancorp of Co 23.62 16,485 389.4 23.62 23.62 23.94 -1.34 615.76 0.00
FDEF First Defiance Fin.Corp. of OH 15.50 8,957 138.8 15.50 15.50 15.25 1.64 N.A. 0.00
FESX First Essex Bancorp of MA* 22.00 7,527 165.6 22.00 22.00 22.62 -2.74 266.67 0.00
FFES First FS&LA of E. Hartford CT 38.25 2,682 102.6 38.25 38.25 36.75 4.08 488.46 0.00
FFSX First FS&LA. MHC of IA (46.1) 30.50 2,833 39.7 30.50 30.50 31.25 -2.40 357.27 0.00
BDJI First Fed. Bancorp. of MN 22.00 1,009 22.2 22.00 22.00 20.25 8.64 N.A. 0.00
FFBH First Fed. Bancshares of AR 23.50 4,896 115.1 23.50 23.50 23.50 0.00 N.A. 0.00
FTFC First Fed. Capital Corp. of WI 33.75 9,165 309.3 33.75 33.75 31.75 6.30 350.00 0.00
FFKY First Fed. Fin. Corp. of KY 22.75 4,159 94.6 22.75 22.75 22.12 2.85 44.44 0.00
FFBZ First Federal Bancorp of OH 20.25 1,575 31.9 20.25 20.25 21.12 -4.12 102.50 0.00
FFCH First Fin. Holdings Inc. of SC 53.37 6,368 339.9 53.37 53.37 50.25 6.21 335.67 0.00
FFBI First Financial Bancorp of IL 21.00 415 8.7 21.00 21.00 21.00 0.00 N.A. 0.00
FFHS First Franklin Corp. of OH 31.25 1,192 37.3 31.25 31.25 28.50 9.65 138.19 0.00
FGHC First Georgia Hold. Corp of GA 8.81 3,052 26.9 8.81 8.81 8.62 2.20 130.03 0.00
FSPG First Home Bancorp of NJ(8) 30.00 2,708 81.2 30.00 30.00 30.00 0.00 400.00 0.00
FFSL First Independence Corp. of KS 14.25 978 13.9 14.25 14.25 14.00 1.79 N.A. 0.00
FISB First Indiana Corp. of IN 29.50 10,561 311.5 29.50 29.50 31.00 -4.84 118.52 0.00
FKFS First Keystone Fin. Corp of PA 37.00 1,228 45.4 37.00 37.00 35.87 3.15 N.A. 0.00
FLKY First Lancaster Bncshrs of KY 16.00 951 15.2 16.00 16.00 15.75 1.59 N.A. 0.00
FLFC First Liberty Fin. Corp. of GA 32.87 7,730 254.1 32.87 32.87 31.00 6.03 547.05 0.00
CASH First Midwest Fin. Corp. of IA 22.12 2,699 59.7 22.12 22.12 22.00 0.55 N.A. 0.00
FMBD First Mutual Bancorp of IL 23.00 3,507 80.7 23.00 23.00 21.25 8.24 N.A. 0.00
FMSB First Mutual SB of Bellevue WA* 18.50 4,067 75.2 18.50 18.50 19.00 -2.63 258.53 0.00
FNGB First Northern Cap. Corp of WI 14.00 8,840 123.8 14.00 14.00 13.25 5.66 92.84 0.00
</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)
- ---------------------------------------
DIBK Dime Financial Corp. of CT* 3.05 3.04 14.54 14.12 178.52
EGLB Eagle BancGroup of IL 0.46 0.36 17.03 17.03 143.71
EBSI Eagle Bancshares of Tucker GA 0.88 0.89 12.59 12.59 154.03
EGFC Eagle Financial Corp. of CT(8) 0.90 1.30 22.91 18.23 332.04
ETFS East Texas Fin. Serv. of TX 0.75 0.70 20.35 20.35 113.01
EMLD Emerald Financial Corp of OH 1.20 1.11 9.28 9.15 118.99
EIRE Emerald Island Bancorp, MA(8)* 1.60 1.70 13.77 13.77 197.11
EFBC Empire Federal Bancorp of MT 0.35 0.46 14.76 14.76 42.30
EFBI Enterprise Fed. Bancorp of OH 1.19 0.99 15.82 15.81 138.41
EQSB Equitable FSB of Wheaton MD 3.75 3.70 26.71 26.71 522.33
FCBF FCB Fin. Corp. of Neenah WI 0.61 0.47 19.74 19.74 134.88
FFDF FFD Financial Corp. of OH 1.16 0.57 14.86 14.86 61.05
FFLC FFLC Bancorp of Leesburg FL 0.94 0.89 13.73 13.73 99.97
FFFC FFVA Financial Corp. of VA(8) 1.70 1.63 16.70 16.36 125.45
FFWC FFW Corporation of Wabash IN 1.21 1.19 12.31 11.18 127.26
FFYF FFY Financial Corp. of OH 1.87 1.84 20.30 20.30 148.22
FMCO FMS Financial Corp. of NJ 2.34 2.32 15.80 15.57 243.58
FFHH FSF Financial Corp. of MN 1.04 1.03 14.41 14.41 128.95
FOBC Fed One Bancorp of Wheeling WV 1.38 1.38 16.85 16.10 150.75
FBCI Fidelity Bancorp of Chicago IL 0.33 1.04 18.66 18.63 178.13
FSBI Fidelity Bancorp, Inc. of PA 1.75 1.71 16.64 16.64 244.98
FFFL Fidelity FSB, MHC of FL (47.7) 0.93 0.79 12.65 12.57 154.16
FFED Fidelity Fed. Bancorp of IN 0.67 0.65 5.15 5.15 84.32
FFOH Fidelity Financial of OH 0.76 0.85 12.34 10.95 94.75
FIBC Financial Bancorp, Inc. of NY 1.46 1.56 15.71 15.63 173.66
FBSI First Bancshares of MO 1.74 1.57 20.73 20.73 148.91
FBBC First Bell Bancorp of PA 1.18 1.15 11.02 11.02 104.63
FBER First Bergen Bancorp of NJ 0.71 0.71 13.57 13.57 99.39
SKBO First Carnegie,MHC of PA(45.0) 0.33 0.33 10.52 10.52 63.97
FSTC First Citizens Corp of GA 2.17 1.94 12.44 9.81 122.97
FCME First Coastal Corp. of ME* 4.52 4.34 10.66 10.66 109.32
FFBA First Colorado Bancorp of Co 1.11 1.10 12.00 11.85 91.76
FDEF First Defiance Fin.Corp. of OH 0.63 0.61 12.61 12.61 64.12
FESX First Essex Bancorp of MA* 1.33 1.14 11.90 10.41 160.71
FFES First FS&LA of E. Hartford CT 1.92 2.18 24.40 24.40 368.16
FFSX First FS&LA. MHC of IA (46.1) 1.18 1.15 14.08 13.96 161.26
BDJI First Fed. Bancorp. of MN 0.70 0.68 11.83 11.83 110.50
FFBH First Fed. Bancshares of AR 1.13 1.08 16.64 16.64 111.75
FTFC First Fed. Capital Corp. of WI 1.80 1.49 11.46 10.80 170.18
FFKY First Fed. Fin. Corp. of KY 1.46 1.45 12.60 11.89 91.99
FFBZ First Federal Bancorp of OH 1.25 1.26 9.92 9.91 129.34
FFCH First Fin. Holdings Inc. of SC 2.22 2.16 16.45 16.45 268.99
FFBI First Financial Bancorp of IL -0.15 0.94 18.10 18.10 202.99
FFHS First Franklin Corp. of OH 1.05 1.24 17.49 17.39 193.95
FGHC First Georgia Hold. Corp of GA 0.32 0.25 4.21 3.86 51.24
FSPG First Home Bancorp of NJ(8) 1.74 1.70 13.31 13.11 193.90
FFSL First Independence Corp. of KS 0.73 0.73 11.79 11.79 115.05
FISB First Indiana Corp. of IN 1.62 1.33 14.13 13.96 146.49
FKFS First Keystone Fin. Corp of PA 2.15 1.97 20.16 20.16 304.10
FLKY First Lancaster Bncshrs of KY 0.53 0.53 14.62 14.62 49.62
FLFC First Liberty Fin. Corp. of GA 1.15 1.24 12.15 10.97 164.18
CASH First Midwest Fin. Corp. of IA 1.35 1.29 16.11 14.31 149.90
FMBD First Mutual Bancorp of IL 0.35 0.32 15.37 11.72 114.74
FMSB First Mutual SB of Bellevue WA* 1.07 1.05 7.53 7.53 110.92
FNGB First Northern Cap. Corp of WI 0.66 0.63 8.24 8.24 74.29
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700 Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of January 2, 1998
<TABLE>
<CAPTION>
Price Change Data
Market Capitalization -----------------------------------------------
----------------------- 52 Week (1) % Change From
Shares Market --------------- -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
- --------------------- ------- ------ ------- ------- ------- ------- ------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
FFPB First Palm Beach Bancorp of FL 43.12 5,048 217.7 43.12 43.12 41.00 5.17 N.A. 0.00
FSLA First SB SLA MHC of NJ (47.5)(8) 48.50 8,007 165.1 48.50 48.50 45.00 7.78 385.00 0.00
SOPN First SB, SSB, Moore Co. of NC 24.50 3,687 90.3 24.50 24.50 23.00 6.52 N.A. 0.00
FWWB First Savings Bancorp of WA* 27.50 10,247 281.8 27.50 27.50 27.87 -1.33 N.A. 0.00
FSFF First SecurityFed Fin of IL 15.75 6,408 100.9 15.75 15.75 15.87 -0.76 N.A. 0.00
SHEN First Shenango Bancorp of PA 34.25 2,069 70.9 34.25 34.25 35.75 -4.20 N.A. 0.00
FBNW FirstBank Corp of Clarkston WA 18.87 1,984 37.4 18.87 18.87 18.12 4.14 N.A. 0.00
FFDB FirstFed Bancorp of AL 21.00 1,151 24.2 21.00 21.00 21.28 -1.32 N.A. 0.00
FSPT FirstSpartan Fin. Corp. of SC 40.12 4,430 177.7 40.12 40.12 36.87 8.81 N.A. 0.00
FLAG Flag Financial Corp of GA 20.12 2,037 41.0 20.12 20.12 19.00 5.89 105.31 0.00
FLGS Flagstar Bancorp, Inc of MI 19.81 13,670 270.8 19.81 19.81 19.62 0.97 N.A. 0.00
FFIC Flushing Fin. Corp. of NY* 23.25 7,983 185.6 23.25 23.25 23.00 1.09 N.A. 0.00
FBHC Fort Bend Holding Corp. of TX 22.00 1,656 36.4 22.00 22.00 21.50 2.33 N.A. 0.00
FTSB Fort Thomas Fin. Corp. of KY 14.87 1,495 22.2 14.87 14.87 14.75 0.81 N.A. 0.00
FKKYD Frankfort First Bancorp of KY 17.75 1,640 29.1 17.75 17.75 17.62 0.74 N.A. 0.00
FTNB Fulton Bancorp of MO 22.12 1,719 38.0 22.12 22.12 21.50 2.88 N.A. 0.00
GFSB GFS Bancorp of Grinnell IA(8) 17.06 988 16.9 17.06 17.06 17.19 -0.76 N.A. 0.00
GUPB GFSB Bancorp of Gallup NM 21.62 801 17.3 21.62 21.62 21.12 2.37 N.A. 0.00
GSLA GS Financial Corp. of LA 19.50 3,438 67.0 19.50 19.50 18.25 6.85 N.A. 0.00
GOSB GSB Financial Corp. of NY 17.50 2,248 39.3 17.50 17.50 18.94 -7.60 N.A. 0.00
GBCI Glacier Bancorp of MT 24.75 6,816 168.7 24.75 24.75 21.56 14.80 412.42 0.00
GFCO Glenway Financial Corp. of OH 18.75 2,280 42.8 18.75 18.75 18.62 0.70 N.A. 0.00
GTPS Great American Bancorp of IL 19.00 1,697 32.2 19.00 19.00 19.50 -2.56 N.A. 0.00
GTFN Great Financial Corp. of KY(8) 50.37 13,823 696.3 50.37 50.37 50.12 0.50 N.A. 0.00
PEDE Great Pee Dee Bancorp of SC 15.75 2,180 34.3 16.12 15.75 16.13 -2.36 N.A. N.A.
GSBC Great Southern Bancorp of MO 24.75 8,080 200.0 24.75 24.75 25.50 -2.94 747.60 0.00
GDVS Greater DV SB,MHC of PA (19.9)* 30.75 3,272 20.0 30.75 30.75 30.75 0.00 N.A. 0.00
GSFC Green Street Fin. Corp. of NC 18.00 4,298 77.4 18.00 18.00 17.62 2.16 N.A. 0.00
GFED Guaranty Fed Bancshares of MO 12.87 6,222 80.1 12.87 12.87 10.00 28.70 N.A. 0.00
HCBB HCB Bancshares of AR 14.75 2,645 39.0 14.75 14.75 13.87 6.34 N.A. 0.00
HEMT HF Bancorp of Hemet CA 18.25 6,282 114.6 18.25 18.25 17.50 4.29 N.A. 0.00
HFFC HF Financial Corp. of SD 27.00 2,803 75.7 27.00 27.00 26.75 0.93 440.00 0.00
HFNC HFNC Financial Corp. of NC 15.37 17,192 264.2 15.37 15.37 14.75 4.20 N.A. 0.00
HMNF HMN Financial, Inc. of MN 31.50 4,212 132.7 31.50 31.50 28.50 10.53 N.A. 0.00
HALL Hallmark Capital Corp. of WI 16.75 2,886 48.3 16.75 16.75 18.00 -6.94 N.A. 0.00
HARB Harbor FSB, MHC of FL (46.6)(8) 66.75 4,973 154.6 66.75 66.75 66.00 1.14 N.A. 0.00
HRBF Harbor Federal Bancorp of MD 25.25 1,693 42.7 25.25 25.25 25.00 1.00 152.50 0.00
HFSA Hardin Bancorp of Hardin MO 18.25 859 15.7 18.25 18.25 18.25 0.00 N.A. 0.00
HARL Harleysville SA of PA 29.37 1,662 48.8 29.37 29.37 29.00 1.28 65.46 0.00
HFGI Harrington Fin. Group of IN 12.75 3,257 41.5 12.75 12.75 12.50 2.00 N.A. 0.00
HARS Harris SB, MHC of PA (24.3) 19.87 33,779 162.3 19.87 19.87 19.62 1.27 N.A. 0.00
HFFB Harrodsburg 1st Fin Bcrp of KY 16.75 2,025 33.9 16.75 16.75 16.75 0.00 N.A. 0.00
HHFC Harvest Home Fin. Corp. of OH 14.50 915 13.3 14.50 14.50 14.50 0.00 N.A. 0.00
HAVN Haven Bancorp of Woodhaven NY 22.94 8,772 201.2 22.94 22.94 21.12 8.62 N.A. 0.00
HTHR Hawthorne Fin. Corp. of CA 20.37 3,088 62.9 20.37 20.37 19.87 2.52 -25.93 0.00
HMLK Hemlock Fed. Fin. Corp. of IL 17.12 2,076 35.5 17.12 17.12 17.25 -0.75 N.A. 0.00
HCBC High Country Bancorp of CO 15.50 1,323 20.5 15.50 15.50 15.25 1.64 N.A. 0.00
HBNK Highland Federal Bank of CA 32.75 2,300 75.3 32.75 32.75 32.75 0.00 N.A. 0.00
HIFS Hingham Inst. for Sav. of MA* 28.75 1,303 37.5 28.75 28.75 28.75 0.00 530.48 0.00
HBEI Home Bancorp of Elgin IL 17.87 6,856 122.5 17.87 17.87 18.06 -1.05 N.A. 0.00
HBFW Home Bancorp of Fort Wayne IN 28.62 2,467 70.6 28.62 28.62 28.25 1.31 N.A. 0.00
HBBI Home Building Bancorp of IN 21.00 312 6.6 21.00 21.00 21.25 -1.18 N.A. 0.00
HCFC Home City Fin. Corp. of OH 18.50 905 16.7 18.50 18.50 17.25 7.25 N.A. 0.00
HOMF Home Fed Bancorp of Seymour IN 26.75 5,102 136.5 26.75 26.75 26.75 0.00 303.47 0.00
HWEN Home Financial Bancorp of IN 18.50 465 8.6 18.50 18.50 18.00 2.78 N.A. 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>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
FFPB First Palm Beach Bancorp of FL 1.85 1.55 22.39 21.87 358.24
FSLA First SB SLA MHC of NJ (47.5)(8) 1.14 1.19 12.39 11.26 130.45
SOPN First SB, SSB, Moore Co. of NC 1.32 1.32 18.43 18.43 80.10
FWWB First Savings Bancorp of WA* 0.99 0.94 14.92 13.78 104.83
FSFF First SecurityFed Fin of IL 0.61 0.61 12.80 12.80 47.35
SHEN First Shenango Bancorp of PA 2.26 2.25 22.55 22.55 194.02
FBNW FirstBank Corp of Clarkston WA 0.33 0.15 14.73 14.73 89.65
FFDB FirstFed Bancorp of AL 1.59 1.55 14.77 13.51 153.31
FSPT FirstSpartan Fin. Corp. of SC 1.25 1.25 29.17 29.17 108.87
FLAG Flag Financial Corp of GA 1.01 0.84 10.66 10.66 117.07
FLGS Flagstar Bancorp, Inc of MI 1.66 0.83 8.89 8.54 148.74
FFIC Flushing Fin. Corp. of NY* 0.99 1.04 17.08 16.40 120.27
FBHC Fort Bend Holding Corp. of TX 1.23 1.03 11.88 11.09 192.88
FTSB Fort Thomas Fin. Corp. of KY 0.76 0.76 10.56 10.56 65.45
FKKYD Frankfort First Bancorp of KY 0.07 0.51 13.67 13.67 81.25
FTNB Fulton Bancorp of MO 0.73 0.63 14.88 14.88 60.33
GFSB GFS Bancorp of Grinnell IA(8) 1.15 1.15 11.01 11.01 95.64
GUPB GFSB Bancorp of Gallup NM 0.97 0.97 17.60 17.60 137.28
GSLA GS Financial Corp. of LA 0.41 0.41 16.44 16.44 38.12
GOSB GSB Financial Corp. of NY 0.27 0.28 14.52 14.52 52.07
GBCI Glacier Bancorp of MT 1.22 1.25 8.41 8.21 84.21
GFCO Glenway Financial Corp. of OH 0.99 0.96 12.17 12.03 128.62
GTPS Great American Bancorp of IL 0.42 0.47 16.80 16.80 82.24
GTFN Great Financial Corp. of KY(8) 2.20 1.62 21.08 20.23 209.33
PEDE Great Pee Dee Bancorp of SC 0.56 0.56 13.51 13.51 35.68
GSBC Great Southern Bancorp of MO 1.57 1.48 7.79 7.79 90.04
GDVS Greater DV SB,MHC of PA (19.9)* 0.68 0.68 8.85 8.85 76.04
GSFC Green Street Fin. Corp. of NC 0.65 0.65 14.65 14.65 41.41
GFED Guaranty Fed Bancshares of MO 0.49 0.49 10.70 10.70 40.00
HCBB HCB Bancshares of AR 0.09 0.10 14.27 13.73 75.75
HEMT HF Bancorp of Hemet CA 0.05 0.28 13.26 11.05 167.20
HFFC HF Financial Corp. of SD 2.05 1.88 19.33 19.33 205.10
HFNC HFNC Financial Corp. of NC 0.62 0.53 9.48 9.48 50.42
HMNF HMN Financial, Inc. of MN 1.34 1.13 20.09 20.09 135.05
HALL Hallmark Capital Corp. of WI 0.91 0.89 10.59 10.59 145.00
HARB Harbor FSB, MHC of FL (46.6)(8) 2.68 2.66 19.47 18.85 227.43
HRBF Harbor Federal Bancorp of MD 0.91 0.91 16.75 16.75 128.29
HFSA Hardin Bancorp of Hardin MO 0.94 0.89 15.76 15.76 136.63
HARL Harleysville SA of PA 2.05 2.06 13.76 13.76 207.73
HFGI Harrington Fin. Group of IN 0.67 0.56 7.74 7.74 159.98
HARS Harris SB, MHC of PA (24.3) 0.52 0.46 5.12 4.53 62.47
HFFB Harrodsburg 1st Fin Bcrp of KY 0.55 0.73 14.49 14.49 53.80
HHFC Harvest Home Fin. Corp. of OH 0.23 0.50 11.30 11.30 102.55
HAVN Haven Bancorp of Woodhaven NY 1.31 1.32 12.53 12.49 208.99
HTHR Hawthorne Fin. Corp. of CA 2.37 2.28 14.01 14.01 288.59
HMLK Hemlock Fed. Fin. Corp. of IL 0.28 0.61 15.06 15.06 77.99
HCBC High Country Bancorp of CO 0.38 0.38 12.86 12.86 66.07
HBNK Highland Federal Bank of CA 2.41 1.83 17.20 17.20 224.34
HIFS Hingham Inst. for Sav. of MA* 1.98 1.98 16.11 16.11 165.96
HBEI Home Bancorp of Elgin IL 0.43 0.43 13.77 13.77 49.96
HBFW Home Bancorp of Fort Wayne IN 1.17 1.17 17.83 17.83 140.27
HBBI Home Building Bancorp of IN 1.05 1.03 18.89 18.89 133.80
HCFC Home City Fin. Corp. of OH 0.92 0.93 15.19 15.19 77.47
HOMF Home Fed Bancorp of Seymour IN 1.74 1.58 11.78 11.43 136.05
HWEN Home Financial Bancorp of IN 0.74 0.64 15.59 15.59 88.84
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700 Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of January 2, 1998
<TABLE>
<CAPTION>
Price Change Data
Market Capitalization -----------------------------------------------
----------------------- 52 Week (1) % Change From
Shares Market --------------- -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
HPBC Home Port Bancorp, Inc. of MA* 23.19 1,842 42.7 23.19 23.19 23.12 0.30 189.88 0.00
HMCI Homecorp, Inc. of Rockford IL(8) 28.25 1,708 48.3 28.25 28.25 29.25 -3.42 182.50 0.00
HZFS Horizon Fin'l. Services of IA 12.00 851 10.2 12.00 12.00 13.00 -7.69 N.A. 0.00
HRZB Horizon Financial Corp. of WA* 18.25 7,434 135.7 18.25 18.25 18.00 1.39 59.81 0.00
IBSF IBS Financial Corp. of NJ 17.50 10,949 191.6 17.50 17.50 17.62 -0.68 N.A. 0.00
ITLA Imperial Thrift & Loan of CA* 19.25 7,847 151.1 19.25 19.25 18.00 6.94 N.A. 0.00
IFSB Independence FSB of DC 17.00 1,281 21.8 17.00 17.00 15.25 11.48 750.00 0.00
INCB Indiana Comm. Bank, SB of IN(8) 20.50 922 18.9 20.50 20.50 20.50 0.00 N.A. 0.00
INBI Industrial Bancorp of OH 18.00 5,173 93.1 18.00 18.00 18.12 -0.66 N.A. 0.00
IWBK Interwest SB of Oak Harbor WA 38.00 8,050 305.9 38.00 38.00 37.87 0.34 280.00 0.00
IPSW Ipswich SB of Ipswich MA* 15.63 2,378 37.2 15.63 15.63 14.00 11.64 N.A. 0.00
JXVL Jacksonville Bancorp of TX 22.75 2,444 55.6 22.75 22.75 19.31 17.81 N.A. 0.00
JXSB Jcksnville SB,MHC of IL (45.6) 28.50 1,272 16.5 28.50 28.50 30.00 -5.00 N.A. 0.00
JSBA Jefferson Svgs Bancorp of MO 21.00 10,013 210.3 21.00 21.00 21.88 -4.02 N.A. 0.00
JOAC Joachim Bancorp of MO(8) 16.00 722 11.6 16.00 16.00 15.50 3.23 N.A. 0.00
KSAV KS Bancorp of Kenly NC 24.00 885 21.2 24.00 24.00 25.00 -4.00 N.A. 0.00
KSBK KSB Bancorp of Kingfield ME* 22.50 1,238 27.9 22.50 22.50 21.00 7.14 N.A. 0.00
KFBI Klamath First Bancorp of OR 21.75 10,019 217.9 21.75 21.75 21.12 2.98 N.A. 0.00
LSBI LSB Fin. Corp. of Lafayette IN 27.25 916 25.0 27.25 27.25 28.25 -3.54 N.A. 0.00
LVSB Lakeview SB of Paterson NJ 25.25 4,164 105.1 25.25 25.25 25.00 1.00 N.A. 0.00
LARK Landmark Bancshares of KS 23.00 1,689 38.8 23.00 23.00 23.00 0.00 N.A. 0.00
LARL Laurel Capital Group of PA 32.50 1,446 47.0 32.50 32.50 33.25 -2.26 153.91 0.00
LSBX Lawrence Savings Bank of MA* 16.25 4,284 69.6 16.25 16.25 15.87 2.39 372.38 0.00
LFED Leeds FSB, MHC of MD (36.3) 21.88 5,182 41.2 21.88 21.88 23.00 -4.87 N.A. 0.00
LXMO Lexington B&L Fin. Corp. of MO 17.37 1,138 19.8 17.37 17.37 17.37 0.00 N.A. 0.00
LIFB Life Bancorp of Norfolk VA(8) 36.12 9,848 355.7 36.12 36.12 35.50 1.75 N.A. 0.00
LFBI Little Falls Bancorp of NJ 20.50 2,608 53.5 20.50 20.50 19.75 3.80 N.A. 0.00
LOGN Logansport Fin. Corp. of IN 17.25 1,261 21.8 17.25 17.25 16.50 4.55 N.A. 0.00
LONF London Financial Corp. of OH 16.75 515 8.6 16.75 16.75 15.75 6.35 N.A. 0.00
LISB Long Island Bancorp, Inc of NY 50.12 24,023 1,204.0 50.12 50.12 47.87 4.70 N.A. 0.00
MAFB MAF Bancorp of IL 35.75 15,249 545.2 35.75 35.75 34.00 5.15 320.59 0.00
MBLF MBLA Financial Corp. of MO 30.62 1,268 38.8 30.62 30.62 29.00 5.59 N.A. 0.00
MFBC MFB Corp. of Mishawaka IN 28.62 1,651 47.3 28.62 28.62 28.00 2.21 N.A. 0.00
MLBC ML Bancorp of Villanova PA(8) 29.94 11,866 355.3 29.94 29.94 29.87 0.23 N.A. 0.00
MSBF MSB Financial Corp. of MI 19.00 1,234 23.4 19.00 19.00 19.00 0.00 N.A. 0.00
MARN Marion Capital Holdings of IN 26.25 1,776 46.6 26.25 26.25 26.50 -0.94 N.A. 0.00
MRKF Market Fin. Corp. of OH 16.00 1,336 21.4 16.00 16.00 15.63 2.37 N.A. 0.00
MFSL Maryland Fed. Bancorp of MD 35.00 6,467 226.3 35.00 35.00 28.25 23.89 566.67 0.00
MASB MassBank Corp. of Reading MA* 48.00 3,561 170.9 48.00 48.00 48.12 -0.25 386.82 0.00
MFLR Mayflower Co-Op. Bank of MA* 25.00 890 22.3 25.00 25.00 24.25 3.09 400.00 0.00
MECH Mechanics SB of Hartford CT* 26.12 5,293 138.3 26.12 26.12 26.00 0.46 N.A. 0.00
MDBK Medford Bank of Medford, MA* 39.50 4,541 179.4 39.50 39.50 39.87 -0.93 464.29 0.00
MERI Meritrust FSB of Thibodaux LA(8) 69.00 774 53.4 69.00 69.00 69.00 0.00 N.A. 0.00
MWBX MetroWest Bank of MA* 8.87 13,956 123.8 8.87 8.87 9.44 -6.04 115.29 0.00
MCBS Mid Continent Bancshares of KS(8) 45.62 1,962 89.5 45.62 45.62 44.62 2.24 N.A. 0.00
MIFC Mid Iowa Financial Corp. of IA 11.50 1,678 19.3 11.50 11.50 11.50 0.00 130.00 0.00
MCBN Mid-Coast Bancorp of ME 30.00 233 7.0 30.00 30.00 30.00 0.00 425.39 0.00
MWBI Midwest Bancshares, Inc. of IA 18.25 1,018 18.6 18.25 18.25 18.25 0.00 448.05 0.00
MWFD Midwest Fed. Fin. Corp of WI(8) 28.37 1,628 46.2 28.37 28.37 28.00 1.32 467.40 0.00
MFFC Milton Fed. Fin. Corp. of OH 15.37 2,305 35.4 15.37 15.37 15.00 2.47 N.A. 0.00
MIVI Miss. View Hold. Co. of MN 18.50 740 13.7 18.50 18.50 18.50 0.00 N.A. 0.00
MBSP Mitchell Bancorp of NC* 17.00 931 15.8 17.00 17.00 17.00 0.00 N.A. 0.00
MBBC Monterey Bay Bancorp of CA 19.75 3,230 63.8 19.75 19.75 19.12 3.29 N.A. 0.00
MONT Montgomery Fin. Corp. of IN 13.06 1,653 21.6 13.06 13.06 12.94 0.93 N.A. 0.00
MSBK Mutual SB, FSB of Bay City MI 12.75 4,279 54.6 12.75 12.75 13.00 -1.92 45.71 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>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
HPBC Home Port Bancorp, Inc. of MA* 1.75 1.74 11.65 11.65 109.13
HMCI Homecorp, Inc. of Rockford IL(8) 0.99 0.80 13.07 13.07 191.38
HZFS Horizon Fin'l. Services of IA 0.77 0.62 10.27 10.27 103.15
HRZB Horizon Financial Corp. of WA* 1.09 1.07 11.17 11.17 71.43
IBSF IBS Financial Corp. of NJ 0.53 0.53 11.69 11.69 67.11
ITLA Imperial Thrift & Loan of CA* 1.52 1.52 12.32 12.27 114.89
IFSB Independence FSB of DC 0.65 0.54 13.89 12.28 201.76
INCB Indiana Comm. Bank, SB of IN(8) 0.53 0.53 12.38 12.38 104.22
INBI Industrial Bancorp of OH 0.98 1.03 11.76 11.76 68.45
IWBK Interwest SB of Oak Harbor WA 2.52 2.32 16.13 15.84 254.25
IPSW Ipswich SB of Ipswich MA* 0.88 0.70 4.78 4.78 85.16
JXVL Jacksonville Bancorp of TX 1.33 1.33 13.82 13.82 95.72
JXSB Jcksnville SB,MHC of IL (45.6) 0.80 0.80 13.63 13.63 129.12
JSBA Jefferson Svgs Bancorp of MO 0.45 0.93 11.02 8.55 129.03
JOAC Joachim Bancorp of MO(8) 0.39 0.39 13.67 13.67 48.58
KSAV KS Bancorp of Kenly NC 1.40 1.39 16.45 16.44 124.22
KSBK KSB Bancorp of Kingfield ME* 1.08 1.10 8.46 8.00 117.84
KFBI Klamath First Bancorp of OR 0.85 0.85 14.42 13.11 97.82
LSBI LSB Fin. Corp. of Lafayette IN 1.61 1.42 18.88 18.88 218.63
LVSB Lakeview SB of Paterson NJ 1.68 1.04 13.29 11.25 124.39
LARK Landmark Bancshares of KS 1.14 1.35 18.62 18.62 135.05
LARL Laurel Capital Group of PA 2.09 2.02 15.20 15.20 145.21
LSBX Lawrence Savings Bank of MA* 1.42 1.41 7.84 7.84 82.39
LFED Leeds FSB, MHC of MD (36.3) 0.64 0.64 9.16 9.16 55.08
LXMO Lexington B&L Fin. Corp. of MO 0.55 0.71 14.74 14.74 52.05
LIFB Life Bancorp of Norfolk VA(8) 1.35 1.25 16.17 15.73 150.93
LFBI Little Falls Bancorp of NJ 0.66 0.60 14.53 13.40 124.40
LOGN Logansport Fin. Corp. of IN 0.91 0.95 12.86 12.86 68.04
LONF London Financial Corp. of OH 0.75 0.70 14.77 14.77 74.19
LISB Long Island Bancorp, Inc of NY 2.06 1.74 22.74 22.53 246.88
MAFB MAF Bancorp of IL 2.48 2.46 17.22 15.13 221.04
MBLF MBLA Financial Corp. of MO 1.45 1.48 22.36 22.36 176.67
MFBC MFB Corp. of Mishawaka IN 1.21 1.21 20.30 20.30 155.01
MLBC ML Bancorp of Villanova PA(8) 1.20 0.86 13.51 12.61 195.16
MSBF MSB Financial Corp. of MI 0.86 0.83 10.32 10.32 62.41
MARN Marion Capital Holdings of IN 1.67 1.65 22.22 22.22 101.25
MRKF Market Fin. Corp. of OH 0.38 0.38 14.89 14.89 42.01
MFSL Maryland Fed. Bancorp of MD 1.08 1.56 15.00 14.81 178.98
MASB MassBank Corp. of Reading MA* 2.78 2.61 28.24 27.82 261.94
MFLR Mayflower Co-Op. Bank of MA* 1.46 1.38 13.98 13.75 144.98
MECH Mechanics SB of Hartford CT* 2.64 2.63 16.33 16.33 156.95
MDBK Medford Bank of Medford, MA* 2.49 2.32 21.96 20.58 243.63
MERI Meritrust FSB of Thibodaux LA(8) 3.42 3.42 24.90 24.90 301.44
MWBX MetroWest Bank of MA* 0.54 0.54 3.13 3.13 41.97
MCBS Mid Continent Bancshares of KS(8) 2.13 2.21 20.38 20.38 206.56
MIFC Mid Iowa Financial Corp. of IA 0.71 1.00 7.00 6.99 74.82
MCBN Mid-Coast Bancorp of ME 1.92 1.82 22.65 22.65 263.83
MWBI Midwest Bancshares, Inc. of IA 1.21 1.07 10.18 10.18 147.20
MWFD Midwest Fed. Fin. Corp of WI(8) 1.39 1.37 11.21 10.81 127.18
MFFC Milton Fed. Fin. Corp. of OH 0.60 0.53 11.45 11.45 91.09
MIVI Miss. View Hold. Co. of MN 0.66 0.97 17.80 17.80 94.29
MBSP Mitchell Bancorp of NC* 0.59 0.59 15.36 15.36 37.15
MBBC Monterey Bay Bancorp of CA 0.58 0.53 14.59 13.53 126.83
MONT Montgomery Fin. Corp. of IN 0.42 0.42 11.81 11.81 61.70
MSBK Mutual SB, FSB of Bay City MI 0.15 0.08 9.73 9.73 152.87
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700 Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of January 2, 1998
<TABLE>
<CAPTION>
Price Change Data
Market Capitalization -----------------------------------------------
----------------------- 52 Week (1) % Change From
Shares Market --------------- -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
NHTB NH Thrift Bancshares of NH 21.00 2,075 43.6 21.00 21.00 21.25 -1.18 354.55 0.00
NSLB NS&L Bancorp of Neosho MO 18.50 712 13.2 18.50 18.50 18.37 0.71 N.A. 0.00
NMSB Newmil Bancorp. of CT* 13.00 3,835 49.9 13.00 13.00 13.00 0.00 104.08 0.00
NASB North American SB of MO 53.13 2,229 118.4 53.13 53.13 56.00 -5.12 ***.** 0.00
NBSI North Bancshares of Chicago IL 18.25 1,443 26.3 18.25 18.25 18.84 -3.13 N.A. 0.00
FFFD North Central Bancshares of IA 19.75 3,258 64.3 19.75 19.75 19.00 3.95 N.A. 0.00
NBN Northeast Bancorp of ME* 18.62 1,940 36.1 18.62 18.62 19.00 -2.00 137.50 0.00
NEIB Northeast Indiana Bncrp of IN 21.75 1,763 38.3 21.75 21.75 20.00 8.75 N.A. 0.00
NWEQ Northwest Equity Corp. of WI 20.75 839 17.4 20.75 20.75 19.25 7.79 N.A. 0.00
NWSB Northwest SB, MHC of PA (30.7) 14.62 46,753 209.8 14.62 14.62 14.50 0.83 N.A. 0.00
NSSY Norwalk Savings Society of CT* 37.75 2,427 91.6 37.75 37.75 38.00 -0.66 N.A. 0.00
NSSB Norwich Financial Corp. of CT(8)* 31.75 5,432 172.5 31.75 31.75 31.25 1.60 353.57 0.00
NTMG Nutmeg FS&LA of CT 10.75 986 10.6 10.75 10.75 10.00 7.50 N.A. 0.00
OHSL OHSL Financial Corp. of OH 27.00 1,235 33.3 27.00 27.00 27.00 0.00 N.A. 0.00
OCFC Ocean Fin. Corp. of NJ 37.50 8,176 306.6 37.50 37.50 37.25 0.67 N.A. 0.00
OCN Ocwen Financial Corp. of FL 25.00 60,505 1,512.6 25.00 25.00 24.00 4.17 N.A. 0.00
OTFC Oregon Trail Fin. Corp of OR 17.25 4,695 81.0 17.25 17.25 16.37 5.38 N.A. 0.00
PBHC OswegoCity SB MHC of NY (46.1)* 29.00 1,917 25.6 29.00 29.00 30.00 -3.33 N.A. 0.00
OFCP Ottawa Financial Corp. of MI 32.50 5,353 174.0 32.50 32.50 30.75 5.69 N.A. 0.00
PFFB PFF Bancorp of Pomona CA 20.50 17,903 367.0 20.50 20.50 18.62 10.10 N.A. 0.00
PSFI PS Financial of Chicago IL 21.37 2,167 46.3 21.37 21.37 19.25 11.01 N.A. 0.00
PVFC PVF Capital Corp. of OH 20.50 2,590 53.1 20.50 20.50 20.19 1.54 365.91 0.00
PALM Palfed, Inc. of Aiken SC(8) 28.50 5,299 151.0 28.50 28.50 28.37 0.46 85.43 0.00
PBCI Pamrapo Bancorp, Inc. of NJ 26.00 2,843 73.9 26.00 26.00 24.87 4.54 361.81 0.00
PFED Park Bancorp of Chicago IL 18.87 2,431 45.9 18.87 18.87 17.87 5.60 N.A. 0.00
PVSA Parkvale Financial Corp of PA 32.62 5,106 166.6 32.62 32.62 31.25 4.38 293.96 0.00
PEEK Peekskill Fin. Corp. of NY 16.87 3,193 53.9 16.87 16.87 17.12 -1.46 N.A. 0.00
PFSB PennFed Fin. Services of NJ 33.12 4,823 159.7 33.12 33.12 32.81 0.94 N.A. 0.00
PWBC PennFirst Bancorp of PA 19.69 5,310 104.6 19.69 19.69 18.37 7.19 146.74 0.00
PWBK Pennwood SB of PA* 19.75 570 11.3 19.75 19.75 18.25 8.22 N.A. 0.00
PBKB People's SB of Brockton MA* 23.00 3,283 75.5 23.00 23.00 23.25 -1.08 287.21 0.00
PFDC Peoples Bancorp of Auburn IN 22.00 3,392 74.6 22.00 22.00 24.75 -11.11 109.32 0.00
PBCT Peoples Bank, MHC of CT (40.1)* 37.50 61,126 917.0 37.50 37.50 36.50 2.74 376.49 0.00
TSBS Peoples Bcrp, MHC of NJ (35.9)(8) 43.00 9,046 139.6 43.00 43.00 42.00 2.38 N.A. 0.00
PFFC Peoples Fin. Corp. of OH 15.00 1,491 22.4 15.00 15.00 14.25 5.26 N.A. 0.00
PHBK Peoples Heritage Fin Grp of ME* 44.75 27,475 1,229.5 44.75 44.75 45.94 -2.59 192.29 0.00
PSFC Peoples Sidney Fin. Corp of OH 18.00 1,785 32.1 18.00 18.00 17.87 0.73 N.A. 0.00
PERM Permanent Bancorp of IN 29.75 2,103 62.6 29.75 29.75 27.50 8.18 N.A. 0.00
PMFI Perpetual Midwest Fin. of IA(8) 28.87 1,873 54.1 28.87 28.87 28.75 0.42 N.A. 0.00
PERT Perpetual of SC, MHC (46.8)(8) 63.00 1,505 44.4 63.00 63.00 60.50 4.13 N.A. 0.00
PCBC Perry Co. Fin. Corp. of MO 23.37 828 19.4 23.37 23.37 23.44 -0.30 N.A. 0.00
PHFC Pittsburgh Home Fin. of PA 18.25 1,969 35.9 18.25 18.25 18.00 1.39 N.A. 0.00
PFSL Pocahnts Fed, MHC of AR (47.0)(8) 43.50 1,632 33.5 43.50 43.50 36.50 19.18 N.A. 0.00
PTRS Potters Financial Corp of OH 21.00 965 20.3 21.00 21.00 20.75 1.20 N.A. 0.00
PKPS Poughkeepsie Fin. Corp. of NY(8) 11.00 12,595 138.5 11.00 11.00 10.19 7.95 41.94 0.00
PHSB Ppls Home SB, MHC of PA (45.0) 18.87 2,760 23.4 18.87 18.87 18.69 0.96 N.A. 0.00
PRBC Prestige Bancorp of PA 20.00 915 18.3 20.00 20.00 20.00 0.00 N.A. 0.00
PFNC Progress Financial Corp. of PA 16.50 4,010 66.2 16.50 16.50 16.12 2.36 49.86 0.00
PSBK Progressive Bank, Inc. of NY(8)* 37.75 3,828 144.5 37.75 37.75 38.25 -1.31 182.35 0.00
PROV Provident Fin. Holdings of CA 21.00 4,836 101.6 21.00 21.00 21.75 -3.45 N.A. 0.00
PULB Pulaski SB, MHC of MO (29.8) 31.37 2,095 19.6 31.37 31.37 31.50 -0.41 N.A. 0.00
PLSK Pulaski SB, MHC of NJ (46.0) 18.25 2,070 17.4 18.25 18.25 17.75 2.82 N.A. 0.00
PULS Pulse Bancorp of S. River NJ 27.00 3,081 83.2 27.00 27.00 26.00 3.85 118.27 0.00
QCFB QCF Bancorp of Virginia MN 29.75 1,382 41.1 29.75 29.75 29.50 0.85 N.A. 0.00
QCBC Quaker City Bancorp of CA 20.50 4,673 95.8 20.50 20.50 21.25 -3.53 173.33 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>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
NHTB NH Thrift Bancshares of NH 0.99 0.78 12.04 10.34 153.90
NSLB NS&L Bancorp of Neosho MO 0.64 0.61 16.61 16.49 84.01
NMSB Newmil Bancorp. of CT* 0.70 0.67 8.42 8.42 82.77
NASB North American SB of MO 4.10 3.86 25.37 24.52 330.46
NBSI North Bancshares of Chicago IL 0.52 0.46 11.36 11.36 84.60
FFFD North Central Bancshares of IA 1.16 1.16 15.13 15.13 66.03
NBN Northeast Bancorp of ME* 0.91 0.76 9.52 8.41 136.83
NEIB Northeast Indiana Bncrp of IN 1.18 1.18 15.51 15.51 107.95
NWEQ Northwest Equity Corp. of WI 1.17 1.13 13.51 13.51 115.56
NWSB Northwest SB, MHC of PA (30.7) 0.41 0.41 4.33 4.09 44.93
NSSY Norwalk Savings Society of CT* 2.40 2.74 20.49 19.76 254.37
NSSB Norwich Financial Corp. of CT(8)* 1.47 1.36 15.05 13.67 129.02
NTMG Nutmeg FS&LA of CT 0.60 0.43 5.88 5.88 106.64
OHSL OHSL Financial Corp. of OH 1.65 1.60 20.74 20.74 189.96
OCFC Ocean Fin. Corp. of NJ 1.68 1.66 27.63 27.63 182.15
OCN Ocwen Financial Corp. of FL 1.34 0.75 6.91 6.73 48.86
OTFC Oregon Trail Fin. Corp of OR 0.59 0.59 13.29 13.29 55.34
PBHC OswegoCity SB MHC of NY (46.1)* 1.05 0.94 11.95 10.03 100.68
OFCP Ottawa Financial Corp. of MI 1.29 1.26 14.15 11.43 161.96
PFFB PFF Bancorp of Pomona CA 0.65 0.66 14.69 14.53 146.09
PSFI PS Financial of Chicago IL 0.72 0.73 14.76 14.76 39.55
PVFC PVF Capital Corp. of OH 1.90 1.82 10.63 10.63 147.98
PALM Palfed, Inc. of Aiken SC(8) 0.49 0.84 10.74 10.74 126.16
PBCI Pamrapo Bancorp, Inc. of NJ 1.73 1.71 16.89 16.77 130.83
PFED Park Bancorp of Chicago IL 0.80 0.83 16.61 16.61 71.79
PVSA Parkvale Financial Corp of PA 2.05 2.05 15.20 15.10 196.91
PEEK Peekskill Fin. Corp. of NY 0.66 0.66 14.81 14.81 56.76
PFSB PennFed Fin. Services of NJ 2.14 2.14 20.72 17.54 282.80
PWBC PennFirst Bancorp of PA 0.95 0.95 12.96 11.53 154.87
PWBK Pennwood SB of PA* 0.83 0.91 15.33 15.33 83.59
PBKB People's SB of Brockton MA* 1.44 0.75 8.96 8.59 218.54
PFDC Peoples Bancorp of Auburn IN 1.24 1.24 13.06 13.06 85.67
PBCT Peoples Bank, MHC of CT (40.1)* 1.44 0.93 11.41 11.40 126.48
TSBS Peoples Bcrp, MHC of NJ (35.9)(8) 0.87 0.61 11.97 10.77 70.63
PFFC Peoples Fin. Corp. of OH 0.53 0.53 15.78 15.78 58.01
PHBK Peoples Heritage Fin Grp of ME* 2.51 2.51 16.42 14.01 220.42
PSFC Peoples Sidney Fin. Corp of OH 0.56 0.56 14.57 14.57 57.61
PERM Permanent Bancorp of IN 1.26 1.25 19.51 19.25 206.17
PMFI Perpetual Midwest Fin. of IA(8) 0.84 0.68 18.24 18.24 214.45
PERT Perpetual of SC, MHC (46.8)(8) 1.17 1.58 20.13 20.13 170.24
PCBC Perry Co. Fin. Corp. of MO 0.90 1.04 18.80 18.80 97.95
PHFC Pittsburgh Home Fin. of PA 1.01 0.90 14.63 14.48 138.80
PFSL Pocahnts Fed, MHC of AR (47.0)(8) 1.46 1.44 14.86 14.86 234.94
PTRS Potters Financial Corp of OH 1.20 1.18 11.20 11.20 127.17
PKPS Poughkeepsie Fin. Corp. of NY(8) 0.37 0.37 5.91 5.91 70.19
PHSB Ppls Home SB, MHC of PA (45.0) 0.56 0.54 10.22 10.22 74.79
PRBC Prestige Bancorp of PA 0.85 0.85 16.88 16.88 150.64
PFNC Progress Financial Corp. of PA 0.90 0.71 5.81 5.18 108.91
PSBK Progressive Bank, Inc. of NY(8)* 2.20 2.16 20.18 18.17 231.09
PROV Provident Fin. Holdings of CA 0.94 0.44 17.66 17.66 132.47
PULB Pulaski SB, MHC of MO (29.8) 1.03 0.90 11.39 11.39 85.64
PLSK Pulaski SB, MHC of NJ (46.0) 0.54 0.54 10.36 10.36 86.47
PULS Pulse Bancorp of S. River NJ 1.84 1.86 14.02 14.02 170.73
QCFB QCF Bancorp of Virginia MN 1.46 1.46 19.84 19.84 113.41
QCBC Quaker City Bancorp of CA 1.20 1.15 15.33 15.33 181.26
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700 Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of January 2, 1998
Price Change Data
Market Capitalization -----------------------------------------------
------------------------ 52 Week (1) % Change From
Shares Market --------------- -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
QCSB Queens County Bancorp of NY* 39.12 15,108 591.0 39.12 39.12 39.25 -0.33 N.A. 0.00
RARB Raritan Bancorp. of Raritan NJ* 27.25 2,372 64.6 27.25 27.25 27.25 0.00 323.14 0.00
REDF RedFed Bancorp of Redlands CA(8) 19.81 7,179 142.2 19.81 19.81 19.75 0.30 N.A. 0.00
RELY Reliance Bancorp, Inc. of NY 36.31 8,712 316.3 36.31 36.31 34.38 5.61 N.A. 0.00
RELI Reliance Bancshares Inc of WI* 9.62 2,472 23.8 9.62 9.62 9.50 1.26 N.A. 0.00
RIVR River Valley Bancorp of IN 18.75 1,190 22.3 18.75 18.75 18.00 4.17 N.A. 0.00
RVSB Riverview Bancorp of WA 17.87 6,128 109.5 17.87 17.87 17.00 5.12 N.A. 0.00
RSLN Roslyn Bancorp, Inc. of NY* 24.12 43,642 1,052.6 24.12 24.12 22.37 7.82 N.A. 0.00
SCCB S. Carolina Comm. Bnshrs of SC 22.50 699 15.7 22.50 22.50 22.94 -1.92 N.A. 0.00
SBFL SB Fngr Lakes MHC of NY (33.1) 32.00 1,785 18.9 32.00 32.00 31.50 1.59 N.A. 0.00
SFED SFS Bancorp of Schenectady NY 26.87 1,231 33.1 26.87 26.87 26.87 0.00 N.A. 0.00
SGVB SGV Bancorp of W. Covina CA 17.75 2,342 41.6 17.75 17.75 17.75 0.00 N.A. 0.00
SHSB SHS Bancorp, Inc. of PA 16.87 820 13.8 16.87 16.87 17.00 -0.76 N.A. 0.00
SISB SIS Bancorp Inc of MA* 39.00 5,581 217.7 39.00 39.00 38.75 0.65 N.A. 0.00
SWCB Sandwich Co-Op. Bank of MA* 43.00 1,919 82.5 43.00 43.00 42.00 2.38 398.84 0.00
SFSL Security First Corp. of OH 21.00 7,591 159.4 21.00 21.00 20.50 2.44 101.92 0.00
SMFC Sho-Me Fin. Corp. of MO(8) 51.00 1,499 76.4 51.00 51.00 49.25 3.55 N.A. 0.00
SKAN Skaneateles Bancorp Inc of NY* 22.25 1,433 31.9 22.25 22.25 21.00 5.95 N.A. 0.00
SOBI Sobieski Bancorp of S. Bend IN 24.25 779 18.9 24.25 24.25 20.00 21.25 N.A. 0.00
SOSA Somerset Savings Bank of MA(8)* 4.87 16,652 81.1 4.87 4.87 4.81 1.25 -4.88 0.00
SSFC South Street Fin. Corp. of NC* 19.00 4,496 85.4 19.00 19.00 17.50 8.57 N.A. 0.00
SCBS Southern Commun. Bncshrs of AL 18.25 1,137 20.8 18.25 18.25 18.25 0.00 N.A. 0.00
SMBC Southern Missouri Bncrp of MO 20.50 1,612 33.0 20.50 20.50 20.50 0.00 N.A. 0.00
SWBI Southwest Bancshares of IL(8) 29.75 2,657 79.0 29.75 29.75 29.75 0.00 197.50 0.00
SVRN Sovereign Bancorp of PA 20.25 89,275 1,807.8 20.25 20.25 19.75 2.53 353.02 0.00
STFR St. Francis Cap. Corp. of WI 50.75 5,238 265.8 50.75 50.75 48.25 5.18 N.A. 0.00
SPBC St. Paul Bancorp, Inc. of IL 26.50 34,133 904.5 26.50 26.50 25.12 5.49 138.10 0.00
SFFC StateFed Financial Corp. of IA 14.50 1,557 22.6 14.50 14.50 14.00 3.57 N.A. 0.00
SFIN Statewide Fin. Corp. of NJ 23.50 4,591 107.9 23.50 23.50 23.75 -1.05 N.A. 0.00
STSA Sterling Financial Corp. of WA 22.00 7,567 166.5 22.00 22.00 20.75 6.02 142.02 0.00
SFSB SuburbFed Fin. Corp. of IL(8) 46.50 1,263 58.7 46.50 46.50 33.75 37.78 597.15 0.00
ROSE T R Financial Corp. of NY* 33.44 17,592 588.3 33.44 33.44 33.12 0.97 N.A. 0.00
THRD TF Financial Corp. of PA 29.00 4,088 118.6 29.00 29.00 29.87 -2.91 N.A. 0.00
TPNZ Tappan Zee Fin., Inc. of NY 18.75 1,488 27.9 18.75 18.75 18.12 3.48 N.A. 0.00
ESBK The Elmira SB FSB of Elmira NY* 30.00 742 22.3 30.00 30.00 30.00 0.00 108.77 0.00
TRIC Tri-County Bancorp of WY 15.00 1,167 17.5 15.00 15.00 13.69 9.57 N.A. 0.00
TWIN Twin City Bancorp of TN 15.50 1,272 19.7 15.50 15.50 14.50 6.90 N.A. 0.00
UCBC Union Community Bancorp of IN 14.31 3,042 43.5 14.69 14.31 10.00 43.10 N.A. N.A.
UFRM United FS&LA of Rocky Mount NC(8) 19.00 3,074 58.4 19.00 19.00 21.00 -9.52 484.62 0.00
UBMT United Fin. Corp. of MT 25.50 1,223 31.2 25.50 25.50 26.87 -5.10 142.86 0.00
VABF Va. Beach Fed. Fin. Corp of VA 18.75 4,979 93.4 18.75 18.75 18.50 1.35 299.79 0.00
WHGB WHG Bancshares of MD 18.75 1,392 26.1 18.75 18.75 16.25 15.38 N.A. 0.00
WSFS WSFS Financial Corp. of DE* 20.00 12,442 248.8 20.00 20.00 19.87 0.65 175.86 0.00
WVFC WVS Financial Corp. of PA* 35.12 1,748 61.4 35.12 35.12 32.25 8.90 N.A. 0.00
WRNB Warren Bancorp of Peabody MA* 22.62 3,798 85.9 22.62 22.62 22.75 -0.57 571.22 0.00
WSBI Warwick Community Bncrp of NY* 16.44 6,414 105.4 16.44 16.44 0.00 -1.00 N.A. 0.00
WFSL Washington FS&LA of Seattle WA 32.00 47,509 1,520.3 32.00 32.00 31.37 2.01 119.33 0.00
WAMU Washington Mutual Inc. of WA* 65.12 257,176 16,747.3 65.12 65.12 62.00 5.03 250.86 0.00
WYNE Wayne Bancorp of NJ 26.75 2,014 53.9 26.75 26.75 27.19 -1.62 N.A. 0.00
WAYN Wayne S&L Co. MHC of OH (47.8) 29.00 2,255 31.2 29.00 29.00 29.00 0.00 N.A. 0.00
WCFB Wbstr Cty FSB MHC of IA (45.2) 20.00 2,100 19.0 20.00 20.00 20.75 -3.61 N.A. 0.00
WBST Webster Financial Corp. of CT 66.87 13,554 906.4 66.87 66.87 62.87 6.36 608.37 0.00
WEFC Wells Fin. Corp. of Wells MN 18.62 1,959 36.5 18.62 18.62 18.00 3.44 N.A. 0.00
WCBI WestCo Bancorp of IL 27.00 2,474 66.8 27.00 27.00 27.25 -0.92 170.00 0.00
WSTR WesterFed Fin. Corp. of MT 26.75 5,577 149.2 26.75 26.75 25.25 5.94 N.A. 0.00
</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
- --------------------- -------- ------- ------- ------- -------
($) ($) ($) ($) ($)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
<S> <C> <C> <C> <C> <C>
QCSB Queens County Bancorp of NY* 1.44 1.45 11.44 11.44 102.00
RARB Raritan Bancorp. of Raritan NJ* 1.63 1.61 12.65 12.45 171.70
REDF RedFed Bancorp of Redlands CA(8) 1.28 1.28 11.21 11.17 134.74
RELY Reliance Bancorp, Inc. of NY 1.96 2.07 19.29 14.17 233.56
RELI Reliance Bancshares Inc of WI* 0.25 0.26 9.18 9.18 19.01
RIVR River Valley Bancorp of IN 0.46 0.62 14.63 14.41 118.02
RVSB Riverview Bancorp of WA 0.47 0.45 9.56 9.20 46.06
RSLN Roslyn Bancorp, Inc. of NY* 0.73 0.93 14.04 13.97 79.61
SCCB S. Carolina Comm. Bnshrs of SC 0.75 0.75 17.35 17.35 65.26
SBFL SB Fngr Lakes MHC of NY (33.1) 0.44 0.51 11.92 11.92 127.71
SFED SFS Bancorp of Schenectady NY 0.94 0.94 17.64 17.64 141.42
SGVB SGV Bancorp of W. Covina CA 0.65 0.71 12.99 12.79 174.63
SHSB SHS Bancorp, Inc. of PA 0.41 0.41 13.83 13.83 109.44
SISB SIS Bancorp Inc of MA* 2.05 2.03 19.16 19.16 260.35
SWCB Sandwich Co-Op. Bank of MA* 2.44 2.39 21.16 20.34 266.68
SFSL Security First Corp. of OH 1.14 1.15 8.31 8.18 89.69
SMFC Sho-Me Fin. Corp. of MO(8) 2.71 2.57 20.77 20.77 230.05
SKAN Skaneateles Bancorp Inc of NY* 1.20 1.16 12.10 11.75 172.81
SOBI Sobieski Bancorp of S. Bend IN 0.64 0.59 15.99 15.99 108.19
SOSA Somerset Savings Bank of MA(8)* 0.32 0.31 2.06 2.06 31.25
SSFC South Street Fin. Corp. of NC* 0.63 0.65 13.73 13.73 53.50
SCBS Southern Commun. Bncshrs of AL 0.70 0.70 12.73 12.73 62.34
SMBC Southern Missouri Bncrp of MO 0.94 0.90 16.36 16.36 101.30
SWBI Southwest Bancshares of IL(8) 1.50 1.45 16.01 16.01 141.14
SVRN Sovereign Bancorp of PA 0.51 0.74 7.24 5.91 163.55
STFR St. Francis Cap. Corp. of WI 2.24 2.21 24.54 21.71 317.04
SPBC St. Paul Bancorp, Inc. of IL 1.39 1.39 11.98 11.95 133.26
SFFC StateFed Financial Corp. of IA 0.69 0.69 9.86 9.86 56.22
SFIN Statewide Fin. Corp. of NJ 1.19 1.19 14.34 14.31 153.15
STSA Sterling Financial Corp. of WA 1.04 0.94 12.98 11.88 247.19
SFSB SuburbFed Fin. Corp. of IL(8) 2.16 1.77 22.72 22.64 342.49
ROSE T R Financial Corp. of NY* 1.88 1.69 13.09 13.09 209.84
THRD TF Financial Corp. of PA 1.22 1.05 17.79 15.71 152.97
TPNZ Tappan Zee Fin., Inc. of NY 0.58 0.57 14.20 14.20 83.43
ESBK The Elmira SB FSB of Elmira NY* 1.27 1.03 19.55 19.03 307.64
TRIC Tri-County Bancorp of WY 0.78 0.79 11.57 11.57 75.56
TWIN Twin City Bancorp of TN 0.71 0.60 10.88 10.88 84.07
UCBC Union Community Bancorp of IN 0.58 0.58 13.40 13.40 36.73
UFRM United FS&LA of Rocky Mount NC(8) 0.63 0.50 6.82 6.82 92.96
UBMT United Fin. Corp. of MT 1.22 1.21 20.24 20.24 84.29
VABF Va. Beach Fed. Fin. Corp of VA 0.75 0.61 8.70 8.70 121.61
WHGB WHG Bancshares of MD 0.54 0.55 14.24 14.24 70.80
WSFS WSFS Financial Corp. of DE* 1.31 1.30 6.66 6.62 120.21
WVFC WVS Financial Corp. of PA* 2.08 2.09 19.38 19.38 161.46
WRNB Warren Bancorp of Peabody MA* 2.04 1.81 10.21 10.21 95.87
WSBI Warwick Community Bncrp of NY* 0.55 0.55 12.60 12.60 53.02
WFSL Washington FS&LA of Seattle WA 2.21 2.20 15.11 13.87 120.39
WAMU Washington Mutual Inc. of WA* 0.01 1.51 19.65 18.20 371.76
WYNE Wayne Bancorp of NJ 1.07 1.07 16.49 16.49 132.71
WAYN Wayne S&L Co. MHC of OH (47.8) 0.81 0.76 10.58 10.58 110.97
WCFB Wbstr Cty FSB MHC of IA (45.2) 0.64 0.64 10.52 10.52 44.99
WBST Webster Financial Corp. of CT 1.79 2.99 26.82 23.10 502.51
WEFC Wells Fin. Corp. of Wells MN 1.09 1.06 14.86 14.86 104.52
WCBI WestCo Bancorp of IL 1.88 1.78 19.41 19.41 124.93
WSTR WesterFed Fin. Corp. of MT 1.16 1.11 19.03 15.35 179.16
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part One
Prices As Of January 2, 1998
<TABLE>
<CAPTION>
Price Change Data
Market Capitalization -----------------------------------------------
----------------------- 52 Week (1) % Change From
Shares Market --------------- -----------------------
Price/ Outst- Capital- Last Last Dec 31, Dec 31,
Financial Institution Share(1) anding ization(9) High Low Week Week 1994(2) 1995(2)
- --------------------- ------- ------- ------- ------- ------- ------- ------- ------- --------
($) (000) ($Mil) ($) ($) ($) (%) (%) (%)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
WOFC Western Ohio Fin. Corp. of OH 27.25 2,356 64.2 27.25 27.25 26.50 2.83 N.A. 0.00
WWFC Westwood Fin. Corp. of NJ 28.25 645 18.2 28.25 28.25 27.75 1.80 N.A. 0.00
WEHO Westwood Hmstd Fin Corp of OH 15.63 2,782 43.5 15.63 15.63 16.62 -5.96 N.A. 0.00
WFI Winton Financial Corp. of OH 20.37 1,986 40.5 20.37 20.37 20.25 0.59 N.A. 0.00
FFWD Wood Bancorp of OH 23.50 2,119 49.8 23.50 23.50 20.50 14.63 N.A. 0.00
YFCB Yonkers Fin. Corp. of NY 19.75 3,021 59.7 19.75 19.75 18.62 6.07 N.A. 0.00
YFED York Financial Corp. of PA 25.75 8,806 226.8 25.75 25.75 24.00 7.29 172.49 0.00
</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
- --------------------- -------- ------- ------ -------- -------
($) ($) ($) ($) ($)
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
<S> <C> <C> <C> <C> <C>
WOFC Western Ohio Fin. Corp. of OH 0.61 0.71 23.39 21.83 168.69
WWFC Westwood Fin. Corp. of NJ 1.20 1.28 15.95 14.27 171.20
WEHO Westwood Hmstd Fin Corp of OH 0.47 0.54 14.20 14.20 51.36
WFI Winton Financial Corp. of OH 1.14 1.33 11.36 11.12 159.81
FFWD Wood Bancorp of OH 1.07 0.98 9.77 9.77 78.58
YFCB Yonkers Fin. Corp. of NY 0.98 0.99 14.52 14.52 103.59
YFED York Financial Corp. of PA 1.26 1.06 11.62 11.62 131.24
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700 Exhibit IV-1
Weekly Thrift Market Line - Part Two
Prices As Of January 2, 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) 13.39 13.16 0.90 7.94 4.45 0.88 7.65 0.78 123.09 0.78
NYSE Traded Companies(11) 8.55 8.33 0.88 11.72 5.62 0.76 10.54 1.06 73.37 1.10
AMEX Traded Companies(16) 14.70 14.59 0.64 3.84 2.90 0.78 4.91 0.66 141.43 0.71
NASDAQ Listed OTC Companies(271) 13.49 13.25 0.92 8.06 4.50 0.89 7.71 0.77 124.00 0.77
California Companies(21) 7.59 7.32 0.62 9.19 5.08 0.54 8.31 1.79 70.59 1.29
Florida Companies(5) 8.55 8.12 1.20 14.66 4.87 0.80 9.61 1.62 86.80 0.76
Mid-Atlantic Companies(59) 11.24 10.89 0.84 8.33 4.64 0.83 8.23 0.80 93.07 0.88
Mid-West Companies(145) 14.52 14.35 0.94 7.42 4.36 0.92 7.23 0.62 135.08 0.66
New England Companies(9) 7.80 7.49 0.55 7.81 4.28 0.60 8.58 0.55 138.53 1.02
North-West Companies(8) 15.11 14.74 0.94 8.66 4.28 0.92 8.23 0.48 221.59 0.66
South-East Companies(37) 17.14 16.99 0.99 7.07 3.68 0.99 6.85 0.89 138.11 0.79
South-West Companies(7) 10.45 10.20 0.93 10.64 6.43 0.89 10.14 0.76 67.78 0.71
Western Companies (Excl CA)(7) 16.60 16.25 1.12 7.42 4.44 1.12 7.44 0.33 166.16 0.74
Thrift Strategy(242) 14.65 14.44 0.92 7.21 4.41 0.91 7.10 0.72 122.96 0.71
Mortgage Banker Strategy(34) 7.55 7.10 0.76 10.97 4.77 0.70 10.10 0.96 131.41 1.01
Real Estate Strategy(9) 7.51 7.32 0.90 11.97 6.29 0.86 11.39 1.23 101.72 1.32
Diversified Strategy(9) 8.42 8.18 1.31 16.29 5.55 1.04 13.52 1.36 117.48 1.05
Retail Banking Strategy(4) 6.65 6.36 -0.24 -0.29 -3.61 -0.29 -1.08 0.73 132.47 0.95
Companies Issuing Dividends(252) 13.71 13.45 0.94 8.04 4.59 0.92 7.83 0.70 121.62 0.75
Companies Without Dividends(46) 11.63 11.53 0.69 7.38 3.64 0.63 6.69 1.20 131.07 0.91
Equity/Assets less than 6%(23) 5.02 4.63 0.65 13.02 5.65 0.59 11.86 1.46 78.41 1.06
Equity/Assets 6-12%(143) 8.80 8.46 0.81 9.55 4.79 0.77 9.18 0.78 132.47 0.87
Equity/Assets greater than 12%(132) 18.90 18.78 1.03 5.70 3.95 1.02 5.61 0.67 120.67 0.65
Converted Last 3 Mths (no MHC)(7) 25.93 25.93 1.12 4.36 3.56 1.12 4.36 0.26 217.41 0.70
Actively Traded Companies(39) 9.21 8.94 1.00 11.92 5.28 0.99 11.89 1.00 128.90 0.95
Market Value Below $20 Million(45) 14.63 14.60 0.82 5.90 4.38 0.83 5.95 0.73 102.74 0.59
Holding Company Structure(263) 13.80 13.58 0.90 7.58 4.34 0.88 7.35 0.78 118.27 0.76
Assets Over $1 Billion(60) 8.02 7.49 0.88 11.60 4.96 0.82 10.89 0.95 108.76 0.97
Assets $500 Million-$1 Billion(47) 10.41 10.09 0.89 9.12 4.53 0.82 8.44 0.87 144.23 0.89
Assets $250-$500 Million(64) 11.92 11.64 0.89 8.27 4.69 0.87 7.99 0.69 134.39 0.75
Assets less than $250 Million(127) 17.36 17.30 0.93 5.86 4.09 0.93 5.87 0.71 116.00 0.67
Goodwill Companies(120) 9.29 8.69 0.84 9.89 4.81 0.81 9.40 0.86 104.65 0.84
Non-Goodwill Companies(178) 15.99 15.99 0.94 6.71 4.22 0.93 6.54 0.72 135.10 0.74
Acquirors of FSLIC Cases(10) 7.53 7.06 0.87 12.28 5.52 0.85 11.91 1.06 58.41 0.75
<CAPTION>
Pricing Ratios Dividend Data(6)
----------------------------------------- -----------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
- --------------------- ------- ------- ------- ------- ------- ------- ------- -------
(X) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Market Averages. SAIF-Insured Thrifts(no MHCs)
- ----------------------------------------------
SAIF-Insured Thrifts(298) 19.98 162.25 19.94 166.86 20.94 0.35 1.49 30.09
NYSE Traded Companies(11) 18.40 199.14 15.17 191.33 19.37 0.41 0.97 15.65
AMEX Traded Companies(16) 19.52 139.01 20.24 140.46 21.28 0.31 1.70 35.77
NASDAQ Listed OTC Companies(271) 20.07 162.32 20.10 167.69 20.99 0.35 1.50 30.39
California Companies(21) 18.41 168.79 11.95 166.80 19.68 0.17 0.50 10.84
Florida Companies(5) 19.76 202.86 21.02 231.53 26.27 0.22 0.74 15.87
Mid-Atlantic Companies(59) 19.69 167.16 17.62 175.78 20.76 0.37 1.37 29.73
Mid-West Companies(145) 19.84 154.83 20.69 158.53 20.67 0.34 1.59 31.51
New England Companies(9) 18.73 171.07 12.86 181.75 21.54 0.41 1.36 28.95
North-West Companies(8) 20.99 162.62 22.02 169.37 21.59 0.32 1.20 18.28
South-East Companies(37) 23.05 177.53 26.38 176.60 23.66 0.45 1.88 41.72
South-West Companies(7) 15.62 149.90 14.89 158.30 16.30 0.35 1.50 27.07
Western Companies (Excl CA)(7) 21.03 158.80 24.03 165.00 21.10 0.47 2.15 38.78
Thrift Strategy(242) 20.31 153.25 20.87 157.70 21.10 0.36 1.60 32.54
Mortgage Banker Strategy(34) 19.28 206.42 15.00 214.71 21.55 0.32 0.99 19.96
Real Estate Strategy(9) 16.45 177.52 13.38 180.92 17.41 0.16 0.77 13.44
Diversified Strategy(9) 18.60 243.02 22.40 251.88 19.22 0.48 1.35 24.07
Retail Banking Strategy(4) 21.61 166.08 10.49 172.25 18.40 0.13 0.66 22.84
Companies Issuing Dividends(252) 20.04 163.94 20.39 168.74 21.02 0.41 1.76 35.72
Companies Without Dividends(46) 19.55 152.67 17.45 156.32 20.25 0.00 0.00 0.00
Equity/Assets less than 6%(23) 17.23 214.38 10.75 229.79 20.54 0.19 0.59 12.24
Equity/Assets 6-12%(143) 18.91 182.14 15.63 189.21 19.81 0.36 1.36 26.42
Equity/Assets greater than 12%(132) 21.73 135.86 25.30 137.23 22.31 0.36 1.75 37.00
Converted Last 3 Mths (no MHC)(7) 26.79 122.70 31.03 122.70 26.79 0.13 0.90 23.79
Actively Traded Companies(39) 18.50 214.73 18.19 222.05 19.29 0.50 1.47 27.01
Market Value Below $20 Million(45) 20.27 129.86 18.42 130.44 21.24 0.32 1.75 34.93
Holding Company Structure(263) 20.27 160.09 20.34 164.79 21.17 0.36 1.55 31.45
Assets Over $1 Billion(60) 18.88 208.97 16.45 225.22 20.73 0.41 1.11 22.59
Assets $500 Million-$1 Billion(47) 19.31 178.84 17.89 185.33 20.35 0.36 1.42 28.83
Assets $250-$500 Million(64) 19.57 163.82 18.52 165.98 20.11 0.35 1.42 26.88
Assets less than $250 Million(127) 21.08 136.63 22.78 137.46 21.71 0.32 1.71 35.81
Goodwill Companies(120) 19.30 184.73 16.49 197.28 20.26 0.39 1.38 27.06
Non-Goodwill Companies(178) 20.46 148.13 22.13 148.13 21.40 0.33 1.56 32.09
Acquirors of FSLIC Cases(10) 18.68 208.00 14.90 205.03 17.91 0.47 1.39 24.63
</TABLE>
(1) Average of high/low or bid/ask price per share.
(2) Or since offering price if converted or first listed in 1994 or 1995.
Percent change figures are actual year-to-date and are not annualized
(3) EPS (earnings per share) is based on actual trailing twelve month data and
is not shown on a pro forma basis.
(4) Excludes intangibles (such as goodwill, value of core deposits, etc.).
(5) ROA (return on assets) and ROE (return on equity) are indicated ratios based
on trailing twelve month common earnings and average common equity and
assets balances; ROI (return on investment) is current EPS divided by
current price.
(6) Annualized, based on last regular quarterly cash dividend announcement.
(7) Indicated dividend as a percent of trailing twelve month earnings.
(8) Excluded from averages due to actual or rumored acquisition activities or
unusual operating characteristics.
* All thrifts are SAIF insured unless otherwise noted with an asterisk.
Parentheses following market averages indicate the number of institutions
included in the respective averages. All figures have been adjusted for
stock splits, stock dividends, and secondary offerings.
Source: Corporate reports and offering circulars for publicly traded companies,
and RP Financial, Inc. calculations. The information provided in this
report has been obtained from sources we believe are reliable, but we
cannot guarantee the accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700 Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of January 2, 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. BIF-Insured Thrifts(no MHCs)
- ---------------------------------------------
BIF-Insured Thrifts(62) 12.88 12.58 1.15 11.34 5.63 1.12 11.04 0.83 134.53 1.36
NYSE Traded Companies(3) 13.28 11.45 1.02 9.43 4.30 0.96 9.07 1.68 46.35 1.15
AMEX Traded Companies(6) 14.19 14.07 0.97 9.05 5.09 0.88 8.09 1.07 104.14 1.43
NASDAQ Listed OTC Companies(53) 12.75 12.52 1.17 11.65 5.76 1.15 11.40 0.76 142.61 1.37
California Companies(1) 10.72 10.68 1.45 13.02 7.90 1.45 13.02 1.54 79.64 1.45
Mid-Atlantic Companies(18) 12.85 12.44 0.93 8.64 4.16 0.93 8.47 0.92 123.72 1.28
Mid-West Companies(2) 36.15 35.47 0.91 2.29 2.30 0.90 2.20 0.85 39.95 0.58
New England Companies(32) 9.06 8.80 1.28 15.06 7.19 1.21 14.11 0.84 140.68 1.62
North-West Companies(4) 10.49 10.12 0.92 8.07 3.84 1.06 11.25 0.17 241.66 1.03
South-East Companies(5) 27.37 27.37 1.33 5.08 3.93 1.33 5.05 0.69 145.62 0.74
Thrift Strategy(46) 14.29 13.99 1.19 10.88 5.69 1.14 10.28 0.84 128.92 1.30
Mortgage Banker Strategy(7) 8.71 8.48 0.92 12.05 5.02 0.95 11.97 0.67 147.52 1.31
Real Estate Strategy(4) 10.69 10.66 1.80 17.32 8.46 1.68 16.10 1.35 88.34 1.59
Diversified Strategy(5) 6.61 6.12 0.83 12.07 4.70 0.94 14.37 0.76 196.07 1.86
Companies Issuing Dividends(52) 11.80 11.48 1.06 10.66 5.11 1.04 10.37 0.79 139.91 1.30
Companies Without Dividends(10) 18.53 18.28 1.61 14.89 8.37 1.57 14.54 1.07 106.30 1.66
Equity/Assets less than 6%(5) 5.19 5.02 0.77 13.82 4.60 0.78 14.15 0.92 98.61 1.33
Equity/Assets 6-12%(40) 8.74 8.38 1.20 13.95 6.67 1.15 13.38 0.93 130.73 1.54
Equity/Assets greater than 12%(17) 23.42 23.19 1.17 5.40 3.85 1.17 5.43 0.60 153.47 1.02
Converted Last 3 Mths (no MHC)(2) 24.25 23.88 1.16 4.79 3.51 1.09 4.47 0.86 71.29 1.13
Actively Traded Companies(17) 8.61 8.26 1.16 13.43 6.16 1.14 13.40 0.68 138.73 1.36
Market Value Below $20 Million(3) 27.90 27.45 1.03 3.66 3.22 1.04 3.73 1.53 35.23 0.76
Holding Company Structure(42) 14.70 14.46 1.21 10.83 5.57 1.19 10.80 0.79 140.75 1.39
Assets Over $1 Billion(15) 9.95 9.26 0.99 10.89 4.64 1.02 11.52 0.85 147.12 1.45
Assets $500 Million-$1 Billion(17) 9.60 9.38 1.12 12.55 6.00 1.07 11.72 0.80 145.27 1.45
Assets $250-$500 Million(13) 12.47 12.30 1.21 11.34 5.66 1.16 10.83 0.66 160.27 1.60
Assets less than $250 Million(17) 18.09 17.94 1.27 10.79 6.15 1.23 10.26 0.98 93.40 1.06
Goodwill Companies(32) 9.72 9.12 0.96 11.05 5.29 0.94 10.91 0.94 129.07 1.35
Non-Goodwill Companies(30) 16.04 16.04 1.34 11.63 5.97 1.31 11.17 0.73 140.93 1.37
<CAPTION>
Pricing Ratios Dividend Data(6)
----------------------------------------- -------------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
- --------------------- ------- ------- ------- ------- ------- ------- ------- -------
(X) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Market Averages. BIF-Insured Thrifts(no MHCs)
- ---------------------------------------------
BIF-Insured Thrifts(62) 18.41 191.30 21.32 192.92 19.32 0.45 1.47 28.39
NYSE Traded Companies(3) 23.55 220.59 24.57 218.77 22.12 0.39 0.65 13.96
AMEX Traded Companies(6) 17.78 156.64 20.87 159.57 19.36 0.57 1.76 36.31
NASDAQ Listed OTC Companies(53) 18.09 192.33 21.16 194.62 19.19 0.45 1.50 28.63
California Companies(1) 12.66 156.25 16.76 156.89 12.66 0.00 0.00 0.00
Mid-Atlantic Companies(18) 21.81 194.75 22.12 194.21 22.12 0.41 1.31 28.56
Mid-West Companies(2) 0.00 104.64 37.85 107.77 0.00 0.00 0.00 0.00
New England Companies(32) 15.65 202.70 17.60 210.44 16.54 0.48 1.62 27.09
North-West Companies(4) 20.60 231.20 21.49 202.88 21.31 0.51 1.56 29.11
South-East Companies(5) 24.91 126.19 33.71 126.19 26.08 0.70 2.00 51.73
Thrift Strategy(46) 18.84 178.58 22.29 180.67 19.66 0.47 1.55 30.47
Mortgage Banker Strategy(7) 18.72 227.19 18.63 235.77 20.38 0.28 1.01 20.76
Real Estate Strategy(4) 11.88 188.90 20.17 189.22 12.58 0.26 1.15 12.75
Diversified Strategy(5) 17.17 258.53 16.63 259.10 17.93 0.62 1.52 25.72
Companies Issuing Dividends(52) 18.87 197.18 20.61 199.10 20.09 0.54 1.75 34.06
Companies Without Dividends(10) 15.67 160.58 25.03 162.03 13.80 0.00 0.00 0.00
Equity/Assets less than 6%(5) 17.78 298.47 15.61 296.96 20.06 0.38 1.04 15.26
Equity/Assets 6-12%(40) 16.48 202.75 17.60 208.20 17.33 0.49 1.58 27.55
Equity/Assets greater than 12%(17) 23.92 136.88 30.43 138.78 24.21 0.40 1.38 33.10
Converted Last 3 Mths (no MHC)(2) 28.58 136.34 33.09 138.51 29.89 0.00 0.00 0.00
Actively Traded Companies(17) 15.91 214.32 17.55 216.46 16.50 0.61 1.77 28.30
Market Value Below $20 Million(3) 26.30 114.67 31.49 116.75 25.26 0.24 1.32 35.45
Holding Company Structure(42) 18.86 184.34 23.26 185.31 19.75 0.45 1.50 29.15
Assets Over $1 Billion(15) 20.31 234.62 21.42 236.03 20.93 0.55 1.39 27.71
Assets $500 Million-$1 Billion(17) 15.65 189.91 17.27 195.31 15.95 0.48 1.50 25.16
Assets $250-$500 Million(13) 18.98 184.77 21.09 188.85 19.72 0.38 1.60 29.19
Assets less than $250 Million(17) 18.67 161.30 24.50 163.54 20.24 0.40 1.43 30.61
Goodwill Companies(32) 18.43 201.03 17.91 205.14 19.37 0.48 1.37 24.77
Non-Goodwill Companies(30) 18.39 181.57 24.73 181.57 19.27 0.43 1.58 32.00
</TABLE>
(1) Average of high/low or bid/ask price per share.
(2) Or since offering price if converted or first listed in 1994 or 1995.
Percent change figures are actual year-to-date and are not annualized.
(3) EPS (earnings per share) is based on actual trailing twelve month data and
is not shown on a pro forma basis.
(4) Excludes intangibles (such as goodwill, value of core deposits, etc.).
(5) ROA (return on assets) and ROE (return on equity) are indicated ratios based
on trailing twelve month common earnings and average common equity and
assets balances; ROI (return on investment) is current EPS divided by
current price.
(6) Annualized, based on last regular quarterly cash dividend announcement.
(7) Indicated dividend as a percent of trailing twelve month earnings.
(8) Excluded from averages due to actual or rumored acquisition activities or
unusual operating characteristics.
* All thrifts are SAIF insured unless otherwise noted with an asterisk.
Parentheses following market averages indicate the number of institutions
included in the respective averages. All figures have been adjusted for
stock splits, stock dividends, and secondary offerings.
Source: Corporate reports and offering circulars for publicly traded companies,
and RP Financial, Inc. calculations. The information provided in this
report has been obtained from sources we believe are reliable, but we
cannot guarantee the accuracy or completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700 Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of January 2, 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 4.07 3.46 0.76 19.09 6.09 0.65 16.33 1.86 43.81 1.22
CSA Coast Savings Financial of CA (8) 5.20 5.14 0.62 12.51 4.36 0.66 13.36 1.23 75.26 1.37
CFB Commercial Federal Corp. of NE 6.16 5.52 0.94 16.08 5.66 0.94 16.08 0.88 75.53 0.90
DME Dime Bancorp, Inc. of NY* 5.43 5.17 0.68 12.66 4.52 0.67 12.46 1.02 51.61 0.81
DSL Downey Financial Corp. of CA 7.13 7.04 0.73 9.96 5.16 0.70 9.56 0.95 55.50 0.58
EBI Equality Bancorp of MO 9.92 9.92 0.53 5.33 3.75 0.53 5.33 0.29 41.13 0.26
FED FirstFed Fin. Corp. of CA 5.16 5.11 0.56 11.73 5.66 0.56 11.68 1.20 168.73 2.57
GSB Glendale Fed. Bk, FSB of CA 5.65 5.05 0.57 10.24 4.68 0.68 12.27 1.36 70.96 1.30
GDW Golden West Fin. Corp. of CA 6.56 6.56 0.88 13.91 6.12 0.86 13.68 1.18 47.94 0.67
GPT GreenPoint Fin. Corp. of NY* 9.69 5.19 1.09 10.41 4.70 1.06 10.17 2.88 28.68 1.26
JSB JSB Financial, Inc. of NY 23.22 23.22 1.93 8.61 5.90 1.71 7.65 1.07 35.16 0.61
NYB New York Bancorp, Inc. of NY (8) 5.21 5.21 1.62 31.66 6.13 1.66 32.45 0.88 65.33 0.92
SIB Staten Island Bancorp of NY* 24.73 24.00 1.29 5.21 3.67 1.13 4.58 1.15 58.76 1.38
WES Westcorp Inc. of Orange CA 9.08 9.06 0.99 10.57 7.59 0.21 2.26 0.76 121.61 1.78
AMEX Traded Companies
- ---------------------
ANA Acadiana Bancshares of LA* 16.95 16.95 0.98 5.64 4.15 0.95 5.46 0.50 201.03 1.32
ANE Alliance Bancorp of CT* 7.36 7.18 0.79 11.65 6.92 0.73 10.74 1.99 62.80 2.00
BKC American Bank of Waterbury CT* 8.81 8.49 1.30 15.51 6.76 1.10 13.09 1.77 48.58 1.48
BFD BostonFed Bancorp of MA 8.52 8.20 0.73 7.68 5.27 0.66 6.95 0.34 184.11 0.76
CFX CFX Corp of NH (8)* 8.71 8.40 0.73 8.91 1.95 0.99 11.98 0.55 137.87 1.10
CNY Carver Bancorp, Inc. of NY 8.40 8.07 -0.15 -1.74 -1.56 0.01 0.13 1.31 47.60 1.07
CBK Citizens First Fin.Corp. of IL 13.75 13.75 0.60 4.13 3.00 0.54 3.67 0.61 38.86 0.28
ESX Essex Bancorp of VA (8) 0.02 -0.08 0.12 NM 5.08 0.10 NM 2.11 51.58 1.27
FCB Falmouth Co-Op Bank of MA* 23.65 23.65 0.82 3.40 2.54 0.74 3.07 0.03 NA 0.92
FAB FirstFed America Bancorp of MA 12.20 12.20 0.05 0.56 0.28 0.48 5.03 0.39 259.57 1.16
GAF GA Financial Corp. of PA 14.63 14.49 1.09 6.28 4.98 1.05 6.08 0.24 63.66 0.41
KNK Kankakee Bancorp of IL 11.43 10.78 0.89 8.28 5.81 0.87 8.12 1.05 60.22 0.90
KYF Kentucky First Bancorp of KY 16.70 16.70 1.16 6.52 5.27 1.14 6.43 0.09 457.83 0.76
MBB MSB Bancorp of Middletown NY (8)* 7.39 3.63 0.27 3.87 2.21 0.18 2.55 NA NA NA
PDB Piedmont Bancorp of NC 16.43 16.43 -0.24 -1.28 -1.02 0.55 2.91 0.89 75.98 0.81
SSB Scotland Bancorp of NC 22.62 22.62 1.86 5.47 6.52 1.83 5.39 NA NA 0.53
SZB SouthFirst Bancshares of AL 14.00 14.00 -0.03 -0.19 -0.13 0.23 1.62 0.75 39.15 0.40
SRN Southern Banc Company of AL 17.01 16.83 0.14 0.79 0.66 0.50 2.84 NA NA 0.20
SSM Stone Street Bancorp of NC 29.57 29.57 1.54 4.69 3.89 1.54 4.69 0.23 229.34 0.62
TSH Teche Holding Company of LA 13.45 13.45 0.98 7.29 4.91 0.93 6.97 0.28 291.99 0.96
FTF Texarkana Fst. Fin. Corp. of AR 15.32 15.32 1.70 10.74 6.44 1.70 10.74 0.23 276.17 0.76
THR Three Rivers Fin. Corp. of MI 13.46 13.41 0.57 4.02 2.79 0.82 5.83 0.87 59.98 0.77
WSB Washington SB, FSB of MD 8.38 8.38 0.42 5.04 2.78 0.59 7.06 1.53 30.34 1.01
NASDAQ Listed OTC Companies
- ---------------------------
FBCV 1st Bancorp of Vincennes IN 8.65 8.49 0.72 8.75 5.98 0.36 4.33 1.30 34.59 0.65
AFED AFSALA Bancorp, Inc. of NY 12.86 12.86 0.79 5.85 4.58 0.79 5.85 0.31 221.60 1.44
ALBK ALBANK Fin. Corp. of Albany NY 9.24 8.14 1.04 11.41 5.82 1.04 11.33 0.94 75.89 0.97
AMFC AMB Financial Corp. of IN 13.94 13.94 1.02 6.29 5.94 0.72 4.43 0.32 118.29 0.51
ASBP ASB Financial Corp. of OH 15.57 15.57 0.97 5.70 4.83 0.91 5.35 0.96 75.72 1.07
ABBK Abington Savings Bank of MA* 7.12 6.46 0.85 12.32 5.70 0.76 11.03 0.16 269.74 0.71
AABC Access Anytime Bancorp of NM 8.65 8.65 1.44 22.38 11.45 1.34 20.78 1.58 31.35 0.95
AFBC Advance Fin. Bancorp of WV 15.40 15.40 0.89 6.41 4.74 0.87 6.25 0.74 38.01 0.33
AADV Advantage Bancorp of WI (8) 9.54 8.88 1.04 11.55 4.77 0.93 10.36 0.48 117.02 1.02
AFCB Affiliated Comm BC, Inc. of MA (8) 9.76 9.71 1.09 11.13 4.81 1.08 11.00 0.34 218.65 1.18
ALBC Albion Banc Corp. of Albion NY 8.57 8.57 0.50 5.53 3.23 0.49 5.45 0.12 321.43 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>
NYSE Traded Companies
- ---------------------
AHM Ahmanson and Co. H.F. of CA 16.42 320.72 13.05 NM 19.20 0.88 1.36 22.34
CSA Coast Savings Financial of CA (8) 22.96 267.75 13.92 270.87 21.50 0.00 0.00 0.00
CFB Commercial Federal Corp. of NE 17.67 260.13 16.03 290.64 17.67 0.22 0.62 10.89
DME Dime Bancorp, Inc. of NY* 22.12 276.97 15.03 290.99 22.46 0.16 0.56 12.31
DSL Downey Financial Corp. of CA 19.38 184.95 13.19 187.35 20.19 0.32 1.11 21.48
EBI Equality Bancorp of MO 26.64 141.91 14.07 141.91 26.64 0.00 0.00 0.00
FED FirstFed Fin. Corp. of CA 17.67 193.35 9.98 195.21 17.75 0.00 0.00 0.00
GSB Glendale Fed. Bk, FSB of CA 21.38 204.57 11.55 228.55 17.83 0.00 0.00 0.00
GDW Golden West Fin. Corp. of CA 16.35 213.71 14.03 213.71 16.63 0.50 0.52 8.43
GPT GreenPoint Fin. Corp. of NY* 21.27 242.59 23.51 NM 21.78 1.00 1.39 29.59
JSB JSB Financial, Inc. of NY 16.96 140.27 32.56 140.27 19.08 1.40 2.78 47.14
NYB New York Bancorp, Inc. of NY (8) 16.30 NM 25.71 NM 15.90 0.60 1.53 25.00
SIB Staten Island Bancorp of NY* 27.27 142.21 35.17 146.55 NM 0.00 0.00 0.00
WES Westcorp Inc. of Orange CA 13.17 132.69 12.05 133.00 NM 0.40 2.32 30.53
AMEX Traded Companies
- ---------------------
ANA Acadiana Bancshares of LA* 24.09 135.71 23.00 135.71 24.86 0.44 1.88 45.36
ANE Alliance Bancorp of CT* 14.45 151.78 11.18 155.62 15.68 0.20 1.20 17.39
BKC American Bank of Waterbury CT* 14.79 208.22 18.34 216.13 17.53 1.44 2.98 44.04
BFD BostonFed Bancorp of MA 18.97 151.93 12.94 157.82 20.95 0.28 1.27 24.14
CFX CFX Corp of NH (8)* NM 290.83 25.34 301.72 NM 0.88 2.95 NM
CNY Carver Bancorp, Inc. of NY NM 110.14 9.25 114.62 NM 0.00 0.00 NM
CBK Citizens First Fin.Corp. of IL NM 141.99 19.52 141.99 NM 0.00 0.00 0.00
ESX Essex Bancorp of VA (8) 19.70 NM 2.17 NM 21.89 0.00 0.00 0.00
FCB Falmouth Co-Op Bank of MA* NM 130.82 30.94 130.82 NM 0.20 0.98 38.46
FAB FirstFed America Bancorp of MA NM 149.79 18.28 149.79 NM 0.00 0.00 0.00
GAF GA Financial Corp. of PA 20.07 128.19 18.75 129.42 20.74 0.48 2.54 51.06
KNK Kankakee Bancorp of IL 17.21 135.78 15.52 144.02 17.54 0.48 1.30 22.33
KYF Kentucky First Bancorp of KY 18.99 131.18 21.91 131.18 19.23 0.50 3.38 64.10
MBB MSB Bancorp of Middletown NY (8)* NM 169.03 12.49 344.41 NM 0.60 1.68 NM
PDB Piedmont Bancorp of NC NM 142.20 23.37 142.20 NM 0.40 3.72 NM
SSB Scotland Bancorp of NC 15.33 132.98 30.07 132.98 15.57 0.20 1.98 30.30
SZB SouthFirst Bancshares of AL NM 139.29 19.50 139.29 NM 0.50 2.24 NM
SRN Southern Banc Company of AL NM 124.28 21.14 125.57 NM 0.35 1.93 NM
SSM Stone Street Bancorp of NC 25.72 135.54 40.07 135.54 25.72 0.45 2.03 52.33
TSH Teche Holding Company of LA 20.37 144.28 19.41 144.28 21.32 0.50 2.19 44.64
FTF Texarkana Fst. Fin. Corp. of AR 15.53 163.19 25.00 163.19 15.53 0.56 2.24 34.78
THR Three Rivers Fin. Corp. of MI NM 143.18 19.27 143.73 24.72 0.40 1.80 64.52
WSB Washington SB, FSB of MD NM 174.42 14.61 174.42 25.71 0.10 1.11 40.00
NASDAQ Listed OTC Companies
- ---------------------------
FBCV 1st Bancorp of Vincennes IN 16.71 141.38 12.23 144.16 NM 0.28 0.91 15.22
AFED AFSALA Bancorp, Inc. of NY 21.84 129.61 16.66 129.61 21.84 0.24 1.29 28.24
ALBK ALBANK Fin. Corp. of Albany NY 17.17 185.91 17.18 211.06 17.29 0.72 1.45 24.91
AMFC AMB Financial Corp. of IN 16.84 110.37 15.38 110.37 23.91 0.28 1.70 28.57
ASBP ASB Financial Corp. of OH 20.70 128.64 20.03 128.64 22.08 0.40 3.02 62.50
ABBK Abington Savings Bank of MA* 17.54 205.97 14.67 227.27 19.61 0.20 1.00 17.54
AABC Access Anytime Bancorp of NM 8.73 146.47 12.67 146.47 9.40 0.00 0.00 0.00
AFBC Advance Fin. Bancorp of WV 21.08 116.51 17.95 116.51 21.60 0.32 1.83 38.55
AADV Advantage Bancorp of WI (8) 20.98 226.38 21.60 243.32 23.40 0.40 0.58 12.12
AFCB Affiliated Comm BC, Inc. of MA (8) 20.79 218.03 21.29 219.32 21.02 0.60 1.62 33.71
ALBC Albion Banc Corp. of Albion NY NM 166.94 14.30 166.94 NM 0.32 0.79 24.43
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of January 2, 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)
- ---------------------------------------
ABCL Allied Bancorp of IL 9.42 9.30 0.79 8.70 3.96 0.88 9.69 0.21 184.61 0.54
ATSB AmTrust Capital Corp. of IN 10.93 10.82 0.40 3.86 3.79 0.23 2.21 2.20 33.49 1.03
AHCI Ambanc Holding Co., Inc. of NY* 11.37 11.37 -0.53 -4.16 -3.17 -0.60 -4.71 0.73 107.99 1.48
ASBI Ameriana Bancorp of IN 11.21 11.21 0.92 8.35 5.69 0.84 7.61 0.52 53.03 0.37
AFFFZ America First Fin. Fund of CA(8) 8.37 8.28 1.99 24.83 13.54 2.01 25.10 0.35 94.92 0.48
ABCW Anchor Bancorp Wisconsin of WI 6.40 6.29 0.99 16.08 5.81 0.93 15.00 0.98 115.36 1.44
ANDB Andover Bancorp, Inc. of MA* 8.12 8.12 1.05 13.16 6.31 1.03 12.85 0.91 107.23 1.33
ASFC Astoria Financial Corp. of NY 7.72 6.53 0.81 10.37 5.24 0.77 9.81 0.46 39.39 0.43
AVND Avondale Fin. Corp. of IL 7.72 7.72 -1.93 -21.53 -20.50 -1.97 -21.92 1.11 86.78 1.65
BKCT Bancorp Connecticut of CT* 10.75 10.75 1.36 13.01 5.12 1.24 11.85 1.04 118.74 2.00
BPLS Bank Plus Corp. of CA 4.52 4.51 0.36 7.51 5.05 0.30 6.24 2.21 67.35 2.02
BWFC Bank West Fin. Corp. of MI 14.15 14.15 1.03 6.73 3.63 0.56 3.65 0.21 69.91 0.21
BANC BankAtlantic Bancorp of FL 5.50 4.55 1.04 18.10 7.18 0.54 9.50 0.92 108.06 1.42
BKUNA BankUnited SA of FL 3.12 2.46 0.31 7.68 3.19 0.28 6.90 0.62 27.63 0.21
BVCC Bay View Capital Corp. of CA 5.82 4.86 0.55 9.13 3.81 0.62 10.22 0.63 195.87 1.62
FSNJ Bayonne Banchsares of NJ 15.62 15.62 0.37 3.86 1.84 0.52 5.41 1.12 47.67 1.38
BFSB Bedford Bancshares of VA 14.10 14.10 1.20 8.41 4.00 1.19 8.35 0.52 92.88 0.58
BFFC Big Foot Fin. Corp. of IL 17.48 17.48 0.50 3.28 1.99 0.50 3.28 0.09 150.75 0.31
BYFC Broadway Fin. Corp. of CA 9.84 9.84 0.26 2.49 2.87 0.33 3.14 1.62 52.84 1.02
CBES CBES Bancorp of MO 16.92 16.92 1.23 6.90 5.43 1.12 6.26 0.59 81.11 0.53
CCFH CCF Holding Company of GA 10.66 10.66 0.15 1.07 0.75 -0.15 -1.14 0.20 288.02 0.70
CENF CENFED Financial Corp. of CA(8) 5.56 5.55 0.64 12.26 5.48 0.58 11.04 0.97 76.38 1.07
CFSB CFSB Bancorp of Lansing MI 7.71 7.71 1.20 15.75 5.03 1.13 14.80 0.19 283.10 0.61
CKFB CKF Bancorp of Danville KY 23.67 23.67 1.83 7.53 6.47 1.37 5.61 1.20 16.62 0.22
CNSB CNS Bancorp of MO 24.33 24.33 0.79 3.21 2.47 0.79 3.21 0.50 80.20 0.58
CSBF CSB Financial Group Inc. of IL* 24.01 22.65 0.50 2.01 2.00 0.43 1.71 0.85 39.95 0.60
CBCI Calumet Bancorp of Chicago IL 16.21 16.21 1.45 9.07 6.68 1.42 8.91 1.27 96.64 1.55
CAFI Camco Fin. Corp. of OH 9.59 8.88 1.20 12.96 6.41 1.01 10.94 0.60 41.84 0.29
CMRN Cameron Fin. Corp. of MO 21.02 21.02 1.26 5.47 4.87 1.26 5.47 0.55 139.04 0.91
CAPS Capital Savings Bancorp of MO(8) 9.14 9.14 0.95 10.96 4.95 0.94 10.78 0.37 84.67 0.39
CFNC Carolina Fincorp of NC* 22.59 22.59 1.17 5.03 3.77 1.14 4.89 0.16 226.67 0.50
CASB Cascade SB of Everett WA 6.64 6.64 0.60 9.62 4.91 0.60 9.62 0.28 332.14 1.12
CATB Catskill Fin. Corp. of NY* 24.78 24.78 1.39 5.20 4.64 1.41 5.26 0.40 162.15 1.50
CNIT Cenit Bancorp of Norfolk VA 6.95 6.36 0.80 11.30 4.32 0.74 10.50 0.52 103.38 0.77
CEBK Central Co-Op. Bank of MA* 9.93 8.88 0.87 8.67 4.96 0.88 8.79 0.53 151.19 1.15
CENB Century Bancshares of NC* 30.29 30.29 1.69 5.60 4.94 1.70 5.62 0.25 219.37 0.85
CBSB Charter Financial Inc. of IL(8) 15.10 13.45 1.40 9.53 5.18 1.54 10.47 NA NA 0.78
COFI Charter One Financial of OH 7.05 6.48 1.26 18.64 5.84 1.23 18.23 0.27 159.82 0.68
CVAL Chester Valley Bancorp of PA 8.66 8.66 0.98 11.33 4.60 0.94 10.84 0.53 173.12 1.12
CTZN CitFed Bancorp of Dayton OH 6.27 5.70 0.86 13.53 5.01 0.86 13.53 0.40 136.26 0.86
CLAS Classic Bancshares of KY 14.90 12.61 0.56 3.44 3.04 0.75 4.66 0.67 93.71 0.94
CMSB Cmnwealth Bancorp of PA 9.28 7.24 0.75 7.49 5.01 0.63 6.32 0.47 85.46 0.71
CBSA Coastal Bancorp of Houston TX 3.47 2.92 0.41 12.41 6.88 0.43 12.77 0.62 38.71 0.54
CFCP Coastal Fin. Corp. of SC 6.56 6.56 1.21 19.41 5.32 1.05 16.77 0.10 966.86 1.18
CMSV Commty. Svgs, MHC of FL (48.5) 11.34 11.34 0.80 7.04 3.04 0.73 6.45 0.41 90.57 0.62
CFTP Community Fed. Bancorp of MS 26.73 26.73 1.47 4.77 3.30 1.45 4.70 0.50 54.53 0.46
CFFC Community Fin. Corp. of VA 13.21 13.21 1.12 8.18 5.43 1.13 8.23 0.56 105.58 0.67
CFBC Community First Bnkg Co. of GA 17.80 17.57 0.74 4.46 2.98 0.74 4.46 2.19 25.76 0.75
CIBI Community Inv. Bancorp of OH 11.75 11.75 0.97 8.31 6.25 0.97 8.31 0.53 94.97 0.59
COOP Cooperative Bk. for Svgs. of NC 7.69 7.69 0.63 8.30 3.12 0.63 8.30 0.21 109.36 0.29
CRZY Crazy Woman Creek Bncorp of WY 23.70 23.70 1.27 4.66 4.66 1.29 4.72 0.38 134.22 1.04
DNFC D&N Financial Corp. of MI 5.34 5.29 0.89 15.80 5.86 0.82 14.66 0.35 178.16 0.83
DCBI Delphos Citizens Bancorp of OH 26.64 26.64 1.54 6.13 4.00 1.54 6.13 0.45 21.81 0.13
DIME Dime Community Bancorp of NY 13.50 11.63 1.09 6.91 4.92 1.06 6.72 0.60 135.05 1.39
DIBK Dime Financial Corp. of CT* 8.14 7.91 1.94 23.83 10.30 1.94 23.75 0.37 353.73 3.21
EGLB Eagle BancGroup of IL 11.85 11.85 0.32 2.61 2.44 0.25 2.04 1.48 35.66 0.73
</TABLE>
<TABLE>
<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)
- ---------------------------------------
ABCL Allied Bancorp of IL 25.24 166.15 15.65 168.24 22.67 0.44 1.64 41.51
ATSB AmTrust Capital Corp. of IN 26.39 98.41 10.76 99.44 NM 0.20 1.40 37.04
AHCI Ambanc Holding Co., Inc. of NY* NM 137.70 15.66 137.70 NM 0.20 1.04 NM
ASBI Ameriana Bancorp of IN 17.58 145.78 16.34 145.78 19.29 0.64 3.22 56.64
AFFFZ America First Fin. Fund of CA(8) 7.39 172.41 14.42 174.25 7.31 1.60 2.96 21.89
ABCW Anchor Bancorp Wisconsin of WI 17.22 260.49 16.67 265.10 18.46 0.32 0.89 15.31
ANDB Andover Bancorp, Inc. of MA* 15.84 196.78 15.98 196.78 16.22 0.76 1.91 30.28
ASFC Astoria Financial Corp. of NY 19.07 191.26 14.76 226.12 20.16 0.60 1.06 20.27
AVND Avondale Fin. Corp. of IL NM 124.73 9.63 124.73 NM 0.00 0.00 NM
BKCT Bancorp Connecticut of CT* 19.54 244.20 26.26 244.20 21.45 0.50 2.29 44.64
BPLS Bank Plus Corp. of CA 19.80 140.50 6.35 140.66 23.83 0.00 0.00 0.00
BWFC Bank West Fin. Corp. of MI 27.54 183.20 25.93 183.20 NM 0.00 0.00 0.00
BANC BankAtlantic Bancorp of FL 13.93 241.82 13.31 292.60 26.56 0.13 0.76 10.66
BKUNA BankUnited SA of FL NM 218.63 6.83 277.94 NM 0.00 0.00 0.00
BVCC Bay View Capital Corp. of CA 26.23 251.52 14.63 301.13 23.43 0.40 1.07 28.17
FSNJ Bayonne Banchsares of NJ NM 128.17 20.02 128.17 NM 0.17 1.25 68.00
BFSB Bedford Bancshares of VA 25.00 202.27 28.51 202.27 25.18 0.56 1.61 40.29
BFFC Big Foot Fin. Corp. of IL NM 141.08 24.67 141.08 NM 0.00 0.00 0.00
BYFC Broadway Fin. Corp. of CA NM 89.71 8.83 89.71 27.60 0.20 1.51 52.63
CBES CBES Bancorp of MO 18.43 123.58 20.91 123.58 20.33 0.40 1.84 33.90
CCFH CCF Holding Company of GA NM 155.73 16.60 155.73 NM 0.54 2.68 NM
CENF CENFED Financial Corp. of CA(8) 18.26 204.56 11.38 204.84 20.28 0.36 0.82 14.94
CFSB CFSB Bancorp of Lansing MI 19.89 302.07 23.29 302.07 21.17 0.48 1.83 36.36
CKFB CKF Bancorp of Danville KY 15.47 120.27 28.46 120.27 20.74 0.50 2.65 40.98
CNSB CNS Bancorp of MO NM 132.50 32.24 132.50 NM 0.24 1.26 51.06
CSBF CSB Financial Group Inc. of IL* NM 104.49 25.09 110.75 NM 0.00 0.00 0.00
CBCI Calumet Bancorp of Chicago IL 14.98 135.95 22.04 135.95 15.25 0.00 0.00 0.00
CAFI Camco Fin. Corp. of OH 15.61 180.24 17.28 194.66 18.49 0.54 2.00 31.21
CMRN Cameron Fin. Corp. of MO 20.53 115.43 24.26 115.43 20.53 0.28 1.39 28.57
CAPS Capital Savings Bancorp of MO(8) 20.21 207.26 18.94 207.26 20.55 0.24 0.99 20.00
CFNC Carolina Fincorp of NC* 26.51 133.33 30.12 133.33 27.29 0.24 1.29 34.29
CASB Cascade SB of Everett WA 20.38 158.49 10.52 158.49 20.38 0.00 0.00 0.00
CATB Catskill Fin. Corp. of NY* 21.57 117.59 29.14 117.59 21.32 0.32 1.77 38.10
CNIT Cenit Bancorp of Norfolk VA 23.16 266.37 18.50 290.85 24.92 1.00 1.27 29.50
CEBK Central Co-Op. Bank of MA* 20.17 168.10 16.69 187.86 19.90 0.32 1.09 22.07
CENB Century Bancshares of NC* 20.23 112.82 34.17 112.82 20.18 2.00 2.36 47.73
CBSB Charter Financial Inc. of IL(8) 19.32 179.76 27.14 201.83 17.58 0.32 1.26 24.43
COFI Charter One Financial of OH 17.13 288.35 20.34 314.05 17.52 1.00 1.60 27.47
CVAL Chester Valley Bancorp of PA 21.74 232.74 20.16 232.74 22.73 0.44 1.47 31.88
CTZN CitFed Bancorp of Dayton OH 19.95 248.12 15.57 272.98 19.95 0.24 0.61 12.12
CLAS Classic Bancshares of KY NM 112.19 16.72 132.62 24.28 0.28 1.67 54.90
CMSB Cmnwealth Bancorp of PA 19.97 156.45 14.52 200.69 23.69 0.28 1.37 27.45
CBSA Coastal Bancorp of Houston TX 14.53 171.27 5.94 203.68 14.12 0.48 1.38 20.00
CFCP Coastal Fin. Corp. of SC 18.80 337.16 22.11 337.16 21.76 0.36 1.53 28.80
CMSV Commty. Svgs, MHC of FL (48.5) NM 223.24 25.32 223.24 NM 0.90 2.55 NM
CFTP Community Fed. Bancorp of MS NM 160.38 42.87 160.38 NM 0.32 1.60 48.48
CFFC Community Fin. Corp. of VA 18.41 145.44 19.21 145.44 18.29 0.56 2.03 37.33
CFBC Community First Bnkg Co. of GA NM 148.63 26.46 150.64 NM 0.60 1.39 46.51
CIBI Community Inv. Bancorp of OH 16.00 133.55 15.69 133.55 16.00 0.32 1.98 31.68
COOP Cooperative Bk. for Svgs. of NC NM 252.10 19.39 252.10 NM 0.00 0.00 0.00
CRZY Crazy Woman Creek Bncorp of WY 21.44 103.76 24.59 103.76 21.15 0.40 2.59 55.56
DNFC D&N Financial Corp. of MI 17.07 251.11 13.41 253.57 18.40 0.18 0.69 11.84
DCBI Delphos Citizens Bancorp of OH 25.00 139.93 37.27 139.93 25.00 0.00 0.00 0.00
DIME Dime Community Bancorp of NY 20.34 151.05 20.39 175.31 20.91 0.24 1.07 21.82
DIBK Dime Financial Corp. of CT* 9.71 203.71 16.59 209.77 9.74 0.44 1.49 14.43
EGLB Eagle BancGroup of IL NM 110.80 13.13 110.80 NM 0.00 0.00 0.00
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700 Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of January 2, 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)
- ---------------------------------------
EBSI Eagle Bancshares of Tucker GA 8.17 8.17 0.65 7.67 4.00 0.65 7.75 1.26 54.76 0.94
EGFC Eagle Financial Corp. of CT(8) 6.90 5.49 0.34 4.79 1.65 0.48 6.91 0.53 87.59 0.86
ETFS East Texas Fin. Serv. of TX 18.01 18.01 0.68 3.68 3.16 0.63 3.43 0.27 88.06 0.48
EMLD Emerald Financial Corp of OH 7.80 7.69 1.05 13.70 5.33 0.97 12.67 0.24 115.15 0.36
EIRE Emerald Island Bancorp, MA(8)* 6.99 6.99 0.86 12.46 4.97 0.92 13.24 0.17 416.26 0.97
EFBC Empire Federal Bancorp of MT 34.89 34.89 0.83 2.37 2.03 1.09 3.12 0.05 357.14 0.45
EFBI Enterprise Fed. Bancorp of OH 11.43 11.42 0.92 7.43 3.47 0.77 6.18 0.07 297.93 0.30
EQSB Equitable FSB of Wheaton MD 5.11 5.11 0.76 15.12 7.08 0.75 14.92 0.52 34.66 0.26
FCBF FCB Fin. Corp. of Neenah WI 14.64 14.64 0.74 4.48 2.04 0.57 3.45 0.24 277.72 0.85
FFDF FFD Financial Corp. of OH 24.34 24.34 1.94 7.84 6.36 0.95 3.85 0.15 209.30 0.46
FFLC FFLC Bancorp of Leesburg FL 13.73 13.73 1.00 6.81 4.32 0.94 6.44 0.18 226.46 0.52
FFFC FFVA Financial Corp. of VA(8) 13.31 13.04 1.40 10.28 4.36 1.35 9.86 0.16 361.92 0.99
FFWC FFW Corporation of Wabash IN 9.67 8.79 1.04 10.52 6.72 1.02 10.35 0.18 217.37 0.60
FFYF FFY Financial Corp. of OH 13.70 13.70 1.29 8.85 5.62 1.27 8.70 0.66 72.24 0.63
FMCO FMS Financial Corp. of NJ 6.49 6.39 1.02 15.82 6.83 1.01 15.69 1.15 43.53 0.94
FFHH FSF Financial Corp. of MN 11.17 11.17 0.85 7.05 4.95 0.84 6.98 0.15 148.95 0.33
FOBC Fed One Bancorp of Wheeling WV 11.18 10.68 0.94 8.21 4.93 0.94 8.21 0.45 91.97 0.88
FBCI Fidelity Bancorp of Chicago IL 10.48 10.46 0.19 1.84 1.33 0.60 5.80 0.41 22.74 0.12
FSBI Fidelity Bancorp, Inc. of PA 6.79 6.79 0.80 11.51 5.98 0.78 11.25 0.30 171.64 1.04
FFFL Fidelity FSB, MHC of FL (47.7) 8.21 8.15 0.67 7.64 2.95 0.57 6.49 0.40 51.95 0.28
FFED Fidelity Fed. Bancorp of IN 6.11 6.11 0.75 14.32 6.54 0.73 13.89 0.13 626.40 0.96
FFOH Fidelity Financial of OH 13.02 11.56 0.91 6.59 4.90 1.02 7.37 0.29 106.32 0.37
FIBC Financial Bancorp, Inc. of NY 9.05 9.00 0.91 9.52 6.05 0.97 10.18 1.75 27.02 0.91
FBSI First Bancshares of MO 13.92 13.92 1.19 8.36 5.52 1.08 7.54 0.67 45.57 0.36
FBBC First Bell Bancorp of PA 10.53 10.53 1.15 9.44 6.21 1.12 9.20 0.09 116.26 0.13
FBER First Bergen Bancorp of NJ 13.65 13.65 0.77 4.97 3.59 0.77 4.97 0.84 127.66 2.47
SKBO First Carnegie, MHC of PA(45.0) 16.45 16.45 0.52 5.53 1.76 0.52 5.53 NA NA 0.83
FSTC First Citizens Corp of GA 10.12 7.98 1.96 20.65 6.20 1.75 18.46 NA NA 1.43
FCME First Coastal Corp. of ME* 9.75 9.75 4.17 48.29 30.40 4.01 46.37 1.65 108.25 2.49
FFBA First Colorado Bancorp of Co 13.08 12.91 1.21 8.92 4.70 1.20 8.84 0.20 141.52 0.39
FDEF First Defiance Fin.Corp. of OH 19.67 19.67 1.03 4.82 4.06 1.00 4.67 0.45 99.07 0.59
FESX First Essex Bancorp of MA* 7.40 6.48 0.90 12.27 6.05 0.77 10.52 0.58 149.29 1.43
FFES First FS&LA of E. Hartford CT 6.63 6.63 0.53 8.37 5.02 0.60 9.51 0.31 87.85 1.44
FFSX First FS&LA. MHC of IA (46.1) 8.73 8.66 0.73 8.79 3.87 0.71 8.56 0.22 185.09 0.53
BDJI First Fed. Bancorp. of MN 10.71 10.71 0.65 5.81 3.18 0.63 5.64 0.32 120.28 0.79
FFBH First Fed. Bancshares of AR 14.89 14.89 1.06 6.78 4.81 1.01 6.48 0.96 23.38 0.29
FTFC First Fed. Capital Corp. of WI 6.73 6.35 1.08 16.76 5.33 0.89 13.87 0.13 395.30 0.64
FFKY First Fed. Fin. Corp. of KY 13.70 12.93 1.64 11.95 6.42 1.62 11.87 0.49 94.29 0.53
FFBZ First Federal Bancorp of OH 7.67 7.66 1.01 13.33 6.17 1.02 13.43 0.52 172.30 1.03
FFCH First Fin. Holdings Inc. of SC 6.12 6.12 0.87 14.24 4.16 0.85 13.86 1.49 45.68 0.82
FFBI First Financial Bancorp of IL 8.92 8.92 -0.07 -0.84 -0.71 0.43 5.28 0.33 178.83 0.87
FFHS First Franklin Corp. of OH 9.02 8.97 0.56 6.21 3.36 0.66 7.33 0.47 90.77 0.64
FGHC First Georgia Hold. Corp of GA 8.22 7.53 0.66 7.98 3.63 0.51 6.23 3.10 20.52 0.75
FSPG First Home Bancorp of NJ(8) 6.86 6.76 0.93 13.99 5.80 0.91 13.67 0.77 95.63 1.36
FFSL First Independence Corp. of KS 10.25 10.25 0.65 5.99 5.12 0.65 5.99 1.25 47.61 0.89
FISB First Indiana Corp. of IN 9.65 9.53 1.14 12.04 5.49 0.93 9.89 1.42 100.99 1.70
FKFS First Keystone Fin. Corp of PA 6.63 6.63 0.82 11.30 5.81 0.75 10.35 1.11 39.39 0.84
FLKY First Lancaster Bncshrs of KY 29.46 29.46 1.23 3.65 3.31 1.23 3.65 2.28 13.93 0.35
FLFC First Liberty Fin. Corp. of GA 7.40 6.68 0.73 9.96 3.50 0.79 10.74 0.72 129.39 1.31
CASH First Midwest Fin. Corp. of IA 10.75 9.55 0.96 8.44 6.10 0.91 8.06 0.75 78.49 0.93
FMBD First Mutual Bancorp of IL 13.40 10.21 0.32 2.12 1.52 0.30 1.94 0.26 138.52 0.47
FMSB First Mutual SB of Bellevue WA* 6.79 6.79 1.02 15.29 5.78 1.00 15.00 0.06 NA 1.31
FNGB First Northern Cap. Corp of WI 11.09 11.09 0.93 8.21 4.71 0.89 7.84 0.08 574.86 0.53
FFPB First Palm Beach Bancorp of FL 6.25 6.10 0.58 8.65 4.29 0.49 7.25 0.57 58.39 0.53
FSLA First SB SLA MHC of NJ (47.5)(8) 9.50 8.63 0.90 9.64 2.35 0.94 10.06 0.57 99.98 1.04
SOPN First SB, SSB, Moore Co. of NC 23.01 23.01 1.75 7.26 5.39 1.75 7.26 0.29 70.15 0.31
</TABLE>
<TABLE>
<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)
- ---------------------------------------
EBSI Eagle Bancshares of Tucker GA 25.00 174.74 14.28 174.74 24.72 0.60 2.73 68.18
EGFC Eagle Financial Corp. of CT(8) NM 238.72 16.47 300.00 NM 1.00 1.83 NM
ETFS East Texas Fin. Serv. of TX NM 116.71 21.02 116.71 NM 0.20 0.84 26.67
EMLD Emerald Financial Corp of OH 18.75 242.46 18.91 245.90 20.27 0.24 1.07 20.00
EIRE Emerald Island Bancorp, MA(8)* 20.12 233.77 16.33 233.77 18.94 0.28 0.87 17.50
EFBC Empire Federal Bancorp of MT NM 116.87 40.78 116.87 NM 0.30 1.74 NM
EFBI Enterprise Fed. Bancorp of OH 28.78 216.50 24.75 216.64 NM 1.00 2.92 NM
EQSB Equitable FSB of Wheaton MD 14.13 198.43 10.15 198.43 14.32 0.00 0.00 0.00
FCBF FCB Fin. Corp. of Neenah WI NM 151.32 22.15 151.32 NM 0.80 2.68 NM
FFDF FFD Financial Corp. of OH 15.73 122.81 29.89 122.81 NM 0.30 1.64 25.86
FFLC FFLC Bancorp of Leesburg FL 23.14 158.41 21.76 158.41 24.44 0.29 1.33 30.85
FFFC FFVA Financial Corp. of VA(8) 22.92 233.35 31.06 238.20 23.91 0.48 1.23 28.24
FFWC FFW Corporation of Wabash IN 14.88 146.22 14.14 161.00 15.13 0.36 2.00 29.75
FFYF FFY Financial Corp. of OH 17.78 163.79 22.43 163.79 18.07 0.80 2.41 42.78
FMCO FMS Financial Corp. of NJ 14.64 216.77 14.06 219.97 14.76 0.28 0.82 11.97
FFHH FSF Financial Corp. of MN 20.19 145.73 16.29 145.73 20.39 0.50 2.38 48.08
FOBC Fed One Bancorp of Wheeling WV 20.29 166.17 18.57 173.91 20.29 0.62 2.21 44.93
FBCI Fidelity Bancorp of Chicago IL NM 132.64 13.89 132.85 23.80 0.32 1.29 NM
FSBI Fidelity Bancorp, Inc. of PA 16.71 175.78 11.94 175.78 17.11 0.36 1.23 20.57
FFFL Fidelity FSB, MHC of FL (47.7) NM 249.01 20.43 250.60 NM 0.90 2.86 NM
FFED Fidelity Fed. Bancorp of IN 15.30 199.03 12.16 199.03 15.77 0.40 3.90 59.70
FFOH Fidelity Financial of OH 20.39 125.61 16.36 141.55 18.24 0.28 1.81 36.84
FIBC Financial Bancorp, Inc. of NY 16.52 153.53 13.89 154.32 15.46 0.40 1.66 27.40
FBSI First Bancshares of MO 18.10 151.95 21.15 151.95 20.06 0.20 0.63 11.49
FBBC First Bell Bancorp of PA 16.10 172.41 18.16 172.41 16.52 0.40 2.11 33.90
FBER First Bergen Bancorp of NJ 27.82 145.54 19.87 145.54 27.82 0.20 1.01 28.17
SKBO First Carnegie, MHC of PA(45.0) NM 178.23 29.31 178.23 NM 0.30 1.60 NM
FSTC First Citizens Corp of GA 16.13 281.35 28.46 NM 18.04 0.32 0.91 14.75
FCME First Coastal Corp. of ME* 3.29 139.49 13.60 139.49 3.43 0.00 0.00 0.00
FFBA First Colorado Bancorp of Co 21.28 196.83 25.74 199.32 21.47 0.52 2.20 46.85
FDEF First Defiance Fin.Corp. of OH 24.60 122.92 24.17 122.92 25.41 0.36 2.32 57.14
FESX First Essex Bancorp of MA* 16.54 184.87 13.69 211.34 19.30 0.56 2.55 42.11
FFES First FS&LA of E. Hartford CT 19.92 156.76 10.39 156.76 17.55 0.60 1.57 31.25
FFSX First FS&LA. MHC of IA (46.1) 25.85 216.62 18.91 218.48 26.52 0.48 1.57 40.68
BDJI First Fed. Bancorp. of MN NM 185.97 19.91 185.97 NM 0.00 0.00 0.00
FFBH First Fed. Bancshares of AR 20.80 141.23 21.03 141.23 21.76 0.24 1.02 21.24
FTFC First Fed. Capital Corp. of WI 18.75 294.50 19.83 312.50 22.65 0.48 1.42 26.67
FFKY First Fed. Fin. Corp. of KY 15.58 180.56 24.73 191.34 15.69 0.56 2.46 38.36
FFBZ First Federal Bancorp of OH 16.20 204.13 15.66 204.34 16.07 0.28 1.38 22.40
FFCH First Fin. Holdings Inc. of SC 24.04 324.44 19.84 324.44 24.71 0.84 1.57 37.84
FFBI First Financial Bancorp of IL NM 116.02 10.35 116.02 22.34 0.00 0.00 NM
FFHS First Franklin Corp. of OH 29.76 178.67 16.11 179.70 25.20 0.40 1.28 38.10
FGHC First Georgia Hold. Corp of GA 27.53 209.26 17.19 228.24 NM 0.05 0.57 15.63
FSPG First Home Bancorp of NJ(8) 17.24 225.39 15.47 228.83 17.65 0.40 1.33 22.99
FFSL First Independence Corp. of KS 19.52 120.87 12.39 120.87 19.52 0.25 1.75 34.25
FISB First Indiana Corp. of IN 18.21 208.78 20.14 211.32 22.18 0.48 1.63 29.63
FKFS First Keystone Fin. Corp of PA 17.21 183.53 12.17 183.53 18.78 0.20 0.54 9.30
FLKY First Lancaster Bncshrs of KY NM 109.44 32.25 109.44 NM 0.50 3.13 NM
FLFC First Liberty Fin. Corp. of GA 28.58 270.53 20.02 299.64 26.51 0.44 1.34 38.26
CASH First Midwest Fin. Corp. of IA 16.39 137.31 14.76 154.58 17.15 0.48 2.17 35.56
FMBD First Mutual Bancorp of IL NM 149.64 20.05 196.25 NM 0.32 1.39 NM
FMSB First Mutual SB of Bellevue WA* 17.29 245.68 16.68 245.68 17.62 0.20 1.08 18.69
FNGB First Northern Cap. Corp of WI 21.21 169.90 18.85 169.90 22.22 0.32 2.29 48.48
FFPB First Palm Beach Bancorp of FL 23.31 192.59 12.04 197.17 27.82 0.70 1.62 37.84
FSLA First SB SLA MHC of NJ (47.5)(8) NM NM 37.18 NM NM 0.48 0.99 42.11
SOPN First SB, SSB, Moore Co. of NC 18.56 132.94 30.59 132.94 18.56 0.88 3.59 66.67
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of January 2, 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)
- ---------------------------------------
FWWB First Savings Bancorp of WA* 14.23 13.15 1.06 6.79 3.60 1.01 6.44 0.27 241.66 0.97
FSFF First SecurityFed Fin of IL 27.03 27.03 1.29 4.77 3.87 1.29 4.77 NA NA 0.98
SHEN First Shenango Bancorp of PA 11.62 11.62 1.17 10.45 6.60 1.16 10.40 0.51 149.56 1.17
FBNW FirstBank Corp of Clarkston WA 16.43 16.43 0.39 3.23 1.75 0.18 1.47 1.70 33.83 0.76
FFDB FirstFed Bancorp of AL 9.63 8.81 1.03 10.63 7.57 1.01 10.36 1.31 33.87 0.63
FSPT FirstSpartan Fin. Corp. of SC 26.79 26.79 0.96 6.28 3.12 0.96 6.28 0.69 56.19 0.49
FLAG Flag Financial Corp of GA 9.11 9.11 0.91 9.84 5.02 0.75 8.19 3.92 49.66 2.82
FLGS Flagstar Bancorp, Inc of MI 5.98 5.74 1.41 22.77 8.38 0.70 11.39 3.04 8.02 0.27
FFIC Flushing Fin. Corp. of NY* 14.20 13.64 0.95 5.92 4.26 0.99 6.22 0.39 172.94 1.12
FBHC Fort Bend Holding Corp. of TX 6.16 5.75 0.64 10.48 5.59 0.53 8.77 0.56 89.94 1.08
FTSB Fort Thomas Fin. Corp. of KY 16.13 16.13 1.21 7.27 5.11 1.21 7.27 1.98 24.60 0.53
FKKYD Frankfort First Bancorp of KY 16.82 16.82 0.09 0.39 0.39 0.64 2.86 0.09 80.00 0.08
FTNB Fulton Bancorp of MO 24.66 24.66 1.25 5.02 3.30 1.08 4.34 1.62 57.19 1.06
GFSB GFS Bancorp of Grinnell IA(8) 11.51 11.51 1.27 11.03 6.74 1.27 11.03 0.98 67.81 0.78
GUPB GFSB Bancorp of Gallup NM 12.82 12.82 0.86 5.43 4.49 0.86 5.43 0.29 115.79 0.63
GSLA GS Financial Corp. of LA 43.13 43.13 1.25 3.81 2.10 1.25 3.81 0.14 211.96 0.81
GOSB GSB Financial Corp. of NY 27.89 27.89 0.45 2.69 1.54 0.46 2.79 NA NA 0.21
GBCI Glacier Bancorp of MT 9.99 9.75 1.50 15.56 4.93 1.53 15.94 0.25 244.11 0.84
GFCO Glenway Financial Corp. of OH 9.46 9.35 0.79 8.36 5.28 0.77 8.11 0.25 123.32 0.37
GTPS Great American Bancorp of IL 20.43 20.43 0.53 2.39 2.21 0.59 2.67 0.26 126.83 0.42
GTFN Great Financial Corp. of KY(8) 10.07 9.66 1.04 10.82 4.37 0.76 7.96 3.11 16.32 0.74
PEDE Great Pee Dee Bancorp of SC 37.86 37.86 1.57 4.15 3.56 1.57 4.15 0.18 283.18 0.56
GSBC Great Southern Bancorp of MO 8.65 8.65 1.84 20.39 6.34 1.74 19.22 1.91 115.21 2.58
GDVS Greater DV SB, MHC of PA (19.9)* 11.64 11.64 0.93 7.97 2.21 0.93 7.97 1.82 33.64 1.00
GSFC Green Street Fin. Corp. of NC 35.38 35.38 1.59 4.45 3.61 1.59 4.45 0.10 147.40 0.20
GFED Guaranty Fed Bancshares of MO 26.75 26.75 1.23 4.58 3.81 1.23 4.58 0.64 162.46 1.29
HCBB HCB Bancshares of AR 18.84 18.13 0.13 0.92 0.61 0.14 1.02 NA NA 1.44
HEMT HF Bancorp of Hemet CA 7.93 6.61 0.03 0.39 0.27 0.17 2.17 1.65 24.89 0.81
HFFC HF Financial Corp. of SD 9.42 9.42 1.02 11.06 7.59 0.94 10.15 0.48 173.70 1.08
HFNC HFNC Financial Corp. of NC 18.80 18.80 1.23 5.43 4.03 1.05 4.64 0.92 92.55 1.06
HMNF HMN Financial, Inc. of MN 14.88 14.88 1.00 6.87 4.25 0.85 5.79 0.10 465.21 0.71
HALL Hallmark Capital Corp. of WI 7.30 7.30 0.65 9.11 5.43 0.64 8.91 0.13 355.91 0.67
HARB Harbor FSB, MHC of FL (46.6)(8) 8.56 8.29 1.22 14.68 4.01 1.21 14.58 0.43 238.88 1.38
HRBF Harbor Federal Bancorp of MD 13.06 13.06 0.71 5.50 3.60 0.71 5.50 0.10 189.19 0.28
HFSA Hardin Bancorp of Hardin MO 11.53 11.53 0.79 5.83 5.15 0.74 5.52 0.09 195.33 0.36
HARL Harleysville SA of PA 6.62 6.62 1.03 16.07 6.98 1.03 16.14 0.02 NA 0.78
HFGI Harrington Fin. Group of IN 4.84 4.84 0.43 8.95 5.25 0.36 7.48 0.20 20.13 0.21
HARS Harris SB, MHC of PA (24.3) 8.20 7.25 0.92 11.11 2.62 0.81 9.83 0.65 63.38 0.96
HFFB Harrodsburg 1st Fin Bcrp of KY 26.93 26.93 1.03 3.77 3.28 1.36 5.01 0.47 59.81 0.38
HHFC Harvest Home Fin. Corp. of OH 11.02 11.02 0.22 2.04 1.59 0.49 4.42 0.10 121.05 0.25
HAVN Haven Bancorp of Woodhaven NY 6.00 5.98 0.68 11.28 5.71 0.68 11.37 0.76 85.85 1.12
HTHR Hawthorne Fin. Corp. of CA 4.85 4.85 0.86 19.13 11.63 0.82 18.40 8.06 18.44 1.70
HMLK Hemlock Fed. Fin. Corp. of IL 19.31 19.31 0.37 2.51 1.64 0.81 5.47 NA NA 1.22
HCBC High Country Bancorp of CO 19.46 19.46 0.58 2.95 2.45 0.58 2.95 0.23 345.14 0.95
HBNK Highland Federal Bank of CA 7.67 7.67 1.13 15.28 7.36 0.86 11.60 2.52 63.92 2.00
HIFS Hingham Inst. for Sav. of MA* 9.71 9.71 1.25 13.03 6.89 1.25 13.03 0.89 78.90 0.91
HBEI Home Bancorp of Elgin IL 27.56 27.56 0.83 3.02 2.41 0.83 3.02 0.35 85.96 0.35
HBFW Home Bancorp of Fort Wayne IN 12.71 12.71 0.87 6.38 4.09 0.87 6.38 0.06 622.42 0.49
HBBI Home Building Bancorp of IN 14.12 14.12 0.74 5.77 5.00 0.73 5.66 0.44 44.51 0.28
HCFC Home City Fin. Corp. of OH 19.61 19.61 1.24 6.77 4.97 1.26 6.84 0.82 77.27 0.73
HOMF Home Fed Bancorp of Seymour IN 8.66 8.40 1.34 15.88 6.50 1.21 14.42 0.48 112.57 0.63
HWEN Home Financial Bancorp of IN 17.55 17.55 0.86 4.60 4.00 0.74 3.98 1.70 36.51 0.73
HPBC Home Port Bancorp, Inc. of MA* 10.68 10.68 1.67 15.71 7.55 1.66 15.62 0.13 NA 1.54
HMCI Homecorp, Inc. of Rockford IL(8) 6.83 6.83 0.51 7.94 3.50 0.41 6.42 2.16 22.95 0.61
HZFS Horizon Fin'l. Services of IA 9.96 9.96 0.81 7.86 6.42 0.65 6.33 0.94 44.31 0.67
HRZB Horizon Financial Corp. of WA* 15.64 15.64 1.58 10.12 5.97 1.55 9.94 NA NA 0.85
</TABLE>
<TABLE>
<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)
- ---------------------------------------
FWWB First Savings Bancorp of WA* 27.78 184.32 26.23 199.56 29.26 0.28 1.02 28.28
FSFF First SecurityFed Fin of IL 25.82 123.05 33.26 123.05 25.82 0.00 0.00 0.00
SHEN First Shenango Bancorp of PA 15.15 151.88 17.65 151.88 15.22 0.60 1.75 26.55
FBNW FirstBank Corp. of Clarkston WA NM 128.11 21.05 128.11 NM 0.28 1.48 NM
FFDB FirstFed Bancorp of AL 13.21 142.18 13.70 155.44 13.55 0.50 2.38 31.45
FSPT FirstSpartan Fin. Corp. of SC NM 137.54 36.85 137.54 NM 0.60 1.50 48.00
FLAG Flag Financial Corp. of GA 19.92 188.74 17.19 188.74 23.95 0.34 1.69 33.66
FLGS Flagstar Bancorp, Inc. of MI 11.93 222.83 13.32 231.97 23.87 0.00 0.00 0.00
FFIC Flushing Fin. Corp. of NY* 23.48 136.12 19.33 141.77 22.36 0.24 1.03 24.24
FBHC Fort Bend Holding Corp. of TX 17.89 185.19 11.41 198.38 21.36 0.40 1.82 32.52
FTSB Fort Thomas Fin. Corp. of KY 19.57 140.81 22.72 140.81 19.57 0.25 1.68 32.89
FKKYD Frankfort First Bancorp of KY NM 129.85 21.85 129.85 NM 0.80 4.51 NM
FTNB Fulton Bancorp of MO NM 148.66 36.67 148.66 NM 0.20 0.90 27.40
GFSB GFS Bancorp of Grinnell IA(8) 14.83 154.95 17.84 154.95 14.83 0.26 1.52 22.61
GUPB GFSB Bancorp of Gallup NM 22.29 122.84 15.75 122.84 22.29 0.40 1.85 41.24
GSLA GS Financial Corp. of LA NM 118.61 51.15 118.61 NM 0.28 1.44 68.29
GOSB GSB Financial Corp. of NY NM 120.52 33.61 120.52 NM 0.00 0.00 0.00
GBCI Glacier Bancorp of MT 20.29 294.29 29.39 301.46 19.80 0.48 1.94 39.34
GFCO Glenway Financial Corp. of OH 18.94 154.07 14.58 155.86 19.53 0.40 2.13 40.40
GTPS Great American Bancorp of IL NM 113.10 23.10 113.10 NM 0.40 2.11 NM
GTFN Great Financial Corp. of KY(8) 22.90 238.95 24.06 248.99 NM 0.60 1.19 27.27
PEDE Great Pee Dee Bancorp of SC 28.13 116.58 44.14 116.58 28.13 0.30 1.90 53.57
GSBC Great Southern Bancorp of MO 15.76 317.72 27.49 317.72 16.72 0.44 1.78 28.03
GDVS Greater DV SB, MHC of PA (19.9)* NM 347.46 40.44 347.46 NM 0.36 1.17 52.94
GSFC Green Street Fin. Corp. of NC 27.69 122.87 43.47 122.87 27.69 0.44 2.44 67.69
GFED Guaranty Fed Bancshares of MO 26.27 120.28 32.18 120.28 26.27 0.30 2.33 61.22
HCBB HCB Bancshares of AR NM 103.36 19.47 107.43 NM 0.20 1.36 NM
HEMT HF Bancorp of Hemet CA NM 137.63 10.92 165.16 NM 0.00 0.00 0.00
HFFC HF Financial Corp. of SD 13.17 139.68 13.16 139.68 14.36 0.42 1.56 20.49
HFNC HFNC Financial Corp. of NC 24.79 162.13 30.48 162.13 29.00 0.28 1.82 45.16
HMNF HMN Financial, Inc. of MN 23.51 156.79 23.32 156.79 27.88 0.00 0.00 0.00
HALL Hallmark Capital Corp. of WI 18.41 158.17 11.55 158.17 18.82 0.00 0.00 0.00
HARB Harbor FSB, MHC of FL (46.6)(8) 24.91 342.84 29.35 NM 25.09 1.40 2.10 52.24
HRBF Harbor Federal Bancorp of MD 27.75 150.75 19.68 150.75 27.75 0.48 1.90 52.75
HFSA Hardin Bancorp of Hardin MO 19.41 115.80 13.36 115.80 20.51 0.48 2.63 51.06
HARL Harleysville SA of PA 14.33 213.44 14.14 213.44 14.26 0.44 1.50 21.46
HFGI Harrington Fin. Group of IN 19.03 164.73 7.97 164.73 22.77 0.12 0.94 17.91
HARS Harris SB, MHC of PA (24.3) NM NM 31.81 NM NM 0.22 1.11 42.31
HFFB Harrodsburg 1st Fin Bcrp of KY NM 115.60 31.13 115.60 22.95 0.40 2.39 72.73
HHFC Harvest Home Fin. Corp. of OH NM 128.32 14.14 128.32 29.00 0.44 3.03 NM
HAVN Haven Bancorp of Woodhaven NY 17.51 183.08 10.98 183.67 17.38 0.30 1.31 22.90
HTHR Hawthorne Fin. Corp. of CA 8.59 145.40 7.06 145.40 8.93 0.00 0.00 0.00
HMLK Hemlock Fed. Fin. Corp. of IL NM 113.68 21.95 113.68 28.07 0.24 1.40 NM
HCBC High Country Bancorp of CO NM 120.53 23.46 120.53 NM 0.00 0.00 0.00
HBNK Highland Federal Bank of CA 13.59 190.41 14.60 190.41 17.90 0.00 0.00 0.00
HIFS Hingham Inst. for Sav. of MA* 14.52 178.46 17.32 178.46 14.52 0.48 1.67 24.24
HBEI Home Bancorp of Elgin IL NM 129.77 35.77 129.77 NM 0.40 2.24 NM
HBFW Home Bancorp of Fort Wayne IN 24.46 160.52 20.40 160.52 24.46 0.20 0.70 17.09
HBBI Home Building Bancorp of IN 20.00 111.17 15.70 111.17 20.39 0.30 1.43 28.57
HCFC Home City Fin. Corp. of OH 20.11 121.79 23.88 121.79 19.89 0.36 1.95 39.13
HOMF Home Fed Bancorp of Seymour IN 15.37 227.08 19.66 234.03 16.93 0.35 1.31 20.11
HWEN Home Financial Bancorp of IN 25.00 118.67 20.82 118.67 28.91 0.20 1.08 27.03
HPBC Home Port Bancorp, Inc. of MA* 13.25 199.06 21.25 199.06 13.33 0.80 3.45 45.71
HMCI Homecorp, Inc. of Rockford IL(8) 28.54 216.14 14.76 216.14 NM 0.00 0.00 0.00
HZFS Horizon Fin'l. Services of IA 15.58 116.85 11.63 116.85 19.35 0.18 1.50 23.38
HRZB Horizon Financial Corp. of WA* 16.74 163.38 25.55 163.38 17.06 0.44 2.41 40.37
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of January 2, 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)
- ---------------------------------------
IBSF IBS Financial Corp. of NJ 17.42 17.42 0.78 4.41 3.03 0.78 4.41 0.13 110.72 0.50
ITLA Imperial Thrift & Loan of CA* 10.72 10.68 1.45 13.02 7.90 1.45 13.02 1.54 79.64 1.45
IFSB Independence FSB of DC 6.88 6.09 0.32 4.85 3.82 0.27 4.03 NA NA 0.36
INCB Indiana Comm. Bank, SB of IN(8) 11.88 11.88 0.53 4.32 2.59 0.53 4.32 NA NA 0.93
INBI Industrial Bancorp of OH 17.18 17.18 1.51 8.26 5.44 1.58 8.68 0.25 193.84 0.54
IWBK Interwest SB of Oak Harbor WA 6.34 6.23 1.12 16.91 6.63 1.03 15.57 0.58 73.44 0.77
IPSW Ipswich SB of Ipswich MA* 5.61 5.61 1.20 20.28 5.63 0.95 16.13 0.84 97.31 1.09
JXVL Jacksonville Bancorp of TX 14.44 14.44 1.46 9.46 5.85 1.46 9.46 0.66 76.75 0.68
JXSB Jcksnville SB,MHC of IL (45.6) 10.56 10.56 0.65 6.02 2.81 0.65 6.02 0.79 56.34 0.56
JSBA Jefferson Svgs Bancorp of MO 8.54 6.63 0.38 4.79 2.14 0.78 9.89 0.67 101.16 0.89
JOAC Joachim Bancorp of MO(8) 28.14 28.14 0.80 2.74 2.44 0.80 2.74 0.24 95.24 0.32
KSAV KS Bancorp of Kenly NC 13.24 13.23 1.21 8.81 5.83 1.20 8.74 0.53 55.44 0.35
KSBK KSB Bancorp of Kingfield ME* 7.18 6.79 0.97 13.74 4.80 0.99 13.99 1.59 52.04 1.07
KFBI Klamath First Bancorp of OR 14.74 13.40 1.14 5.81 3.91 1.14 5.81 0.03 510.24 0.23
LSBI LSB Fin. Corp. of Lafayette IN 8.64 8.64 0.78 8.67 5.91 0.69 7.65 1.05 69.89 0.83
LVSB Lakeview SB of Paterson NJ 10.68 9.04 1.43 13.49 6.65 0.88 8.35 1.14 59.91 1.49
LARK Landmark Bancshares of KS 13.79 13.79 0.88 5.93 4.96 1.05 7.02 NA NA NA
LARL Laurel Capital Group of PA 10.47 10.47 1.46 14.04 6.43 1.41 13.57 0.43 201.97 1.25
LSBX Lawrence Savings Bank of MA* 9.52 9.52 1.76 20.06 8.74 1.75 19.92 0.66 156.71 2.35
LFED Leeds FSB, MHC of MD (36.3) 16.63 16.63 1.18 7.24 2.93 1.18 7.24 0.06 315.29 0.30
LXMO Lexington B&L Fin. Corp. of MO 28.32 28.32 1.03 3.49 3.17 1.33 4.50 0.48 78.37 0.49
LIFB Life Bancorp of Norfolk VA(8) 10.71 10.42 0.92 8.70 3.74 0.85 8.05 0.41 141.46 1.32
LFBI Little Falls Bancorp of NJ 11.68 10.77 0.57 4.32 3.22 0.52 3.93 0.90 38.49 0.77
LOGN Logansport Fin. Corp. of IN 18.90 18.90 1.41 7.25 5.28 1.48 7.57 0.49 55.66 0.39
LONF London Financial Corp. of OH 19.91 19.91 1.02 5.01 4.48 0.96 4.68 NA NA 0.63
LISB Long Island Bancorp, Inc of NY 9.21 9.13 0.86 9.35 4.11 0.73 7.90 0.91 63.07 0.92
MAFB MAF Bancorp of IL 7.79 6.84 1.16 14.90 6.94 1.15 14.78 0.42 128.75 0.69
MBLF MBLA Financial Corp. of MO 12.66 12.66 0.83 6.49 4.74 0.85 6.62 0.57 50.27 0.50
MFBC MFB Corp. of Mishawaka IN 13.10 13.10 0.84 5.76 4.23 0.84 5.76 0.10 141.76 0.18
MLBC ML Bancorp of Villanova PA(8) 6.92 6.46 0.70 9.91 4.01 0.50 7.10 0.43 178.98 1.71
MSBF MSB Financial Corp. of MI 16.54 16.54 1.49 8.38 4.53 1.44 8.09 1.02 40.20 0.45
MARN Marion Capital Holdings of IN 21.95 21.95 1.69 7.48 6.36 1.67 7.39 1.08 104.36 1.32
MRKF Market Fin. Corp. of OH 35.44 35.44 0.98 3.41 2.38 0.98 3.41 0.34 27.23 0.20
MFSL Maryland Fed. Bancorp of MD 8.38 8.27 0.62 7.43 3.09 0.89 10.73 0.47 85.54 0.46
MASB MassBank Corp. of Reading MA* 10.78 10.62 1.10 10.61 5.79 1.03 9.96 0.21 113.84 0.84
MFLR Mayflower Co-Op. Bank of MA* 9.64 9.48 1.05 10.93 5.84 1.00 10.33 0.57 154.47 1.56
MECH Mechanics SB of Hartford CT* 10.40 10.40 1.79 17.75 10.11 1.78 17.69 0.91 188.34 2.53
MDBK Medford Bank of Medford, MA* 9.01 8.45 1.07 11.98 6.30 1.00 11.16 0.27 219.01 1.12
MERI Meritrust FSB of Thibodaux LA(8) 8.26 8.26 1.15 14.65 4.96 1.15 14.65 0.39 70.30 0.52
MWBX MetroWest Bank of MA* 7.46 7.46 1.38 18.49 6.09 1.38 18.49 0.90 131.24 1.55
MCBS Mid Continent Bancshares of KS(8) 9.87 9.87 1.11 10.98 4.67 1.15 11.39 0.24 47.79 0.19
MIFC Mid Iowa Financial Corp. of IA 9.36 9.34 1.00 10.77 6.17 1.40 15.17 NA NA 0.45
MCBN Mid-Coast Bancorp of ME 8.59 8.59 0.76 8.81 6.40 0.72 8.35 0.64 82.14 0.64
MWBI Midwest Bancshares, Inc. of IA 6.92 6.92 0.87 12.62 6.63 0.77 11.16 0.81 59.23 0.79
MWFD Midwest Fed. Fin. Corp of WI(8) 8.81 8.50 1.15 13.20 4.90 1.13 13.01 NA NA 1.02
MFFC Milton Fed. Fin. Corp. of OH 12.57 12.57 0.73 4.95 3.90 0.65 4.38 0.29 91.98 0.44
MIVI Miss. View Hold. Co. of MN 18.88 18.88 0.70 3.78 3.57 1.03 5.55 NA NA NA
MBSP Mitchell Bancorp of NC* 41.35 41.35 1.61 3.77 3.47 1.61 3.77 2.25 23.36 0.63
MBBC Monterey Bay Bancorp of CA 11.50 10.67 0.47 4.06 2.94 0.43 3.71 0.76 51.39 0.60
MONT Montgomery Fin. Corp. of IN 19.14 19.14 0.68 3.57 3.22 0.68 3.57 0.73 24.43 0.20
MSBK Mutual SB, FSB of Bay City MI 6.36 6.36 0.10 1.59 1.18 0.05 0.85 0.05 650.66 0.64
NHTB NH Thrift Bancshares of NH 7.82 6.72 0.70 9.26 4.71 0.55 7.30 0.87 105.97 1.14
NSLB NS&L Bancorp of Neosho MO 19.77 19.63 0.77 3.83 3.46 0.73 3.65 0.14 51.16 0.13
NMSB Newmil Bancorp. of CT* 10.17 10.17 0.85 8.36 5.38 0.82 8.00 1.36 128.18 3.26
NASB North American SB of MO 7.68 7.42 1.26 17.18 7.72 1.19 16.18 3.11 27.16 0.98
NBSI North Bancshares of Chicago IL 13.43 13.43 0.63 4.35 2.85 0.56 3.85 NA NA 0.27
</TABLE>
<TABLE>
<CAPTION>
Pricing Ratios Dividend Data(6)
----------------------------------------- -----------------------
Price/ Price/ Ind. Divi-
Price/ Price/ Price/ Tang. Core Div./ dend Payout
Financial Institution Earning Book Assets Book Earnings Share Yield Ratio(7)
- --------------------- ------- ------- ------- ------- ------- ------- ------- -------
(X) (%) (%) (%) (x) ($) (%) (%)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ Listed OTC Companies (continued)
- ---------------------------------------
IBSF IBS Financial Corp. of NJ NM 149.70 26.08 149.70 NM 0.40 2.29 NM
ITLA Imperial Thrift & Loan of CA* 12.66 156.25 16.76 156.89 12.66 0.00 0.00 0.00
IFSB Independence FSB of DC 26.15 122.39 8.43 138.44 NM 0.22 1.29 33.85
INCB Indiana Comm. Bank, SB of IN(8) NM 165.59 19.67 165.59 NM 0.36 1.76 67.92
INBI Industrial Bancorp of OH 18.37 153.06 26.30 153.06 17.48 0.56 3.11 57.14
IWBK Interwest SB of Oak Harbor WA 15.08 235.59 14.95 239.90 16.38 0.72 1.89 28.57
IPSW Ipswich SB of Ipswich MA* 17.76 326.99 18.35 326.99 22.33 0.16 1.02 18.18
JXVL Jacksonville Bancorp of TX 17.11 164.62 23.77 164.62 17.11 0.50 2.20 37.59
JXSB Jcksnville SB,MHC of IL (45.6) NM 209.10 22.07 209.10 NM 0.45 1.58 56.25
JSBA Jefferson Svgs Bancorp of MO NM 190.56 16.28 245.61 22.58 0.28 1.33 62.22
JOAC Joachim Bancorp of MO(8) NM 117.04 32.94 117.04 NM 0.50 3.13 NM
KSAV KS Bancorp of Kenly NC 17.14 145.90 19.32 145.99 17.27 0.60 2.50 42.86
KSBK KSB Bancorp of Kingfield ME* 20.83 265.96 19.09 281.25 20.45 0.08 0.36 7.41
KFBI Klamath First Bancorp of OR 25.59 150.83 22.23 165.90 25.59 0.32 1.47 37.65
LSBI LSB Fin. Corp. of Lafayette IN 16.93 144.33 12.46 144.33 19.19 0.34 1.25 21.12
LVSB Lakeview SB of Paterson NJ 15.03 189.99 20.30 224.44 24.28 0.13 0.51 7.74
LARK Landmark Bancshares of KS 20.18 123.52 17.03 123.52 17.04 0.40 1.74 35.09
LARL Laurel Capital Group of PA 15.55 213.82 22.38 213.82 16.09 0.52 1.60 24.88
LSBX Lawrence Savings Bank of MA* 11.44 207.27 19.72 207.27 11.52 0.00 0.00 0.00
LFED Leeds FSB, MHC of MD (36.3) NM 238.86 39.72 238.86 NM 0.56 2.56 NM
LXMO Lexington B&L Fin. Corp. of MO NM 117.84 33.37 117.84 24.46 0.30 1.73 54.55
LIFB Life Bancorp of Norfolk VA(8) 26.76 223.38 23.93 229.62 28.90 0.48 1.33 35.56
LFBI Little Falls Bancorp of NJ NM 141.09 16.48 152.99 NM 0.20 0.98 30.30
LOGN Logansport Fin. Corp. of IN 18.96 134.14 25.35 134.14 18.16 0.40 2.32 43.96
LONF London Financial Corp. of OH 22.33 113.41 22.58 113.41 23.93 0.24 1.43 32.00
LISB Long Island Bancorp, Inc of NY 24.33 220.40 20.30 222.46 28.80 0.60 1.20 29.13
MAFB MAF Bancorp of IL 14.42 207.61 16.17 236.29 14.53 0.28 0.78 11.29
MBLF MBLA Financial Corp. of MO 21.12 136.94 17.33 136.94 20.69 0.40 1.31 27.59
MFBC MFB Corp. of Mishawaka IN 23.65 140.99 18.46 140.99 23.65 0.32 1.12 26.45
MLBC ML Bancorp of Villanova PA(8) 24.95 221.61 15.34 237.43 NM 0.40 1.34 33.33
MSBF MSB Financial Corp. of MI 22.09 184.11 30.44 184.11 22.89 0.28 1.47 32.56
MARN Marion Capital Holdings of IN 15.72 118.14 25.93 118.14 15.91 0.88 3.35 52.69
MRKF Market Fin. Corp. of OH NM 107.45 38.09 107.45 NM 0.28 1.75 73.68
MFSL Maryland Fed. Bancorp of MD NM 233.33 19.56 236.33 22.44 0.45 1.29 41.67
MASB MassBank Corp. of Reading MA* 17.27 169.97 18.32 172.54 18.39 0.96 2.00 34.53
MFLR Mayflower Co-Op. Bank of MA* 17.12 178.83 17.24 181.82 18.12 0.68 2.72 46.58
MECH Mechanics SB of Hartford CT* 9.89 159.95 16.64 159.95 9.93 0.00 0.00 0.00
MDBK Medford Bank of Medford, MA* 15.86 179.87 16.21 191.93 17.03 0.72 1.82 28.92
MERI Meritrust FSB of Thibodaux LA(8) 20.18 277.11 22.89 277.11 20.18 0.70 1.01 20.47
MWBX MetroWest Bank of MA* 16.43 283.39 21.13 283.39 16.43 0.12 1.35 22.22
MCBS Mid Continent Bancshares of KS(8) 21.42 223.85 22.09 223.85 20.64 0.40 0.88 18.78
MIFC Mid Iowa Financial Corp. of IA 16.20 164.29 15.37 164.52 11.50 0.08 0.70 11.27
MCBN Mid-Coast Bancorp of ME 15.63 132.45 11.37 132.45 16.48 0.52 1.73 27.08
MWBI Midwest Bancshares, Inc. of IA 15.08 179.27 12.40 179.27 17.06 0.24 1.32 19.83
MWFD Midwest Fed. Fin. Corp of WI(8) 20.41 253.08 22.31 262.44 20.71 0.34 1.20 24.46
MFFC Milton Fed. Fin. Corp. of OH 25.62 134.24 16.87 134.24 29.00 0.60 3.90 NM
MIVI Miss. View Hold. Co. of MN 28.03 103.93 19.62 103.93 19.07 0.16 0.86 24.24
MBSP Mitchell Bancorp of NC* 28.81 110.68 45.76 110.68 28.81 0.40 2.35 67.80
MBBC Monterey Bay Bancorp of CA NM 135.37 15.57 145.97 NM 0.12 0.61 20.69
MONT Montgomery Fin. Corp. of IN NM 110.58 21.17 110.58 NM 0.22 1.68 52.38
MSBK Mutual SB, FSB of Bay City MI NM 131.04 8.34 131.04 NM 0.00 0.00 0.00
NHTB NH Thrift Bancshares of NH 21.21 174.42 13.65 203.09 26.92 0.50 2.38 50.51
NSLB NS&L Bancorp of Neosho MO 28.91 111.38 22.02 112.19 NM 0.50 2.70 NM
NMSB Newmil Bancorp. of CT* 18.57 154.39 15.71 154.39 19.40 0.32 2.46 45.71
NASB North American SB of MO 12.96 209.42 16.08 216.68 13.76 0.80 1.51 19.51
NBSI North Bancshares of Chicago IL NM 160.65 21.57 160.65 NM 0.32 1.75 61.54
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of January 2, 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 22.91 22.91 1.83 7.47 5.87 1.83 7.47 0.22 446.43 1.16
NBN Northeast Bancorp of ME* 6.96 6.15 0.71 9.98 4.89 0.59 8.33 1.03 93.77 1.22
NEIB Northeast Indiana Bncrp of IN 14.37 14.37 1.20 7.72 5.43 1.20 7.72 0.17 350.00 0.67
NWEQ Northwest Equity Corp. of WI 11.69 11.69 1.02 8.65 5.64 0.99 8.36 1.43 33.84 0.59
NWSB Northwest SB, MHC of PA (30.7) 9.64 9.10 0.96 9.86 2.80 0.96 9.86 0.77 85.90 0.87
NSSY Norwalk Savings Society of CT* 8.06 7.77 0.97 12.43 6.36 1.10 14.19 1.31 73.30 1.46
NSSB Norwich Financial Corp. of CT(8)* 11.66 10.60 1.14 10.24 4.63 1.06 9.48 1.20 158.13 2.71
NTMG Nutmeg FS&LA of CT 5.51 5.51 0.61 10.93 5.58 0.43 7.83 NA NA 0.55
OHSL OHSL Financial Corp. of OH 10.92 10.92 0.90 8.04 6.11 0.88 7.80 0.18 121.89 0.31
OCFC Ocean Fin. Corp. of NJ 15.17 15.17 1.01 5.69 4.48 1.00 5.62 0.52 83.85 0.86
OCN Ocwen Financial Corp. of FL 14.14 13.77 3.10 32.06 5.36 1.73 17.94 5.79 13.48 1.11
OTFC Oregon Trail Fin. Corp of OR 24.02 24.02 1.07 4.44 3.42 1.07 4.44 0.07 307.09 0.54
PBHC OswegoCity SB MHC of NY (46.1)* 11.87 9.96 1.06 9.23 3.62 0.95 8.26 0.91 43.96 0.67
OFCP Ottawa Financial Corp. of MI 8.74 7.06 0.81 9.10 3.97 0.79 8.89 0.35 106.15 0.43
PFFB PFF Bancorp of Pomona CA 10.06 9.95 0.45 4.25 3.17 0.46 4.32 1.62 64.39 1.44
PSFI PS Financial of Chicago IL 37.32 37.32 1.96 4.86 3.37 1.99 4.92 0.68 31.79 0.52
PVFC PVF Capital Corp. of OH 7.18 7.18 1.36 19.67 9.27 1.31 18.84 1.17 57.57 0.72
PALM Palfed, Inc. of Aiken SC(8) 8.51 8.51 0.39 4.82 1.72 0.67 8.26 2.04 53.36 1.30
PBCI Pamrapo Bancorp, Inc. of NJ 12.91 12.82 1.34 9.82 6.65 1.32 9.70 2.39 28.48 1.21
PFED Park Bancorp of Chicago IL 23.14 23.14 1.10 4.80 4.24 1.14 4.98 0.24 118.76 0.72
PVSA Parkvale Financial Corp of PA 7.72 7.67 1.08 14.34 6.28 1.08 14.34 0.26 547.66 1.91
PEEK Peekskill Fin. Corp. of NY 26.09 26.09 1.14 4.30 3.91 1.14 4.30 1.24 28.37 1.35
PFSB PennFed Fin. Services of NJ 7.33 6.20 0.82 10.90 6.46 0.82 10.90 0.61 32.20 0.28
PWBC PennFirst Bancorp of PA 8.37 7.44 0.67 8.85 4.82 0.67 8.85 0.68 87.79 1.45
PWBK Pennwood SB of PA* 18.34 18.34 0.99 5.21 4.20 1.09 5.71 1.49 42.39 1.04
PBKB People's SB of Brockton MA* 4.10 3.93 0.83 15.38 6.26 0.43 8.01 0.53 110.55 1.08
PFDC Peoples Bancorp of Auburn IN 15.24 15.24 1.48 9.70 5.64 1.48 9.70 0.29 106.74 0.38
PBCT Peoples Bank, MHC of CT (40.1)* 9.02 9.01 1.16 13.69 3.84 0.75 8.84 0.76 146.25 1.66
TSBS Peoples Bcrp, MHC of NJ (35.9)(8) 16.95 15.25 1.30 7.51 2.02 0.91 5.27 0.91 55.06 0.80
PFFC Peoples Fin. Corp. of OH 27.20 27.20 0.90 3.32 3.53 0.90 3.32 NA NA 0.39
PHBK Peoples Heritage Fin Grp of ME* 7.45 6.36 1.28 16.08 5.61 1.28 16.08 0.86 121.04 1.55
PSFC Peoples Sidney Fin. Corp of OH 25.29 25.29 1.04 6.27 3.11 1.04 6.27 1.00 40.10 0.45
PERM Permanent Bancorp of IN 9.46 9.34 0.62 6.63 4.24 0.62 6.58 1.07 47.01 1.00
PMFI Perpetual Midwest Fin. of IA(8) 8.51 8.51 0.40 4.65 2.91 0.32 3.76 0.30 240.42 0.86
PERT Perpetual of SC, MHC (46.8)(8) 11.82 11.82 0.78 6.37 1.86 1.05 8.60 0.12 502.32 0.87
PCBC Perry Co. Fin. Corp. of MO 19.19 19.19 0.93 4.93 3.85 1.07 5.70 0.03 104.17 0.19
PHFC Pittsburgh Home Fin. of PA 10.54 10.43 0.84 6.97 5.53 0.75 6.21 1.69 30.77 0.78
PFSL Pocahnts Fed, MHC of AR (47.0)(8) 6.33 6.33 0.63 10.08 3.36 0.62 9.94 0.16 274.52 1.07
PTRS Potters Financial Corp of OH 8.81 8.81 0.96 10.97 5.71 0.95 10.79 0.44 389.09 2.65
PKPS Poughkeepsie Fin. Corp. of NY(8) 8.42 8.42 0.54 6.43 3.36 0.54 6.43 4.19 23.86 1.34
PHSB Ppls Home SB, MHC of PA (45.0) 13.66 13.66 0.73 6.80 2.97 0.71 6.55 0.45 148.08 1.37
PRBC Prestige Bancorp of PA 11.21 11.21 0.63 5.12 4.25 0.63 5.12 0.33 82.34 0.40
PFNC Progress Financial Corp. of PA 5.33 4.76 0.90 17.21 5.45 0.71 13.58 2.07 37.27 1.11
PSBK Progressive Bank, Inc. of NY(8)* 8.73 7.86 0.96 11.35 5.83 0.94 11.15 0.94 115.80 1.65
PROV Provident Fin. Holdings of CA 13.33 13.33 0.75 5.30 4.48 0.35 2.48 1.58 55.80 0.98
PULB Pulaski SB, MHC of MO (29.8) 13.30 13.30 1.21 9.31 3.28 1.06 8.14 NA NA 0.42
PLSK Pulaski SB, MHC of NJ (46.0) 11.98 11.98 0.64 6.99 2.96 0.64 6.99 0.65 83.38 0.95
PULS Pulse Bancorp of S. River NJ 8.21 8.21 1.10 13.94 6.81 1.11 14.09 0.75 59.52 1.82
QCFB QCF Bancorp of Virginia MN 17.49 17.49 1.34 7.36 4.91 1.34 7.36 0.24 345.09 2.00
QCBC Quaker City Bancorp of CA 8.46 8.46 0.71 8.11 5.85 0.68 7.77 1.35 67.38 1.15
QCSB Queens County Bancorp of NY* 11.22 11.22 1.54 11.21 3.68 1.55 11.28 0.69 89.32 0.69
RARB Raritan Bancorp. of Raritan NJ* 7.37 7.25 1.02 13.34 5.98 1.01 13.18 0.39 208.57 1.26
REDF RedFed Bancorp of Redlands CA(8) 8.32 8.29 1.01 12.28 6.46 1.01 12.28 1.80 44.74 0.92
RELY Reliance Bancorp, Inc. of NY 8.26 6.07 0.89 10.80 5.40 0.93 11.40 0.67 41.66 0.62
RELI Reliance Bancshares Inc of WI* 48.29 48.29 1.32 2.58 2.60 1.38 2.68 NA NA 0.56
RIVR River Valley Bancorp of IN 12.40 12.21 0.46 4.24 2.45 0.62 5.72 0.71 122.47 1.05
</TABLE>
<TABLE>
<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 17.03 130.54 29.91 130.54 17.03 0.25 1.27 21.55
NBN Northeast Bancorp of ME* 20.46 195.59 13.61 221.40 24.50 0.21 1.13 23.08
NEIB Northeast Indiana Bncrp of IN 18.43 140.23 20.15 140.23 18.43 0.34 1.56 28.81
NWEQ Northwest Equity Corp. of WI 17.74 153.59 17.96 153.59 18.36 0.56 2.70 47.86
NWSB Northwest SB, MHC of PA (30.7) NM 337.64 32.54 NM NM 0.16 1.09 39.02
NSSY Norwalk Savings Society of CT* 15.73 184.24 14.84 191.04 13.78 0.40 1.06 16.67
NSSB Norwich Financial Corp. of CT(8)* 21.60 210.96 24.61 232.26 23.35 0.56 1.76 38.10
NTMG Nutmeg FS&LA of CT 17.92 182.82 10.08 182.82 25.00 0.15 1.40 25.00
OHSL OHSL Financial Corp. of OH 16.36 130.18 14.21 130.18 16.88 0.88 3.26 53.33
OCFC Ocean Fin. Corp. of NJ 22.32 135.72 20.59 135.72 22.59 0.80 2.13 47.62
OCN Ocwen Financial Corp. of FL 18.66 NM 51.17 NM NM 0.00 0.00 0.00
OTFC Oregon Trail Fin. Corp of OR 29.24 129.80 31.17 129.80 29.24 0.00 0.00 0.00
PBHC OswegoCity SB MHC of NY (46.1)* 27.62 242.68 28.80 289.13 NM 0.28 0.97 26.67
OFCP Ottawa Financial Corp. of MI 25.19 229.68 20.07 284.34 25.79 0.40 1.23 31.01
PFFB PFF Bancorp of Pomona CA NM 139.55 14.03 141.09 NM 0.00 0.00 0.00
PSFI PS Financial of Chicago IL 29.68 144.78 54.03 144.78 29.27 0.48 2.25 66.67
PVFC PVF Capital Corp. of OH 10.79 192.85 13.85 192.85 11.26 0.00 0.00 0.00
PALM Palfed, Inc. of Aiken SC(8) NM 265.36 22.59 265.36 NM 0.12 0.42 24.49
PBCI Pamrapo Bancorp, Inc. of NJ 15.03 153.94 19.87 155.04 15.20 1.00 3.85 57.80
PFED Park Bancorp of Chicago IL 23.59 113.61 26.28 113.61 22.73 0.00 0.00 0.00
PVSA Parkvale Financial Corp of PA 15.91 214.61 16.57 216.03 15.91 0.52 1.59 25.37
PEEK Peekskill Fin. Corp. of NY 25.56 113.91 29.72 113.91 25.56 0.36 2.13 54.55
PFSB PennFed Fin. Services of NJ 15.48 159.85 11.71 188.83 15.48 0.28 0.85 13.08
PWBC PennFirst Bancorp of PA 20.73 151.93 12.71 170.77 20.73 0.36 1.83 37.89
PWBK Pennwood SB of PA* 23.80 128.83 23.63 128.83 21.70 0.32 1.62 38.55
PBKB People's SB of Brockton MA* 15.97 256.70 10.52 267.75 NM 0.44 1.91 30.56
PFDC Peoples Bancorp of Auburn IN 17.74 168.45 25.68 168.45 17.74 0.44 2.00 35.48
PBCT Peoples Bank, MHC of CT (40.1)* 26.04 328.66 29.65 328.95 NM 0.76 2.03 52.78
TSBS Peoples Bcrp, MHC of NJ (35.9)(8) NM NM 60.88 NM NM 0.35 0.81 40.23
PFFC Peoples Fin. Corp. of OH 28.30 95.06 25.86 95.06 28.30 0.50 3.33 NM
PHBK Peoples Heritage Fin Grp of ME* 17.83 272.53 20.30 319.41 17.83 0.84 1.88 33.47
PSFC Peoples Sidney Fin. Corp of OH NM 123.54 31.24 123.54 NM 0.28 1.56 50.00
PERM Permanent Bancorp of IN 23.61 152.49 14.43 154.55 23.80 0.44 1.48 34.92
PMFI Perpetual Midwest Fin. of IA(8) NM 158.28 13.46 158.28 NM 0.30 1.04 35.71
PERT Perpetual of SC, MHC (46.8)(8) NM 312.97 37.01 312.97 NM 1.40 2.22 NM
PCBC Perry Co. Fin. Corp. of MO 25.97 124.31 23.86 124.31 22.47 0.40 1.71 44.44
PHFC Pittsburgh Home Fin. of PA 18.07 124.74 13.15 126.04 20.28 0.24 1.32 23.76
PFSL Pocahnts Fed, MHC of AR (47.0)(8) 29.79 292.73 18.52 292.73 NM 0.90 2.07 61.64
PTRS Potters Financial Corp of OH 17.50 187.50 16.51 187.50 17.80 0.20 0.95 16.67
PKPS Poughkeepsie Fin. Corp. of NY(8) 29.73 186.13 15.67 186.13 29.73 0.20 1.82 54.05
PHSB Ppls Home SB, MHC of PA (45.0) NM 184.64 25.23 184.64 NM 0.00 0.00 0.00
PRBC Prestige Bancorp of PA 23.53 118.48 13.28 118.48 23.53 0.12 0.60 14.12
PFNC Progress Financial Corp. of PA 18.33 283.99 15.15 318.53 23.24 0.12 0.73 13.33
PSBK Progressive Bank, Inc. of NY(8)* 17.16 187.07 16.34 207.76 17.48 0.68 1.80 30.91
PROV Provident Fin. Holdings of CA 22.34 118.91 15.85 118.91 NM 0.00 0.00 0.00
PULB Pulaski SB, MHC of MO (29.8) NM 275.42 36.63 275.42 NM 1.10 3.51 NM
PLSK Pulaski SB, MHC of NJ (46.0) NM 176.16 21.11 176.16 NM 0.30 1.64 55.56
PULS Pulse Bancorp of S. River NJ 14.67 192.58 15.81 192.58 14.52 0.80 2.96 43.48
QCFB QCF Bancorp of Virginia MN 20.38 149.95 26.23 149.95 20.38 0.00 0.00 0.00
QCBC Quaker City Bancorp of CA 17.08 133.72 11.31 133.72 17.83 0.00 0.00 0.00
QCSB Queens County Bancorp of NY* 27.17 341.96 38.35 341.96 26.98 0.80 2.04 55.56
RARB Raritan Bancorp. of Raritan NJ* 16.72 215.42 15.87 218.88 16.93 0.48 1.76 29.45
REDF RedFed Bancorp of Redlands CA(8) 15.48 176.72 14.70 177.35 15.48 0.00 0.00 0.00
RELY Reliance Bancorp, Inc. of NY 18.53 188.23 15.55 256.25 17.54 0.64 1.76 32.65
RELI Reliance Bancshares Inc of WI* NM 104.79 50.60 104.79 NM 0.00 0.00 0.00
RIVR River Valley Bancorp of IN NM 128.16 15.89 130.12 NM 0.20 1.07 43.48
</TABLE>
<PAGE>
RP FINANCIAL, LC.
- -----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Exhibit IV-1 (continued)
Weekly Thrift Market Line - Part Two
Prices As Of January 2, 1998
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)
- ---------------------------------------
RVSB Riverview Bancorp of WA 20.76 19.97 1.22 9.14 2.63 1.17 8.75 0.14 226.93 0.58
RSLN Roslyn Bancorp, Inc. of NY* 17.64 17.55 0.96 5.10 3.03 1.22 6.50 0.27 257.00 2.60
SCCB S. Carolina Comm. Bnshrs of SC 26.59 26.59 1.15 4.34 3.33 1.15 4.34 0.87 73.62 0.81
SBFL SB Fngr Lakes MHC of NY (33.1) 9.33 9.33 0.37 3.83 1.38 0.43 4.44 0.50 103.35 1.10
SFED SFS Bancorp of Schenectady NY 12.47 12.47 0.68 5.36 3.50 0.68 5.36 0.75 57.32 0.58
SGVB SGV Bancorp of W. Covina CA 7.44 7.32 0.39 5.02 3.66 0.43 5.48 1.06 29.26 0.41
SHSB SHS Bancorp, Inc. of PA 12.64 12.64 0.37 2.96 2.43 0.37 2.96 1.43 33.94 0.74
SISB SIS Bancorp Inc of MA* 7.36 7.36 0.83 11.20 5.26 0.82 11.09 0.33 379.00 2.67
SWCB Sandwich Co-Op. Bank of MA* 7.93 7.63 0.97 11.95 5.67 0.95 11.70 0.82 93.38 1.06
SFSL Security First Corp. of OH 9.27 9.12 1.36 14.56 5.43 1.37 14.69 0.33 226.25 0.84
SMFC Sho-Me Fin. Corp. of MO(8) 9.03 9.03 1.30 13.56 5.31 1.23 12.86 0.29 190.55 0.63
SKAN Skaneateles Bancorp Inc of NY* 7.00 6.80 0.70 10.25 5.39 0.68 9.91 2.04 41.25 0.98
SOBI Sobieski Bancorp of S. Bend IN 14.78 14.78 0.62 3.85 2.64 0.57 3.55 0.13 188.68 0.31
SOSA Somerset Savings Bank of MA(8)* 6.59 6.59 1.03 17.02 6.57 1.00 16.49 5.91 24.16 1.87
SSFC South Street Fin. Corp. of NC* 25.66 25.66 1.21 5.34 3.32 1.25 5.51 0.31 57.66 0.38
SCBS Southern Commun. Bncshrs of AL 20.42 20.42 1.15 5.98 3.84 1.15 5.98 2.47 46.11 1.84
SMBC Southern Missouri Bncrp of MO 16.15 16.15 0.94 5.84 4.59 0.90 5.59 0.88 51.46 0.66
SWBI Southwest Bancshares of IL(8) 11.34 11.34 1.06 9.81 5.04 1.02 9.48 0.20 101.05 0.28
SVRN Sovereign Bancorp of PA 4.43 3.61 0.42 10.16 2.52 0.61 14.74 0.65 99.50 0.92
STFR St. Francis Cap. Corp. of WI 7.74 6.85 0.76 9.21 4.41 0.75 9.08 0.21 181.82 0.83
SPBC St. Paul Bancorp, Inc. of IL 8.99 8.97 1.06 12.12 5.25 1.06 12.12 0.36 210.72 1.10
SFFC StateFed Financial Corp. of IA 17.54 17.54 1.27 7.17 4.76 1.27 7.17 2.55 10.16 0.33
SFIN Statewide Fin. Corp. of NJ 9.36 9.34 0.81 8.36 5.06 0.81 8.36 0.38 104.03 0.84
STSA Sterling Financial Corp. of WA 5.25 4.81 0.48 11.12 4.73 0.43 10.05 0.47 96.70 0.82
SFSB SuburbFed Fin. Corp. of IL(8) 6.63 6.61 0.66 10.12 4.65 0.54 8.29 0.34 58.37 0.30
ROSE T R Financial Corp. of NY* 6.24 6.24 0.97 15.55 5.62 0.87 13.98 0.54 74.97 0.76
THRD TF Financial Corp. of PA 11.63 10.27 0.77 6.96 4.21 0.67 5.99 0.27 128.49 0.82
TPNZ Tappan Zee Fin., Inc. of NY 17.02 17.02 0.72 4.05 3.09 0.70 3.98 1.68 32.52 1.17
ESBK The Elmira SB FSB of Elmira NY* 6.35 6.19 0.42 6.63 4.23 0.34 5.38 0.64 103.23 0.86
TRIC Tri-County Bancorp of WY 15.31 15.31 1.06 6.88 5.20 1.07 6.97 NA NA 1.05
TWIN Twin City Bancorp of TN 12.94 12.94 0.85 6.65 4.58 0.72 5.62 0.16 88.17 0.20
UCBC Union Community Bancorp of IN 36.48 36.48 1.58 4.33 4.05 1.58 4.33 0.16 165.44 0.30
UFRM United FS&LA of Rocky Mount NC(8) 7.34 7.34 0.71 9.49 3.32 0.57 7.53 0.77 101.45 0.92
UBMT United Fin. Corp. of MT 24.01 24.01 1.41 6.09 4.78 1.40 6.04 0.48 15.21 0.22
VABF Va. Beach Fed. Fin. Corp of VA 7.15 7.15 0.61 8.99 4.00 0.50 7.31 1.24 59.40 0.95
WHGB WHG Bancshares of MD 20.11 20.11 0.77 3.48 2.88 0.78 3.55 0.85 29.87 0.32
WSFS WSFS Financial Corp. of DE* 5.54 5.51 1.14 20.70 6.55 1.13 20.54 1.27 134.95 2.68
WVFC WVS Financial Corp. of PA* 12.00 12.00 1.30 10.59 5.92 1.31 10.64 0.19 361.83 1.21
WRNB Warren Bancorp of Peabody MA* 10.65 10.65 2.16 21.61 9.02 1.91 19.17 1.15 97.04 1.73
WSBI Warwick Community Bncrp of NY* 23.76 23.76 1.04 4.37 3.35 1.04 4.37 0.56 83.81 0.88
WFSL Washington FS&LA of Seattle WA 12.55 11.52 1.86 15.80 6.91 1.85 15.73 0.69 62.10 0.58
WAMU Washington Mutual Inc. of WA* 5.29 4.90 0.00 0.09 0.02 0.70 13.63 NA NA 0.98
WYNE Wayne Bancorp of NJ 12.43 12.43 0.86 6.10 4.00 0.86 6.10 0.89 88.41 1.18
WAYN Wayne S&L Co. MHC of OH (47.8) 9.53 9.53 0.73 7.89 2.79 0.68 7.40 0.58 65.29 0.46
WCFB Wbstr Cty FSB MHC of IA (45.2) 23.38 23.38 1.43 6.14 3.20 1.43 6.14 0.07 560.00 0.72
WBST Webster Financial Corp. of CT 5.34 4.60 0.46 9.03 2.68 0.77 15.08 0.72 111.52 1.43
WEFC Wells Fin. Corp. of Wells MN 14.22 14.22 1.06 7.49 5.85 1.03 7.29 0.31 114.71 0.39
WCBI WestCo Bancorp of IL 15.54 15.54 1.50 9.72 6.96 1.42 9.20 0.21 139.06 0.37
WSTR WesterFed Fin. Corp. of MT 10.62 8.57 0.81 6.87 4.34 0.77 6.58 0.41 116.74 0.72
WOFC Western Ohio Fin. Corp. of OH 13.87 12.94 0.37 2.65 2.24 0.43 3.09 0.44 115.19 0.66
WWFC Westwood Fin. Corp. of NJ 9.32 8.34 0.73 7.79 4.25 0.78 8.31 0.13 158.78 0.58
WEHO Westwood Hmstd Fin Corp of OH 27.65 27.65 1.01 3.29 3.01 1.16 3.78 0.22 77.88 0.22
WFI Winton Financial Corp. of OH 7.11 6.96 0.76 10.50 5.60 0.89 12.25 0.30 84.06 0.29
FFWD Wood Bancorp of OH 12.43 12.43 1.41 11.10 4.55 1.29 10.17 0.35 101.19 0.44
YFCB Yonkers Fin. Corp. of NY 14.02 14.02 1.05 6.64 4.96 1.06 6.71 0.48 72.05 0.78
YFED York Financial Corp. of PA 8.85 8.85 0.96 11.41 4.89 0.81 9.60 2.50 23.98 0.69
</TABLE>
<TABLE>
<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)
- ---------------------------------------
RVSB Riverview Bancorp of WA NM 186.92 38.80 194.24 NM 0.12 0.67 25.53
RSLN Roslyn Bancorp, Inc. of NY* NM 171.79 30.30 172.66 25.94 0.28 1.16 38.36
SCCB S. Carolina Comm. Bnshrs of SC 30.00 129.68 34.48 129.68 30.00 0.60 2.67 NM
SBFL SB Fngr Lakes MHC of NY (33.1) NM 268.46 25.06 268.46 NM 0.40 1.25 NM
SFED SFS Bancorp of Schenectady NY 28.59 152.32 19.00 152.32 28.59 0.28 1.04 29.79
SGVB SGV Bancorp of W. Covina CA 27.31 136.64 10.16 138.78 25.00 0.00 0.00 0.00
SHSB SHS Bancorp, Inc. of PA NM 121.98 15.41 121.98 NM 0.00 0.00 0.00
SISB SIS Bancorp Inc of MA* 19.02 203.55 14.98 203.55 19.21 0.56 1.44 27.32
SWCB Sandwich Co-Op. Bank of MA* 17.62 203.21 16.12 211.41 17.99 1.40 3.26 57.38
SFSL Security First Corp. of OH 18.42 252.71 23.41 256.72 18.26 0.32 1.52 28.07
SMFC Sho-Me Fin. Corp. of MO(8) 18.82 245.55 22.17 245.55 19.84 0.00 0.00 0.00
SKAN Skaneateles Bancorp Inc of NY* 18.54 183.88 12.88 189.36 19.18 0.27 1.21 22.50
SOBI Sobieski Bancorp of S. Bend IN NM 151.66 22.41 151.66 NM 0.32 1.32 50.00
SOSA Somerset Savings Bank of MA(8)* 15.22 236.41 15.58 236.41 15.71 0.00 0.00 0.00
SSFC South Street Fin. Corp. of NC* NM 138.38 35.51 138.38 29.23 0.40 2.11 63.49
SCBS Southern Commun. Bncshrs of AL 26.07 143.36 29.27 143.36 26.07 0.30 1.64 42.86
SMBC Southern Missouri Bncrp of MO 21.81 125.31 20.24 125.31 22.78 0.50 2.44 53.19
SWBI Southwest Bancshares of IL(8) 19.83 185.82 21.08 185.82 20.52 0.80 2.69 53.33
SVRN Sovereign Bancorp of PA NM 279.70 12.38 342.64 27.36 0.08 0.40 15.69
STFR St. Francis Cap. Corp. of WI 22.66 206.81 16.01 233.76 22.96 0.56 1.10 25.00
SPBC St. Paul Bancorp, Inc. of IL 19.06 221.20 19.89 221.76 19.06 0.40 1.51 28.78
SFFC StateFed Financial Corp. of IA 21.01 147.06 25.79 147.06 21.01 0.20 1.38 28.99
SFIN Statewide Fin. Corp. of NJ 19.75 163.88 15.34 164.22 19.75 0.44 1.87 36.97
STSA Sterling Financial Corp. of WA 21.15 169.49 8.90 185.19 23.40 0.00 0.00 0.00
SFSB SuburbFed Fin. Corp. of IL(8) 21.53 204.67 13.58 205.39 26.27 0.32 0.69 14.81
ROSE T R Financial Corp. of NY* 17.79 255.46 15.94 255.46 19.79 0.64 1.91 34.04
THRD TF Financial Corp. of PA 23.77 163.01 18.96 184.60 27.62 0.40 1.38 32.79
TPNZ Tappan Zee Fin., Inc. of NY NM 132.04 22.47 132.04 NM 0.28 1.49 48.28
ESBK The Elmira SB FSB of Elmira NY* 23.62 153.45 9.75 157.65 29.13 0.61 2.03 48.03
TRIC Tri-County Bancorp of WY 19.23 129.65 19.85 129.65 18.99 0.40 2.67 51.28
TWIN Twin City Bancorp of TN 21.83 142.46 18.44 142.46 25.83 0.40 2.58 56.34
UCBC Union Community Bancorp of IN 24.67 106.79 38.96 106.79 24.67 0.30 2.10 51.72
UFRM United FS&LA of Rocky Mount NC(8) NM 278.59 20.44 278.59 NM 0.24 1.26 38.10
UBMT United Fin. Corp. of MT 20.90 125.99 30.25 125.99 21.07 1.00 3.92 NM
VABF Va. Beach Fed. Fin. Corp of VA 25.00 215.52 15.42 215.52 NM 0.20 1.07 26.67
WHGB WHG Bancshares of MD NM 131.67 26.48 131.67 NM 0.32 1.71 59.26
WSFS WSFS Financial Corp. of DE* 15.27 300.30 16.64 302.11 15.38 0.00 0.00 0.00
WVFC WVS Financial Corp. of PA* 16.88 181.22 21.75 181.22 16.80 1.20 3.42 57.69
WRNB Warren Bancorp of Peabody MA* 11.09 221.55 23.59 221.55 12.50 0.52 2.30 25.49
WSBI Warwick Community Bncrp of NY* 29.89 130.48 31.01 130.48 29.89 0.00 0.00 0.00
WFSL Washington FS&LA of Seattle WA 14.48 211.78 26.58 230.71 14.55 0.96 3.00 43.44
WAMU Washington Mutual Inc. of WA* NM 331.40 17.52 NM NM 1.12 1.72 NM
WYNE Wayne Bancorp of NJ 25.00 162.22 20.16 162.22 25.00 0.20 0.75 18.69
WAYN Wayne S&L Co. MHC of OH (47.8) NM 274.10 26.13 274.10 NM 0.62 2.14 NM
WCFB Wbstr Cty FSB MHC of IA (45.2) NM 190.11 44.45 190.11 NM 0.80 4.00 NM
WBST Webster Financial Corp. of CT NM 249.33 13.31 289.48 22.36 0.80 1.20 44.69
WEFC Wells Fin. Corp. of Wells MN 17.08 125.30 17.81 125.30 17.57 0.48 2.58 44.04
WCBI WestCo Bancorp of IL 14.36 139.10 21.61 139.10 15.17 0.68 2.52 36.17
WSTR WesterFed Fin. Corp. of MT 23.06 140.57 14.93 174.27 24.10 0.46 1.72 39.66
WOFC Western Ohio Fin. Corp. of OH NM 116.50 16.15 124.83 NM 1.00 3.67 NM
WWFC Westwood Fin. Corp. of NJ 23.54 177.12 16.50 197.97 22.07 0.20 0.71 16.67
WEHO Westwood Hmstd Fin Corp of OH NM 110.07 30.43 110.07 28.94 0.28 1.79 59.57
WFI Winton Financial Corp. of OH 17.87 179.31 12.75 183.18 15.32 0.50 2.45 43.86
FFWD Wood Bancorp of OH 21.96 240.53 29.91 240.53 23.98 0.40 1.70 37.38
YFCB Yonkers Fin. Corp. of NY 20.15 136.02 19.07 136.02 19.95 0.24 1.22 24.49
YFED York Financial Corp. of PA 20.44 221.60 19.62 221.60 24.29 0.48 1.86 38.10
</TABLE>
<PAGE>
EXHIBIT IV-2
Historical Stock Price Indices
<PAGE>
<TABLE>
<CAPTION>
Exhibit IV-2
Historical Stock Price Indices(1)
SNL SNL
NASDAQ Thrift Bank
Year/Qtr. Ended DJIA S&P 500 Composite Index Index
--------------- ---- ------- --------- ----- -----
<S> <C> <C> <C> <C> <C>
1991: Quarter 1 2881.1 375.2 482.3 125.5 66.0
Quarter 2 2957.7 371.2 475.9 130.5 82.0
Quarter 3 3018.2 387.9 526.9 141.8 90.7
Quarter 4 3168.0 417.1 586.3 144.7 103.1
1992: Quarter 1 3235.5 403.7 603.8 157.0 113.3
Quarter 2 3318.5 408.1 563.6 173.3 119.7
Quarter 3 3271.7 417.8 583.3 167.0 117.1
Quarter 4 3301.1 435.7 677.0 201.1 136.7
1993: Quarter 1 3435.1 451.7 690.1 228.2 151.4
Quarter 2 3516.1 450.5 704.0 219.8 147.0
Quarter 3 3555.1 458.9 762.8 258.4 154.3
Quarter 4 3754.1 466.5 776.8 252.5 146.2
1994: Quarter 1 3625.1 445.8 743.5 241.6 143.1
Quarter 2 3625.0 444.3 706.0 269.6 152.6
Quarter 3 3843.2 462.6 764.3 279.7 149.2
Quarter 4 3834.4 459.3 752.0 244.7 137.6
1995: Quarter 1 4157.7 500.7 817.2 278.4 152.1
Quarter 2 4556.1 544.8 933.5 313.5 171.7
Quarter 3 4789.1 584.4 1,043.5 362.3 195.3
Quarter 4 5117.1 615.9 1,052.1 376.5 207.6
1996: Quarter 1 5587.1 645.5 1,101.4 382.1 225.1
Quarter 2 5654.6 670.6 1,185.0 387.2 224.7
Quarter 3 5882.2 687.3 1,226.9 429.3 249.2
Quarter 4 6442.5 737.0 1,280.7 483.6 280.1
1997: Quarter 1 6583.5 757.1 1,221.7 527.7 292.5
Quarter 2 7672.8 885.1 1,442.1 624.5 333.3
Quarter 3 7945.3 947.3 1,685.7 737.5 381.7
Quarter 4 7908.3 970.4 1,570.4 814.1 414.9
January 2, 1998 7965.0 975.0 1,581.5 810.5 414.9
</TABLE>
(1) End of period data.
Sources: SNL Securities; Wall Street Journal.
<PAGE>
EXHIBIT IV-3
Historical Thrift Stock Indices
<PAGE>
---------------
Thrift INVESTOR
---------------
INDEX VALUES
<TABLE>
<CAPTION>
Index Values Percent Change Since
---------------------------------------- -----------------------------
11/28/97 1 Month YTD LTM 1 Month YTD LTM
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
All Pub. Traded Thrifts 767.4 752.4 483.6 485.8 1.98 58.67 57.95
MHC Index 1,065.9 1,065.7 538.0 520.4 0.02 98.12 104.82
INSURANCE INDICES
- --------------------------------------------------------------------------------------------------------------------
SAIF Thrifts 703.7 689.6 439.2 441.9 2.06 60.22 59.25
BIF Thrifts 967.3 949.6 616.8 617.6 1.86 56.82 56.63
STOCK EXCHANGE INDICES
- --------------------------------------------------------------------------------------------------------------------
AMEX Thrifts 238.4 225.8 156.2 156.5 5.58 52.63 52.32
NYSE Thrifts 466.9 464.0 277.3 285.1 0.62 68.40 63.80
OTC Thrifts 876.2 855.8 569.7 564.9 2.38 53.78 55.09
GEOGRAPHIC INDICES
- --------------------------------------------------------------------------------------------------------------------
Mid-Atlantic Thrifts 1,575.5 1,533.7 970.7 967.8 2.72 62.31 62.80
Midwestern Thrifts 1,690.7 1,645.0 1,159.3 1,149.0 2.78 45.84 47.15
New England Thrifts 712.4 684.3 428.9 424.9 4.11 66.11 67.66
Southeastern Thrifts 704.5 718.1 447.2 454.5 -1.90 57.53 54.98
Southwestern Thrifts 468.2 455.4 315.9 318.9 2.81 48.22 46.82
Western Thrifts 770.7 759.8 474.7 484.6 1.43 62.35 59.02
ASSET SIZE INDICES
- --------------------------------------------------------------------------------------------------------------------
Less than $250M 815.4 795.7 586.6 586.6 2.46 39.00 39.00
$250M to $500M 1,215.8 1,188.6 789.8 778.0 2.29 53.94 56.28
$500M to $1B 778.8 763.2 521.8 517.5 2.05 49.27 50.50
$1B to $5B 877.9 867.3 546.0 541.9 1.22 60.78 62.00
Over $5B 491.5 480.8 305.8 310.8 2.21 60.71 58.13
COMPARATIVE INDICES
- --------------------------------------------------------------------------------------------------------------------
Dow Jones Industrials 7,823.1 7,442.1 6,448.3 6,499.3 5.12 21.32 20.37
S&P 500 955.4 914.6 740.7 755.0 4.46 28.98 26.54
</TABLE>
All SNL Indices are market-value weighted; i.e., an institution's effect on an
index is proportionate to that institution's market capitalization. All SNL
thrift indices, except for the SNL MHC Index, began at 100 on March 30, 1984.
The SNL MHC Index began at 201.082 on Dec. 31, 1992, the level of the SNL Thrift
Index on that date. On March 30, 1984, the S&P 500 closed at 159.2 and the DOW
Jones Industrials stood at 1164.9.
Mid-Atlantic: DE, DC, MD, NJ, NY, PA, PR;
Midwest: IA, IL, IN, KS, KY, MI, MN, MO, ND, NE, OH, SD, WI;
New England: CT, MA, ME, NH, RI, VT;
Southeast: AL, AR, FL, GA, MS, NC, SC, TN, VA, WV;
Southwest: CO, LA, NM, OK, TX, UT;
West: AZ, AK, CA, HI, ID, MT, NV, OR, WA, WY
Source: SNL Securities DECEMBER 1997
<PAGE>
EXHIBIT IV-4
Market Area Acquisition Activity
<PAGE>
Maryland Thrift Merger and Acquisition Activity 1996 - Present
<TABLE>
<CAPTION>
Seller Financials at Completion
------------------------------------------------
Total TgEq/ YTD YTD NPAs/ Rsrvs/
Ann'd Comp Assets Assets ROAA ROAE Assets NPLs
Date Date Buyer ST Seller ST ($000) (%) (%) (%) (%) (%)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
06/23/97 11/13/97 Crestar Financial VA American Natl Bncp MD 505,318 8.97 0.29 3.13 NA NA
03/11/97 08/25/97 Provident Bkshrs MD First Citizens Fin'l MD 687,196 6.06 0.48 7.98 2.14 141.10
12/05/96 03/31/97 Shore Bancshares MD Kent S&LA MD 24,034 12.49 1.34 10.85 0.37 17.05
11/26/96 05/30/97 Keystone Financial PA First Financial-W.MD MD 345,505 11.68 0.05 0.42 0.95 303.16
04/02/96 11/15/96 F&M Bancorp MD Home Federal Corp MD 214,615 8.44 1.20 15.02 6.03 61.87
12/22/95 05/02/96 FCNB Corp MD Harbor Investment MD 35,570 11.06 0.57 5.03 0.00 NA
05/25/95 01/26/96 FCNB Corp MD Laurel Bancorp MD 112,343 15.28 1.33 8.55 3.02 50.16
04/11/94 02/02/96 Susquehanna Bcshrs PA Fairfax Financial MD 393,389 8.70 0.82 10.83 1.16 NA
Average 289,746 10.34 0.76 7.73 1.95 114.67
Median 280,060 10.02 0.70 8.27 1.16 61.87
<CAPTION>
Deal Terms and Pricing at Completion
--------------------------------------
Deal Deal Deal Deal Pr/
Ann'd Comp Value Pr/Sh Consid Pr/Bk Tg Bk
Date Date Buyer ST Seller ST ($M) ($) Type (%) (%)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
06/23/97 11/13/97 Crestar Financial VA American Natl Bncp MD 77.2 20.32 Mixture 170.14 170.14
03/11/97 08/25/97 Provident Bkshrs MD First Citizens Fin'l MD 112.4 33.73 Stock 225.44 225.44
12/05/96 03/31/97 Shore Bancshares MD Kent S&LA MD 5.1 35.49 Cash 165.48 165.48
11/26/96 05/30/97 Keystone Financial PA First Financial-W.MD MD 81.1 36.44 Mixture 183.59 183.59
04/02/96 11/15/96 F&M Bancorp MD Home Federal Corp MD 29.3 11.52 Stock 152.34 153.97
12/22/95 05/02/96 FCNB Corp MD Harbor Investment MD 6.6 69.08 Cash 163.89 163.89
05/25/95 01/26/96 FCNB Corp MD Laurel Bancorp MD 26.0 15.31 Stock 137.33 137.33
04/11/94 02/02/96 Susquehanna Bcshrs PA Fairfax Financial MD 62.6 NA Cash 148.84 150.78
Average 46.2 33.60 168.13 168.64
Median 29.3 34.61 163.89 163.89
<CAPTION>
Deal Terms and
Pricing at Completion
-------------------------------
Deal Pr/ Deal Pr/ TgBkPr/
Ann'd Comp 4-Qtr Assets CoreDp
Date Date Buyer ST Seller ST EPS (x) (%) (%)
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
06/23/97 11/13/97 Crestar Financial VA American Natl Bncp MD 53.46 15.28 6.73
03/11/97 08/25/97 Provident Bkshrs MD First Citizens Fin'l MD 30.94 16.25 13.43
12/05/96 03/31/97 Shore Bancshares MD Kent S&LA MD 20.99 21.38 10.46
11/26/96 05/30/97 Keystone Financial PA First Financial-W.MD MD 22.64 22.24 15.49
04/02/96 11/15/96 F&M Bancorp MD Home Federal Corp MD 28.79 12.81 6.68
12/22/95 05/02/96 FCNB Corp MD Harbor Investment MD 30.70 19.20 9.90
05/25/95 01/26/96 FCNB Corp MD Laurel Bancorp MD 18.67 22.51 9.94
04/11/94 02/02/96 Susquehanna Bcshrs PA Fairfax Financial MD 12.84 13.19 5.84
Average 23.65 18.23 10.25
Median 22.64 19.20 9.94
</TABLE>
Note: At this time there are no pending thrift deals in the state of Maryland.
Source: SNL Securities, LC.
<PAGE>
EXHIBIT IV-5
Baltimore County Savings Bank, F.S.B.
Director and Senior Management Summary Resumes
<PAGE>
Baltimore County Savings Bank, F.S.B.
Director and Senior Management Summary Resumes
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 1988. 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.
George S. Magsamen has been retired for approximately 10 years. Prior
to his retirement, Mr. Magsamen was the owner of Magsamen Bus Company.
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.
Source: BCSB's prospectus.
<PAGE>
EXHIBIT IV-6
Baltimore County Savings Bank, F.S.B.
Pro Forma Regulatory Capital Ratios
<PAGE>
EXHIBIT IV-6
Baltimore County Savings Bank, F.S.B.
Pro Forma Regulatory Capital Ratios
<TABLE>
<CAPTION>
Pro Forma Capital of the Bank as of September 30, 1997 Based on the Sale of (1):
--------------------------------------------------------------------------------
Bank's 1,517,250 Shares 1,785,000 Shares 2,052,750 Shares
Historical Capital at at $10.00 at $10.00 at $10.00
September 30, 1997 Per Share Per Share Per Share
---------------------- ----------------------- -------------------- ------------------------
Percentage of Percentage of Percentage of Percentage of
Amount Assets (2) Amount Assets (2) Amount Assets (2) Amount Assets (2)
------ ------------ ------ ------------ ------ ------------ ------ ---------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Capital under general accepted
accounting principles........ $ 23,858 9.48% $ 29,050 11.25% $ 30,049 11.59% $ 31,047 11.92%
========= ==== ========= ===== ========= ===== ========= =====
Tangible capital............... $ 22,901 9.10% $ 28,093 10.89% $ 29,092 11.22% $ 30,090 11.55%
Tangible capital requirement... 3,775 1.50 3,871 1.50 3,889 1.50 3,907 1.50
--------- ---- --------- ----- --------- ----- --------- -----
Excess....................... $ 19,126 7.60% $ 24,222 9.39% $ 25,202 9.72% $ 26,183 10.05%
========= ==== ========= ===== ========= ===== ========= =====
Core capital................... $ 22,901 9.10% $ 28,093 10.89% $ 29,092 11.22% $ 30,090 11.55%
Core capital requirement....... 7,550 3.00 7,742 3.00 7,778 3.00 7,815 3.00
--------- ---- --------- ----- --------- ----- --------- -----
Excess....................... $ 15,351 6.10% $ 20,351 7.89% $ 21,313 8.22% $ 22,276 8.55%
========= ==== ========= ===== ========= ===== ========= =====
Total capital.................. $ 23,878 17.43% $ 29,070 21.02% $ 30,069 21.71% $ 31,067 22.39%
Risk-based capital requirement. 10,959 8.00 11,062 8.00 11,081 8.00 11,101 8.00
--------- ---- --------- ----- --------- ----- --------- -----
Excess....................... $ 12,919 9.43% $ 18,007 13.02% $ 18,987 13.71% $ 19,967 14.39%
========= ==== ========= ===== ========= ===== ========= =====
</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 principals for capital as determined under generally accepted
accounting principals, 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.
Source: BCSB's prospectus
<PAGE>
EXHIBIT IV-7
Baltimore County Savings Bank, F.S.B.
Pro Forma Analysis Sheet: Fully Converted Basis
<PAGE>
EXHIBIT IV-7
PRO FORMA ANALYSIS SHEET
Baltimore County Savings Bank, FSB
Prices as of January 2, 1998
<TABLE>
<CAPTION>
Peer Group Maryland Companies All SAIF-Insured Institutions
------------------------ ----------------------- -------------------------------
Price Multiple Symbol Subject (1) Mean Median Mean Median Mean Median
-------------- ------ ----------- ---- ------ ---- ------ ---- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Price-earnings ratio P/E 15.82x 21.66x 21.66x 20.94x 20.94x 20.01x 19.83x
Price-book ratio = P/B 71.25% 107.71% 105.71% 177.72% 174.42% 165.51% 154.95%
Price-assets ratio = P/A 14.99% 25.14% 25.41% 18.10% 19.56% 20.36% 19.47%
</TABLE>
<TABLE>
<CAPTION>
Valuation Parameters
--------------------
<S> <C> <C> <C>
Pre-Conversion Earnings (Y) $1,977,000 ESOP Stock Purchases (E) 8.00% (5)
Pre-Conversion Book Value (B) $23,858,000 Cost of ESOP Borrowings (S) 0.00% (4)
Pre-Conv. Tang. Book Value (B) $23,807,000 ESOP Amortization (T) 10.00 years
Pre-Conversion Assets (A) $251,738,000 RRP Amount (M) 4.00%
Reinvestment Rate (2)(R) 3.32% RRP Vesting (N) 5.00 years (5)
Est. Conversion Expenses (3)(X) 2.00% Foundation (F) 1.76%
Tax rate (TAX) 39.00% Tax Benefit (Z) 292,499
Percentage Sold (PCT) 100.00%
</TABLE>
<TABLE>
<CAPTION>
Calculation of Pro Forma Value After Conversion
-----------------------------------------------
<S> <C>
1. V= P/E * (Y) V= $43,250,000
--------------------------------------------------------------
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= $43,250,000
---------------------------
1 - P/B * PCT * (1-X-E-M-F)
3. V= P/A * (A+Z) V= $43,250,000
---------------------------
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 3,612,500 10.00 $36,125,000 63,750 3,676,250 36,762,500
Midpoint 4,250,000 10.00 42,500,000 75,000 4,325,000 43,250,000
Maximum 4,887,500 10.00 48,875,000 86,250 4,973,750 49,737,500
</TABLE>
----------------------------------------------------------
(1) Pricing ratios shown reflect the midpoint value.
(2) Net return reflects a reinvestment rate of 5.44 percent, and a tax rate
of 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 IV-8
Baltimore County Savings Bank, F.S.B.
Pro Forma Effect of Conversion Proceeds: Fully Converted Basis
<PAGE>
Exhibit IV-8
PRO FORMA EFFECT OF CONVERSION PROCEEDS
Baltimore County Savings Bank, FSB
At the Minimum
<TABLE>
<C> <S> <C>
1. Offering Proceeds $36,125,000
Less: Estimated Offering Expenses 722,500
-------
Net Conversion Proceeds $35,402,500
2. Estimated Additional Income from Conversion Proceeds
Net Conversion Proceeds $35,402,500
Less: Capital Expenditures 1,250,000
Less: Non-Cash Stock Purchases (1) 4,335,000
---------
Net Proceeds Reinvested $29,817,500
Estimated net incremental rate of return 3.32%
-----
Earnings Increase $989,464
Less: Estimated cost of ESOP borrowings (2) 0
Less: Amortization of ESOP borrowings (3) 176,290
Less: Recognition Plan Vesting (4) 176,290
-------
Net Earnings Increase $636,884
</TABLE>
<TABLE>
<CAPTION>
Net
Before Earnings After
3. Pro Forma Earnings Conversion Increase Conversion
---------- -------- ----------
<C> <S> <C> <C> <C> <C>
12 Months ended September 30, 1997 (reported) $1,977,000 $636,884 $2,613,884
12 Months ended September 30, 1997 (core) $1,925,000 $636,884 $2,561,884
Before Net Cash Tax Benefit (5) After
4. Pro Forma Net Worth Conversion Proceeds Of Contribution Conversion
---------- -------- --------------- ----------
September 30, 1997 $23,858,000 $31,067,500 $248,624 $55,174,125
September 30, 1997 (Tangible) $23,807,000 $31,067,500 $248,624 $55,123,125
Before Net Cash Tax Benefit (5) After
5. Pro Forma Assets Conversion Proceeds Of Contribution Conversion
---------- -------- --------------- ----------
September 30, 1997 $251,738,000 $31,067,500 $248,624 $283,054,125
</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 IV-8
PRO FORMA EFFECT OF CONVERSION PROCEEDS
Baltimore County Savings Bank, FSB
At the Midpoint
<TABLE>
<S> <C> <C>
1. Offering Proceeds $42,500,000
Less: Estimated Offering Expenses 850,000
--------
Net Conversion Proceeds $41,650,000
2. Estimated Additional Income from Conversion Proceeds
Net Conversion Proceeds $41,650,000
Less: Capital Expenditures 1,250,000
Less: Non-Cash Stock Purchases (1) 5,100,000
---------
Net Proceeds Reinvested $35,300,000
Estimated net incremental rate of return 3.32%
-----
Earnings Increase $1,171,395
Less: Estimated cost of ESOP borrowings (2) 0
Less: Amortization of ESOP borrowings (3) 207,400
Less: Recognition Plan Vesting (4) 207,400
-------
Net Earnings Increase $756,595
</TABLE>
<TABLE>
<CAPTION>
Net
Before Earnings After
3. Pro Forma Earnings Conversion Increase Conversion
---------- -------- ----------
<S> <C> <C> <C> <C>
12 Months ended September 30, 1997 (reported) $1,977,000 $756,595 $2,733,595
12 Months ended September 30, 1997 (core) $1,925,000 $756,595 $2,681,595
Before Net Cash Tax Benefit (5) After
4. Pro Forma Net Worth Conversion Proceeds Of Contribution Conversion
---------- -------- --------------- ----------
September 30, 1997 $23,858,000 $36,550,000 $292,499 $60,700,499
September 30, 1997 (Tangible) $23,807,000 $36,550,000 $292,499 $60,649,499
Before Net Cash Tax Benefit (5) After
5. Pro Forma Assets Conversion Proceeds Of Contribution Conversion
---------- -------- --------------- ----------
September 30, 1997 $251,738,000 $36,550,000 $292,499 $288,580,499
</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>
<TABLE>
<CAPTION>
Exhibit IV-8
PRO FORMA EFFECT OF CONVERSION PROCEEDS
Baltimore County Savings Bank, FSB
At the Maximum
<C> <S> <C>
1. Offering Proceeds $48,875,000
Less: Estimated Offering Expenses 977,500
-------
Net Conversion Proceeds $47,897,500
2. Estimated Additional Income from Conversion Proceeds
Net Conversion Proceeds $47,897,500
Less: Capital Expenditures 1,250,000
Less: Non-Cash Stock Purchases (1) 5,865,000
---------
Net Proceeds Reinvested $40,782,500
Estimated net incremental rate of return 3.32%
-----
Earnings Increase $1,353,326
Less: Estimated cost of ESOP borrowings (2) 0
Less: Amortization of ESOP borrowings (3) 238,510
Less: Recognition Plan Vesting (4) 238,510
-------
Net Earnings Increase $876,306
</TABLE>
<TABLE>
<CAPTION>
Net
Before Earnings After
3. Pro Forma Earnings Conversion Increase Conversion
---------- -------- ----------
<C> <S> <C> <C> <C> <C>
12 Months ended September 30, 1997 (reported) $1,977,000 $876,306 $2,853,306
12 Months ended September 30, 1997 (core) $1,925,000 $876,306 $2,801,306
Before Net Cash Tax Benefit (5) After
4. Pro Forma Net Worth Conversion Proceeds Of Contribution Conversion
---------- -------- --------------- ----------
September 30, 1997 $23,858,000 $42,032,500 $336,374 $66,226,873
September 30, 1997 (Tangible) $23,807,000 $42,032,500 $336,374 $66,175,873
Before Net Cash Tax Benefit (5) After
5. Pro Forma Assets Conversion Proceeds Of Contribution Conversion
---------- -------- --------------- ----------
September 30, 1997 $251,738,000 $42,032,500 $336,374 $294,106,873
</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 IV-9
Peer Group Core Earnings Analysis
<PAGE>
RP FINANCIAL, LC.
-----------------------------------------
Financial Services Industry Consultants
1700 North Moore Street, Suite 2210
Arlington, Virginia 22209
(703) 528-1700
<TABLE>
<CAPTION>
Core Earnings Analysis
Comparable Institution Analysis
For the Twelve Months Ended September 30, 1997
Estimated
Net Income Less: Net Tax Effect Less: Extd Core Income Estimated
to Common Gains(Loss) @ 34% Items to Common Shares Core EPS
---------- ----------- ---------- ---------- ---------- ---------- --------
($000) ($000) $000) ($000) ($000) ($000) ($)
Comparable Group
----------------
<S> <C> <C> <C> <C> <C> <C> <C>
CMSV Commty. Svgs, MHC of FL (48.5) 5,443 -666 226 0 5,003 5,095 0.98
FFFL Fidelity FSB, MHC of FL (47.7) 6,313 -1,464 498 0 5,347 6,783 0.79
SKBO First Carnegie, MHC of PA(45.0)(1)(3) 570 7 -2 0 575 2,300 0.33
FFSX First FS&LA. MHC of IA (46.1) 3,342 -120 41 0 3,263 2,833 1.15
GDVS Greater DV SB, MHC of PA (19.9) 2,217 0 0 0 2,217 3,272 0.68
HARS Harris SB, MHC of PA (24.3) 17,562 -3,160 1,074 0 15,476 33,779 0.46
JXSB Jcksnville SB, MHC of IL (45.6) 1,020 -10 3 0 1,013 1,272 0.80
LFED Leeds FSB, MHC of MD (36.3) 3,338 0 0 0 3,338 5,182 0.64
NWSB Northwest SB, MHC of PA (30.7) 19,333 -355 121 0 19,099 46,753 0.41
PBHC OswegoCity SB MHC of NY (46.1) 2,005 -315 107 0 1,797 1,917 0.94
PBCT Peoples Bank, MHC of CT (40.1) 87,800 -47,300 16,082 0 56,582 61,126 0.93
PHSB Ppls Home SB, MHC of PA (45.0)(3) 1,169 -86 29 0 1,112 2,760 0.54
PULB Pulaski SB, MHC of MO (29.8) 2,160 -408 139 0 1,891 2,095 0.90
PLSK Pulaski SB, MHC of NJ (46.0) 1,110 0 0 0 1,110 2,070 0.54
SBFL SB Fngr Lakes MHC of NY (33.1) 784 186 -63 0 907 1,785 0.51
WAYN Wayne S&L Co. MHC of OH (47.8) 1,829 -163 55 0 1,721 2,255 0.76
WCFB Wbstr Cty FSB MHC of IA (45.2) 1,336 0 0 0 1,336 2,100 0.64
</TABLE>
(1) Financial information is for the quarter ending June 30, 1997.
(3) Figures are for three quarters of financial data, EPS figures are
annualized.
Source: Audited and unaudited financial statements, corporate reports and
offering circulars, and RP Financial, LC. calculations. The
information provided in this table has been obtained from sources
we believe are reliable, but we cannot guarantee the accuracy or
completeness of such information.
Copyright (c) 1997 by RP Financial, LC.
<PAGE>
EXHIBIT IV-10
Baltimore County Savings Bank, F.S.B.
Pro Forma Analysis Sheet: Minority Stock Offering
<PAGE>
EXHIBIT IV-10
PRO FORMA ANALYSIS SHEET
Baltimore County Savings Bank, FSB
Prices as of January 2, 1998
<TABLE>
<CAPTION>
Peer Group Maryland Companies All SAIF-Insured Institutions
--------------------- --------------------- -----------------------------
Price Multiple Symbol Subject (1) Mean Median Mean Median Mean Median
- -------------- ------ ----------- ---- ------ ---- ------ ---- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Price-earnings ratio P/E 19.21x 26.50x 26.04x 20.94x 20.94x 20.01x 19.83x
Price-book ratio = P/B 111.12% 246.27% 242.68% 177.72% 174.42% 165.51% 154.95%
Price-assets ratio = P/A 16.21% 29.27% 28.80% 18.10% 19.56% 20.36% 19.47%
</TABLE>
<TABLE>
<CAPTION>
Valuation Parameters
- --------------------
<S> <C> <C> <C>
Pre-Conversion Earnings (2)(Y) $1,969,000 ESOP Stock Purchases (E) 8.00% (6)
Pre-Conversion Book Value (2)(B) $23,608,000 Cost of ESOP Borrowings (S) 0.00% (5)
Pre-Conv. Tang. Book Value (2)(B) $23,557,000 ESOP Amortization (T) 10.00 years
Pre-Conversion Assets (2)(A) $251,488,000 RRP Amount (M) 4.00%
Reinvestment Rate (3)(R) 3.32% RRP Vesting (N) 5.00 years (6)
Est. Conversion Expenses (4)(X) 3.84% Foundation (F) 4.20%
Tax rate (TAX) 39.00% Tax Benefit (Z) 292,500
Percentage Sold (PCT) 43.01%
</TABLE>
Calculation of Pro Forma Value After Conversion
- -----------------------------------------------
<TABLE>
<S> <C> <C>
1. V= P/E * (Y) V= $43,250,000
-------------------------------------------------------------
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= $43,250,000
------------------------------
1 - P/B * PCT * (1-X-E-M-F)
3. V= P/A * (A+Z) V= $43,250,000
------------------------------
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 2,084,000 1,517,250 10.00 $15,172,500 75,000 1,592,250 15,922,500
Midpoint 2,465,000 1,785,000 10.00 17,850,000 75,000 1,860,000 18,600,000
Maximum 2,846,000 2,052,750 10.00 20,527,500 75,000 2,127,750 21,277,500
</TABLE>
- ----------------------------------------------------------
(1) Pricing ratios shown reflect the midpoint value.
(2) Reflects $250,000 retained by the MHC, assumed to earn the reinvestment
rate of 5.44 percent and a tax rate of 39.0 percent.
(3) Net return reflects a reinvestment rate of 5.44 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 IV-11
Baltimore County Savings Bank, F.S.B.
Pro Forma Effects: Minority Stock Offering
<PAGE>
Exhibit IV-11
PRO FORMA EFFECT OF CONVERSION PROCEEDS
Baltimore County Savings Bank, FSB
At the Minimum
<TABLE>
<C> <S> <C>
1. Offering Proceeds $15,172,500
Less: Estimated Offering Expenses 648,000
-------
Net Conversion Proceeds $14,524,500
2. Estimated Additional Income from Conversion Proceeds
Net Conversion Proceeds $14,524,500
Less: Planned Capital Expenditures 1,250,000
Less: Non-Cash Stock Purchases (1) 1,820,700
---------
Net Proceeds Reinvested $11,453,800
Estimated net incremental rate of return 3.32%
-----
Earnings Increase $380,083
Less: Estimated cost of ESOP borrowings (2) 0
Less: Amortization of ESOP borrowings (3) 74,042
Less: Recognition Plan Vesting (4) 74,042
------
Net Earnings Increase $231,999
<CAPTION>
Net
Before Earnings After
3. Pro Forma Earnings Conversion Increase Conversion
---------- -------- ----------
<C> <S> <C> <C> <C>
12 Months ended September 30, 1997 (reported) $1,969,000 $231,999 $2,200,999
12 Months ended September 30, 1997 (core) $1,917,000 $231,999 $2,148,999
<CAPTION>
Before Net Cash Tax Benefit (5) After
4. Pro Forma Net Worth Conversion Proceeds Of Contribution Conversion
---------- -------- --------------- ----------
<C> <S> <C> <C> <C> <C>
September 30, 1997 $23,608,000 $12,703,800 $248,625 $36,560,425
September 30, 1997 (Tangible) $23,557,000 $12,703,800 $248,625 $36,509,425
<CAPTION>
Before Net Cash Tax Benefit (5) After
5. Pro Forma Assets Conversion Proceeds Of Contribution Conversion
---------- -------- --------------- ----------
<C> <S> <C> <C> <C> <C>
September 30, 1997 $251,488,000 $12,703,800 $248,625 $264,440,425
</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 IV-11
PRO FORMA EFFECT OF CONVERSION PROCEEDS
Baltimore County Savings Bank, FSB
At the Midpoint
<TABLE>
<S> <C> <C>
1. Offering Proceeds $17,850,000
Less: Estimated Offering Expenses 685,000
--------
Net Conversion Proceeds $17,165,000
2. Estimated Additional Income from Conversion Proceeds
Net Conversion Proceeds $17,165,000
Less: Planned Capital Expenditures 1,250,000
Less: Non-Cash Stock Purchases (1) 2,142,000
---------
Net Proceeds Reinvested $13,773,000
Estimated net incremental rate of return 3.32%
-----
Earnings Increase $457,043
Less: Estimated cost of ESOP borrowings (2) 0
Less: Amortization of ESOP borrowings (3) 87,108
Less: Recognition Plan Vesting (4) 87,108
------
Net Earnings Increase $282,827
</TABLE>
<TABLE>
<CAPTION>
Net
Before Earnings After
3. Pro Forma Earnings Conversion Increase Conversion
---------- -------- -----------
<S> <C> <C> <C> <C>
12 Months ended September 30, 1997 (reported) $1,969,000 $282,827 $2,251,827
12 Months ended September 30, 1997 (core) $1,917,000 $282,827 $2,199,827
Before Net Cash Tax Benefit (5) After
4. Pro Forma Net Worth Conversion Proceeds Of Contribution Conversion
---------- -------- --------------- ----------
September 30, 1997 $23,608,000 $15,023,000 $292,500 $38,923,500
September 30, 1997 (Tangible) $23,557,000 $15,023,000 $292,500 $38,872,500
Before Net Cash Tax Benefit (5) After
5. Pro Forma Assets Conversion Proceeds Of Contribution Conversion
---------- -------- --------------- ----------
September 30, 1997 $251,488,000 $15,023,000 $292,500 $266,803,500
</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 IV-11
PRO FORMA EFFECT OF CONVERSION PROCEEDS
Baltimore County Savings Bank, FSB
At the Maximum
<TABLE>
<S> <C> <C>
1. Offering Proceeds $20,527,500
Less: Estimated Offering Expenses 722,000
-------
Net Conversion Proceeds $19,805,500
2. Estimated Additional Income from Conversion Proceeds
Net Conversion Proceeds $19,805,500
Less: Planned Capital Expenditures 1,250,000
Less: Non-Cash Stock Purchases (1) 2,463,300
---------
Net Proceeds Reinvested $16,092,200
Estimated net incremental rate of return 3.32%
-----
Earnings Increase $534,004
Less: Estimated cost of ESOP borrowings (2) 0
Less: Amortization of ESOP borrowings (3) 100,174
Less: Recognition Plan Vesting (4) 100,174
-------
Net Earnings Increase $333,655
</TABLE>
<TABLE>
<CAPTION>
Net
Before Earnings After
3. Pro Forma Earnings Conversion Increase Conversion
---------- -------- ----------
<S> <C> <C> <C> <C>
12 Months ended September 30, 1997 (reported) $1,969,000 $333,655 $2,302,655
12 Months ended September 30, 1997 (core) $1,917,000 $333,655 $2,250,655
Before Net Cash Tax Benefit (5) After
4. Pro Forma Net Worth Conversion Proceeds Of Contribution Conversion
---------- -------- --------------- ----------
September 30, 1997 $23,608,000 $17,342,200 $292,500 $41,242,700
September 30, 1997 (Tangible) $23,557,000 $17,342,200 $292,500 $41,191,700
Before Net Cash Tax Benefit (5) After
5. Pro Forma Assets Conversion Proceeds Of Contribution Conversion
---------- -------- --------------- ----------
September 30, 1997 $251,488,000 $17,342,200 $292,500 $269,122,700
</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 V-1
RP Financial, LC.
Firm Qualifications Statement
<PAGE>
RP Financial,LC.
- ----------------------------------------- FIRM QUALIFICATION STATEMENT
Financial Services Industry Consultants
RP Financial provides financial and management consulting and valuation services
to the financial services industry nationwide, particularly federally-insured
financial institutions. RP Financial establishes long-term client relationships
through its wide array of services, emphasis on quality and timeliness, hands-on
involvement by our principals and senior consulting staff, and careful
structuring of strategic plans and transactions. RP Financial's staff draws from
backgrounds in consulting, regulatory agencies and investment banking, thereby
providing our clients with considerable resources.
STRATEGIC AND CAPITAL PLANNING
RP Financial's strategic and capital planning services are designed to provide
effective workable plans with quantifiable results. Through a program known as
SAFE (Strategic Alternatives Financial Evaluations), RP Financial analyzes
strategic options to enhance shareholder value or other established objectives.
Our planning services involve conducting situation analyses; establishing
mission statements, strategic goals and objectives; and identifying strategies
for enhancement of franchise value, capital management and planning, earnings
improvement and operational issues. Strategy development typically includes the
following areas: capital formation and management, asset/liability targets,
profitability, return on equity and market value of stock. Our proprietary
financial simulation model provides the basis for evaluating the financial
impact of alternative strategies and assessing the feasibility/compatibility of
such strategies with regulations and/or other guidelines.
MERGER AND ACQUISITION SERVICES
RP Financial's merger and acquisition (M&A) services include targeting
candidates and potential acquirors, assessing acquisition merit, conducting
detailed due diligence, negotiating and structuring transactions, preparing
merger business plans and financial simulations, rendering fairness opinions and
assisting in implementing post-acquisition strategies. Through our financial
simulations, comprehensive in-house data bases, valuation expertise and
regulatory knowledge, RP Financial's M&A consulting focuses on structuring
transactions to enhance shareholder returns.
VALUATION SERVICES
RP Financial's extensive valuation practice includes valuations for a variety of
purposes including mergers and acquisitions, mutual-to-stock conversions, ESOPs,
subsidiary companies, mark-to-market transactions, loan and servicing
portfolios, non-traded securities, core deposits, FAS 107 (fair market value
disclosure), FAS 122 (loan servicing rights) and FAS 123 (stock options). Our
principals and staff are highly experienced in performing valuation appraisals
which conform with regulatory guidelines and appraisal industry standards. RP
Financial is the nation's leading valuation firm for mutual-to-stock conversions
of thrift institutions.
OTHER CONSULTING SERVICES AND DATA BASES
RP Financial offers a variety of other services including branching strategies,
feasibility studies and special research studies, which are complemented by our
quantitative and computer skills. RP Financial's consulting services are aided
by its in-house data base resources for commercial banks and savings
institutions and proprietary valuation and financial simulation models.
YEAR 2000 SERVICES
RP Financial, through a relationship with a computer research and development
company with a proprietary methodology, offers Year 2000 advisory and conversion
services to financial institutions which are more cost effective and less
disruptive than most other providers of such service.
RP Financial's Key Personnel (Years of Relevant Experience)
Ronald S. Riggins, Managing Director (17)
William E. Pommerening, Managing Director (13)
Gregory E. Dunn, Senior Vice President (15)
James P. Hennessey, Senior Vice President (10)
James J. Oren, Senior Vice President (11)
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Washington Headquarters
Rossyln Center
1700 North Moore Street. Suite 2210 Telephone:(703) 528-1700
Arlington, VA 22209 Fax No.: (703) 528-1788
